Significant unemployment means that some patterns of specialization and trade that were working yesterday are not working today. And new patterns have yet to develop. Therefore, a necessary condition for significant unemployment is a breakdown in the regulatory mechanism, such that the patterns of specialization and trade are not adequate.

Conventional macroeconomics neither describes nor explains how the regulatory mechanism breaks down. Instead, both monetarism and Keynesianism rely on a concept called “aggregate demand,” which is to economics what “aether” was to physics before the Michelson-Morley experiment.

Why was there a recession? There was a drop in “aggregate demand.” How do we know there was a drop in “aggregate demand?” Because we saw a recession. It’s circular. It’s dogma. The circularity is particularly clear when you use nominal GDP as your measure of aggregate demand. What causes a drop in nominal GDP? A drop in nominal GDP.

I reject the concept of aggregate demand. I say that we need to be able to explain how the market regulatory system breaks down.

My preferred explanation is to focus on the financial sector. Financial intermediation helps to facilitate the roundabout production that takes place in a modern economy. Patterns of specialization and trade reflect plans about the future, and financial intermediation makes it possible to act on such plans. But financial intermediation is inherently delicate, since the intermediaries have assets that are riskier and longer-lived than their liabilities. Under adversity, if financial intermediaries have to cut back on their activities, this causes patterns of specialization and trade to break while inhibiting the formation of new patterns.

What Banks Do

Years ago, I coined a useful aphorism for understanding the economic role of the financial sector:

Households and nonfinancial firms wish to have balance sheets consisting of risky, long-term liabilities and riskless, short-term assets. Financial firms accommodate this by having balance sheets consisting of riskless, short-term liabilities and risky, long-term assets.

You will take many years to repay your mortgage. And there is a chance that you will default. If you raise funds to start a business, it will take a while for you to pay your investors, and if things go poorly they may lose it all. Those are risky, long-term liabilities. But you want your assets to be short-term and risk-free. The money in your checking account can be withdrawn at any time, and you assume that there is no risk to you of having your money in the bank.

As economic activity expands, the balance sheet of the financial sector expands. As the economy contracts, the balance sheet of the financial sector contracts.

Does economic activity drive financial activity, or does causality go the other way? Or is it mixture of both that is impossible to disentangle?

Think of economic activity as your body moving. Think of financial intermediation as your lungs breathing. Moving fast makes your lungs work harder to take in oxygen. That is causality going from your activity to your lungs. Having impaired lungs that do not work well will slow you down. That is causality going from your lungs to your activity.

The 1920s and 1930s

Consider the 1920s and 1930s in the United States. Compiling data from various sources, Claude reports that as of 1922 there were 28,820 commercial banks. From 1923 through 1929, an average of 692 of these failed each year, while only an average of 339 per year were started. Each of these years there was a net loss of banks. Mergers and acquisitions further thinned the sector, ending with 23,695 banks in 1929.

But from 1930 through 1933, the number of bank failures soared to 1350, 2293, 1453, and 4000, respectively. Bank startups were only 153, 105, 93, and 323, respectively.

In the 1920s, most of the banks that failed were in the farm sector. I believe that the causal factor was weakness in the prices for agricultural commodities, caused by a drop in export demand for wheat and other farm products. It was (a part of) the real economy causing a contraction in (part of) the financial sector.

In the early 1930s, I believe that causality went primarily in the other direction. The source of the sharp economic decline was weakness in the banking sector. (Ben Bernanke’s doctoral dissertation famously made the case for this view.) There was a pervasive loss of trust in banks, which made unsustainable their continued issuance of short-term deposits backed by risky, long-term loans. Even banks that remained in business had to reduce the size of their balance sheets.

With the financial sector as a whole contracting sharply, ordinary economic activity could not be supported. Home buyers could not obtain mortgages. Entrepreneurs could not obtain funds to start businesses. Existing businesses could not fund expansions of plant and equipment.

From 1945 to 1990

As Edward Leamer pointed out, the recessions that took place from 1945 to 1990 were predominantly collapses in housing construction and purchases of consumer durables. I think that if you examine these closely, you will find that each downturn was triggered by a decline in financial intermediation, caused by the interaction of higher market interest rates with the system of bank regulation then in place.

This was the era in which the financial institutions that backed mortgages and consumer loans were subject to Regulation Q, which was a government-imposed ceiling on the interest rates payable to depositors. Whenever market interest rates rose by enough to make regulation Q rates unattractive, deposits at banks and savings institutions would stop growing or even contract. Since they were the sources of mortgages and consumer loans, lending dried up, forcing a slowdown in economic activity.

Our current century

By 1990, the regulatory structure for the financial system had changed.

• the laws and regulations that had kept the American banking system fragmented, with thousands of small banks and no large national banks, had been lifted.

• The savings and loan industry, which had been the most important channel by which tighter credit reduce mortgage lending, had disappeared, to be replaced by mortgage securitization.

• Regulation Q was no longer a factor, although it was not officially repealed until 2011.

• the primary regulatory tool to govern the safety of banks was capital requirements, which were tied to risk.

These changes allowed for a large expansion in financial intermediation in the United States, which in turn accommodated a long period of economic growth known as the Great Moderation. But the risk-based capital standards, which fixed bank capital/asset ratios based on the type of assets that the banks held, were not making the financial system safe. Instead, they were allocating capital toward government’s preferred uses.

Risk-based capital rules were particularly lenient for mortgage-backed securities issued by the government-sponsored enterprises Fannie Mae and Freddie Mac. In 2003, capital rules leaned further in the direction of financing home mortgages. They allowed securities created on Wall Street by investment bankers like Goldman Sachs to be carved into “tranches” that included large amounts that were rated highly by credit rating agencies, such as Moody’s or S&P. The rating models were gamed by the investment bankers, and a lot of securities that were stamped “AAA” or “AA” credit were actually much riskier than those designations were meant to represent.

In the money market, the highly-rated mortgage securities were treated as collateral for very short-term loans in what Wall Street called the repo market. A corporate treasurer might make a loan for a day or a week to Goldman or another investment banker, with the loan backed by a highly-rated mortgage security. This was a classic example of my depiction of financial intermediaries: long-term, risky liabilities (the mortgages backing the highly-rated securities) had been turned into short-term supposedly-riskless assets (repo loans).

As this financial intermediation expanded, the government was a cheerleader. Congress even held hearings accusing banks as well as the large mortgage agencies Freddie Mac and Fannie Mae of failing to supply enough mortgage credit, especially to minorities and other allegedly under-served market segments. Laws and jawboning pressured lenders to be increasingly lenient in their lending standards.

In 2008, the riskiness of the mortgage securities was exposed. The repo market froze, no longer able to carry out its financial intermediation. That was the Financial Crisis of that year.

Subsequently, the economy suffered its longest and deepest slump since the Great Depression. Although politicians shoveled billions of taxpayer dollars into bank bailouts, at the same time they excoriated mortgage lenders for having improperly induced borrowers to take on excessive loans. The politicians demanded a tightening of mortgage lending standards, exacerbating a credit crunch that would have taken place in any event.

My narrative of the economic decline is that it was caused by a decline in financial intermediation. This reduced lending for all sorts of long-term, risky investments, not just housing. And bank regulatory policy worked in the direction of exacerbating this decline. Although government passed a lot of deficit-spending “stimulus,” this did not come close to offsetting the contractionary effects of the drop in financial intermediation, which was partly market driven but largely imposed through legislation/regulation under the Dodd-Frank law that was passed in the wake of the crisis.

As of now

At present, large investments are taking place in long-term, risky projects. This is particularly evident in the AI sector. Companies with no free cash flow are being valued at hundreds of billions of dollars, by venture capitalists, stock market investors, and bond buyers. My concern is that if something bad happens, it probably will result in a dramatic decline in financial intermediation. In that case, the real economy will go down with it.

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Some patterns are persistent—jobs that existed last year still exist this year. Call these legacy jobs. Other patterns are new: jobs that existed last year disappear, and new jobs are created.

The economy needs a lot of legacy jobs. Market prices and entrepreneurial activity can reallocate some resources, but it is impossible to start with a blank slate every day.

The economy also needs a lot of new jobs. These are the market’s way of integrating new workers, reallocating existing workers, and pursuing trial-and-error innovation.

Modern statistics, including Job Openings and Labor Turnover (JOLTS) and the Business Dynamics Statistics give us some information on these phenomena. In recent years the monthly rate of new job creation is about 5 million. This is far more than the payroll survey—closely followed by investors and journalists—shows, which in a typical month is an increase of about 200,000 jobs. The difference is that the JOLTS data shows the total number of new hires and new separations, while the payroll survey news release shows the net difference between hires and separations.

Relative to the reported “jobs created” data in the payroll survey, the JOLTS data reveal much more churn. Macroeconomists have yet to focus on this important phenomenon.

I wish that we had JOLTS data and Business Dynamics Statistics for the 1930s. In the absence of such figures, I asked Claude Fable to speculate. What it estimated was that the latter part of the Great Depression was affected by slow formation of new businesses relative to what would have been expected in a growing economy or a “normal” recession.

My point is that something held back entrepreneurial activity in the latter part of the Depression. Candidates include:

• a reduction in financial intermediation. When banks suddenly stop lending to home builders and other small businesses, that restricts the supply of new firms.

• pessimism about the prospects for business success, which lowers the demand for new ventures. Conventional historians say that President Roosevelt boosted confidence with sayings like “The only thing we have to fear is fear itself.” But there are economists who have argued that what businessmen feared were Roosevelt himself. He used anti-business rhetoric. His experimental, arbitrary policy moves added to the uncertainty that always challenges entrepreneurs.

Here is how Claude wrote up the analysis of our attempt to separate unemployment into that caused by legacy firms collapsing and that caused by new firms not forming.

Business Formation and the Persistence of Unemployment in the 1930s

A speculative decomposition, with two counterfactual scenarios

Note on the nature of this exercise: the labor force and unemployment figures below are standard historical estimates (Lebergott/BLS). The decomposition of employment into “1929-cohort” and “post-1929-cohort” businesses is a constructed reconstruction — no data source from the period tracks employment by firm age.

1. The question

Why was there still so much excess labor in 1939, a full decade after the crash? Two broad candidate explanations:

1. Incumbent under-hiring — businesses that existed in 1929 never restored their workforces, whether because of firm deaths, high policy-induced wage floors, labor-saving technological substitution, or caution.

2. Missing business formation — the decade never generated the wave of new firms, new establishments, and new industries that, in a normal decade (like the 1920s, with autos, radio, electrification, appliances, chain retail, and construction), absorbs labor force growth and displaced workers.

The chart below attempts to illustrate the role that missing business formation played in accounting for the high numbers of unemployed workers (9.5 million) in 1929. It shows how much more unemployment there was relative to two alternative scenarios: one in which new business formation occurs at a rate consistent with a “normal” recession; and one in which new business formation occurs at a rate consistent with no recession at all. By 1939, the normal recession scenario would have reduce unemployment by about a fourth, and the no-recession scenario would have reduced it by about a third.

A useful framing fact from modern labor economics: in typical postwar recessions, the collapse of hiring by existing firms dominates the downturn, while suppressed firm formation accounts for a smaller share of the initial decline (roughly a fifth to a quarter in 2008–09, on Business Dynamics Statistics evidence) — but the missing startups cast the longer shadow, because a hire not made can be made next year, while a firm not founded is usually never founded, and its years-two-through-ten growth is lost with it (the “missing generation” mechanism of Sedláček–Sterk, Pugsley–Şahin, and Gourio–Messer–Siemer). The hypothesis explored here is that the 1930s exhibit this pattern in extreme form: incumbents explain the descent of 1929–33; missing entry explains a disproportionate share of the persistence of slack at the decade’s end.

No 1930s data measure any of this directly. Firm age, gross worker flows outside manufacturing, and establishment births were not systematically recorded. The nearest real evidence: BLS manufacturing labor turnover statistics (accessions, quits, layoffs, from 1919), Dun & Bradstreet business population counts, and incorporation statistics — fragments, not a decomposition.

We treat “businesses existing in 1929” broadly — including farms, government as then constituted, and the self-employed — and tracks employment at the survivors of that cohort. Much of the sharp rise in unemployed from 1929-1933 consists mostly of a drop in employment at these “legacy” businesses, including businesses that folded altogether. Claude estimates that this was about 4/5 of the loss of jobs as of 1933. Claude writes:

• This is consistent with the general principle that recessions’ descents are incumbent stories: net job loss is achieved primarily through collapsed hiring at existing firms, with layoffs elevated but doing less of the cumulative work than intuition suggests.

• [Legacy business employment] then recovers with the economy but never approaches its 1929 level, for two compounding reasons: permanent firm deaths (the Dun & Bradstreet business count fell on the order of 10%+ by 1933, and workers at dead firms can never reappear), and labor-saving productivity gains at survivors. On Alexander Field’s evidence, the 1930s were the most technologically progressive decade of the century for total factor productivity; by decade’s end, surviving industry was producing 1929’s output — manufacturing output in 1939 exceeded 1929 — with meaningfully fewer workers.

• Even in a normal decade legacy business employment would drift down somewhat, since some 1929 firms would have died anyway; the Depression turned a drift into a permanent shortfall of more than 7 million.

The post-1929-business formation estimate is the most speculative and the most consequential.

• Entry never stopped. Even 1932 saw hundreds of thousands of business formations, mostly tiny — many were unemployment-driven “necessity” ventures (a man with a truck, a widow taking boarders). But each annual cohort was small, undercapitalized, high-mortality, and slow-growing.

• The cumulative total for employment at new businesses reaches only ~5.5 million by 1939, roughly 12% of all employment. The benchmark that gives this number meaning: in a healthy decade, firms under ten years old typically account for something like 18–20% of employment. Applied to 1939’s economy, the “normal” value would be 8 to 9 million.

Why entry stayed suppressed for a decade

• The financing infrastructure for entry was destroyed and not rebuilt. Some nine thousand bank failures eliminated exactly the institutions — local banks with relationship knowledge — that funded small and new enterprise, and survivors spent the decade hoarding reserves. Home equity and personal savings, the perennial seed capital of founders, had been devastated. Contemporary credit surveys (Hardy–Viner) documented a persistent “credit gap” for small business through the late 1930s.

• The business population never recovered. The count of operating firms fell sharply to 1933 and had not regained its 1929 level by 1939 despite a larger population; new incorporations collapsed and stayed low. A growing economy with a flat-to-shrinking firm count is the signature of suppressed entry. The up-or-out dynamic compounds this over a decade: the firms not founded in 1930–33 were the ones that should have been the fast-growing five-to-eight-year-olds of 1938.

• Construction — the most entry-intensive, small-firm-intensive major sector — never came back. Residential building ran at a fraction of 1920s levels for the entire decade.

• Regime uncertainty as an entry tax. Robert Higgs’s argument — that the shifting rules of the late New Deal deterred long-horizon investment — is debated for incumbents but plausibly bites hardest on entry, the longest-horizon, least-hedged bet in the economy.

The incumbent side of the ledger

A real portion of 1939’s slack belongs to existing firms genuinely under-hiring, not just to missing entry. The strongest version of this case (Cole–Ohanian): New Deal policy — NIRA codes, then Wagner Act unionization — pushed real wages in the covered industrial sector well above market-clearing levels, and incumbents responded not with mass layoffs but by not hiring, meeting demand through hours and productivity instead of bodies. The 1937–38 relapse — triggered partly by the post-Wagner-validation wage push plus fiscal and monetary tightening — shows how fragile incumbent hiring remained.

A rough synthesis allocation of the 1939 employment gap: 40–50% missing extensive margin (suppressed formation, never-born industries, the absent construction recovery, compounding of the lost startup decade); 30–40% incumbent under-hiring (wage floors, labor-saving substitution, caution); remainder labor supply growth and matching frictions (displaced farmers, older laid-off workers fitting poorly into what hiring there was).

3. Counterfactual scenarios

Both scenarios hold the labor force and the 1929-cohort figures at baseline values, change only the new-business estimate, and let unemployment fall out as the residual. This makes them pure accounting counterfactuals; Section 5 discusses why general equilibrium complicates them in both directions.

The no-recession scenario assumes new business formation at the 1920s rate. The normal-recession scenario assumes new business formation falling and recovering according to a pattern consistent with recent recessions.

4. What the comparison shows

Finding 1: Most of the entry damage came from the chronic suppression, not the acute crash. The gap between the baseline and the normal-recession scenario — 2.3 million jobs — is the cost of entry staying weak for the whole decade rather than recovering after two years. The further gap from normal recession to no recession — only 0.7 million — is the cost of the acute 1930–31 collapse itself. A two-year entry dip is survivable; a ten-year one is a lost generation of firms compounding into a lost stock of jobs. In the 1930s the “dip” simply never ended: credit for founders was never rebuilt, construction never returned, and the policy environment taxed exactly the longest-horizon bets.

Finding 2: Even the no-recession scenario leaves 1939 unemployment near 12% — three to four times a normal year. Fixing the entry margin alone repairs perhaps a third of the 1939 gap; the incumbent row’s 7.4-million shortfall from 1929 (firm deaths, wage floors, labor-saving substitution) still stands.

Finding 3: The 1937–38 relapse persists in both counterfactuals but is far less catastrophic. Peak counterfactual unemployment in 1938 is 7.5–8.2 million versus the actual 10.4. A larger young-firm sector would not have prevented that policy-driven recession, but a labor market entering it at 5–6% slack rather than 14% would have experienced it as an ordinary recession rather than a relapse into crisis — which is, in miniature, the whole cost of the missing margin.

A supporting out-of-sample observation: the war. When demand exploded after 1940, employment recovered with astonishing speed, indicating that the matching machinery and labor quality were intact — what had been missing was reasons to hire and, especially, new productive undertakings to hire into. Notably, much wartime absorption happened through what were effectively new establishments — new plants, shipyards, government-financed greenfield capacity. The state forcibly performed the extensive-margin function that private entry had failed to perform for a decade.

5. Caveats

The Darby caveat (largest single uncertainty). We follow Lebergott’s convention of counting federal emergency workers (WPA, CCC) as unemployed. On Michael Darby’s alternative, 1939 unemployment is about 6.5 million rather than 9.5, and 1938 about 7.5 rather than 10.4. Under Darby’s convention, the scenario with new business formation would make the 1939 unemployment sit around 3.5 million — approaching 6%, i.e., near normalcy — showing how much the interpretation of the counterfactuals hinges on this one accounting choice.

The cohort boundary is genuinely fuzzy. Is a 1929 firm that went bankrupt in 1932 and was reorganized under new owners in 1934 “existing in 1929” or “created since”? Reorganizations were epidemic in the 1930s.

[this paragraph is me writing] We are assuming no effect of increased new business formation on employment at existing firms. If you assume that there is a fixed level of demand, then every worker hired at a new firm would displace a worker at an existing firm. Instead, if you assume that entrepreneurs are creating new patterns of specialization and trade, then the workers employed at new firms have more spending power than when they were unemployed and end up buying more from existing firms. This is the Clower channel of the Keynesian multiplier.

6. Summary

The labor force grew by 6 million over the 1930s while employment at the 1929 cohort of businesses ended the decade 7.4 million below its starting point — a combined 13-million-job hole — against which new business formation supplied only about 5.5 million jobs, versus the 8–9 million a normal decade’s entry would have generated. The counterfactuals suggest that healthy entry alone would have cut 1939 unemployment significantly (from ~17% to ~12% on Lebergott’s convention, from 11 percent to 6 percent under Darby’s), with most of that gain coming not from avoiding the acute 1930–31 formation crash but from avoiding its decade-long continuation. The remaining two-thirds of the slack belongs to the incumbent margin — firm deaths, wage floors above market-clearing, and labor-saving substitution — and to the growth of the labor force itself. The general principle: incumbent hiring freezes explain descents; missing entry explains lost decades. The 2010s offered a mild version of this lesson; the 1930s offered the extreme one.

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America 1914–1930

Lecture 2.7

Bought on Time: Prosperity and Its Financial Structure, 1922–1929

Part One: The Committee of Experts

In January of 1924 a retired American brigadier general sat down in a room in Paris to solve the largest arithmetic problem in the world, and the answer he produced set the terms on which American money went abroad for the next five years.

Charles G. Dawes was a Chicago utility man, Comptroller of the Currency under McKinley, chief of supply for Pershing’s army in France, first director of the Budget Bureau, a man who smoked a pipe with an upturned bowl and had written a piece of parlor music that would later, with words attached, become a popular song. In 1923 he was asked to chair a committee of experts on the German reparations problem, which had by then produced the occupation of the Ruhr, a passive resistance campaign, and a hyperinflation that ended with the mark at four trillion to the dollar and a wheelbarrow as the standard unit of currency. The committee had two American members: Dawes, and Owen D. Young of General Electric, a lawyer of such quality that he did most of the drafting while Dawes did the chairing and the newspapers. It reported in April of 1924. The plan bearing Dawes’s name rescheduled the German payments on a rising scale, reorganized the Reichsbank, put the railways up as security, installed an American in Berlin as Agent General to supervise the transfers — and, to prime the whole apparatus, floated an international loan of eight hundred million gold marks, of which a hundred ten million dollars was offered in New York in October of 1924.

The New York tranche sold out in minutes. Reports of the day put the oversubscription at ten times, and men who had put in orders were begging their brokers for allotments. Dawes was on the Republican ticket that autumn as Coolidge’s running mate and got the Nobel Peace Prize the next year, and the American investor got a lesson he applied with tremendous energy for the next four years: German paper paid seven or eight percent, and American paper paid four and a half, and Germany was now supervised by an American accountant, and what could go wrong.

What followed was a lending fad, and it had all the marks of one. Between 1924 and 1929 American investors put something in the neighborhood of two and a half billion dollars into German securities, out of six billion or so lent abroad altogether. Investment houses that had sold Liberty Bonds to forty million Americans during the war came out of it with a nationwide retail distribution machine and nothing to distribute; the National City Company had upwards of a thousand salesmen and fifty-odd branch offices. Foreign bonds were what they found to sell. By the middle of the decade there were representatives of a dozen and more American houses resident in Berlin, competing for business the way vacuum-cleaner men competed for a doorstep, and the competition ran in a direction that ought to be noticed: the salesman’s problem was to find a borrower who could be talked into taking more than he had come for.

The German municipalities obliged. A city that wanted a loan for a waterworks was encouraged to take enough for the waterworks and a stadium. Towns borrowed in dollars, at long term, for swimming baths, opera houses, planetariums, exhibition halls, municipal theaters — the whole civic furniture of a country that had lost its savings in the inflation and found that foreigners would supply the deficiency at eight percent. The German public called it Amerikanisierung, and the American salesman called it a good week. Hjalmar Schacht, running the Reichsbank, tried to stop it, on the ground that a country obliged to pay reparations in foreign exchange had no business spending its foreign borrowings on municipal swimming pools. S. Parker Gilbert, the Agent General in Berlin — an American of thirty-two, out of Rutgers and Harvard Law, who had been Under Secretary of the Treasury at twenty-nine and who is one of the most impressive and least known men of the decade — spent from 1925 onward writing reports which said, in a prose of glacial politeness, that Germany was borrowing more than it could service, that the money was going into consumption dressed as public works, and that the lenders were not looking at the credits. The reports were published. The bonds kept selling.

The quality of underwriting in the fad is best shown by the parallel case in Latin America, because the Senate investigated it afterward and put the details on the record. The house of J. and W. Seligman and the National City Company, marketing the bonds of Peru, had on their payroll — as a promoter, for something over four hundred thousand dollars — the son of the president of Peru, a young man named Juan Leguía whose commercial qualifications were exactly the ones his name implies. National City’s own investigators had reported that Peru was a bad moral and political risk with a long record of default. The bonds went out to the retail customers, ninety million dollars of them, and defaulted in 1931. The same investigation found houses that had sent a salesman to a South American finance ministry to ask what the country might like to borrow for.

And underneath the fad ran a circle that everyone could see and nobody could break. America lent to Germany. Germany paid reparations to Britain, France, Belgium, and Italy. Britain, France, Belgium, and Italy paid war debts to the United States Treasury — sixteen countries had signed funding agreements by 1927, and Coolidge had disposed of the question of forgiveness with the most Yankee sentence of the decade: they hired the money, didn’t they. So American money went out through the bond houses and came back through the Treasury, and the whole apparatus of European settlement rested on the continued willingness of an American investor in Ohio to buy the bonds of a German city he could not have located on a map.

[ PAUSE FOR QUESTIONS ]

Part Two: The Curtain in Detroit

On the second of December, 1927, a man in Detroit could not get near a car dealership, and neither could anyone else.

The Ford Motor Company had spent six months not building automobiles. In May the line at Highland Park had stopped, the Rouge had gone quiet in its automotive departments, and something on the order of sixty thousand men in Detroit had been sent home with no date to return. The company was retooling — new dies, new machine tools, a new engine, a new frame, a new everything — to replace a product that had been in continuous production for nineteen years and had put fifteen million vehicles on the roads of the world. Estimates of the cost of the changeover ran into the hundreds of millions of dollars, and every dollar of it came out of the company’s own till, because Henry Ford had spent a career arranging never to owe a banker anything.

What the six months of silence produced was the Model A, and its unveiling on the second of December was, by the standards of anything that had come before, a national event. The company’s advertising had run in two thousand newspapers. In New York the crowd around the showroom on Broadway required mounted police; in Detroit the showroom windows were papered over and the cars wheeled in under canvas at night. Ford’s own count, which is a company’s count and should be labeled as such, held that ten million Americans looked at the automobile within thirty-six hours of the curtain going up. Kansas City moved the exhibition to a convention hall. Cleveland’s dealer sold his allotment for the year before he had a car to deliver.

The Model T had been an answer to the question of how a farmer gets to town. It came in black, it cost two hundred ninety dollars by 1926, and it was the most successful manufactured object in the history of the world. The Model A was an answer to a question nobody had needed to ask in 1908: what does a man buy when he already owns a car. It had a self-starter as standard, safety glass in the windshield, four-wheel brakes, a gearshift arranged the way the rest of the industry arranged it, and it came in Arabian Sand, Dawn Gray, Niagara Blue, and Gun Metal Blue. It could be had, from the first day, on a payment plan.

The country that stood in line to look at it was a country in which better than half of all households owned an automobile, in which some four-fifths of automobile sales went to households replacing or adding to a car they already had, and in which the man who kept his money in his pocket until he had the whole price was becoming a curiosity. Ford had lost the market for nineteen years of the most successful product ever built because the market had stopped wanting what he was selling, and had started wanting the thing his competitors had learned to sell: the next one.

[ PAUSE FOR QUESTIONS ]

Part Three: What the Decade Made

Begin with the size of it, because the size of it is the fact everything else in this lecture hangs from.

Between the trough of 1921 and the peak of 1929 the output of the American economy grew by something close to half. Industrial production roughly doubled from the 1921 low. Output per man-hour in manufacturing rose across the decade at a rate the country had never sustained before — on the order of five percent a year, compounding, so that by 1929 an hour of American factory labor produced something like sixty percent more than it had in 1919. That number is the engine under every other number, and it explains why the money wage described in the last lecture could rise by a sixth against a price level that stood still. The employer who paid more per hour was buying more per hour.

The electrified shop floor is the largest single reason. In 1899 something under five percent of the mechanical power driving American factories came from electric motors; steam engines turned line shafts that ran the length of a building, and every machine in the shop hung off a belt from the shaft overhead, which meant that the shop’s layout was dictated by the drive train and that the whole apparatus turned whether one machine was working or forty. By 1929 electricity supplied about four-fifths of factory power, and the reason it mattered took thirty years to become obvious: the individual motor freed the machine from the shaft, and the free machine could be put where the work wanted it. The assembly line is a consequence of the electric motor. So is the single-story plant on cheap land outside town, lit by windows and bulbs instead of by the necessity of stacking machines near the engine house. The gain came from the rearrangement, and the rearrangement took a generation of engineers to see.

The automobile industry was the center of gravity, and it is hard to overstate the reach. Registrations went from about eight million cars in 1920 to about twenty-three million in 1929, in a country of thirty million households. Production peaked in 1929 above four and a half million vehicles. The industry consumed something like fifteen percent of the nation’s steel, the great majority of its plate glass, four-fifths of its rubber, and a share of its refined petroleum that turned an illuminating-oil business into a motor-fuel business. It pulled the road along behind it: state and local governments were building highways at better than a billion dollars a year by the late twenties, and paved mileage more than doubled across the decade, which put the tourist cabin and the roadside stand and the filling station into the American landscape and put the country garage out of the blacksmith business. It reorganized where people lived, since a man with a car could live four miles from a streetcar line, and the suburban subdivision followed.

Alfred Sloan is the figure to know here, and he was as different from Henry Ford as one American could be from another. Ford was an intuitive with a genius for one thing and a growing contempt for the people who told him about other things. Sloan was a graduate of MIT, a former roller-bearing manufacturer, cool, courteous, remote, half-deaf, a man who thought about organization the way other men think about mechanics. He took the presidency of General Motors in 1923 from a company that Billy Durant had assembled by buying whatever he liked and had twice nearly destroyed by the same method, and Sloan made of it the model that American corporate management would copy for the next fifty years: the multidivisional firm, divisions run as businesses with their own profit and loss, a general office that allocated capital and left the operating men alone, a controller’s department that could tell you on the fifteenth what happened in the previous month. He arranged the products in a ladder — Chevrolet, Pontiac, Oldsmobile, Buick, Cadillac — a car for every purse and purpose, with a rung to climb as your income rose. He gave the country the annual model, which is to say he introduced the idea that a perfectly good automobile could become undesirable in September. And through the General Motors Acceptance Corporation, founded in 1919, he sold the customer the money to buy the car.

Installment credit is the mechanism that made the consumer-durable economy work. In 1914, consumer credit existed almost solely for purchasing pianos or sewing machines, but by 1929 its use had spread all over. Roughly three-quarters of new automobiles were sold on time. Something like two-thirds of furniture, most washing machines and refrigerators, most radios, most vacuum cleaners. Installment paper outstanding ran to about three billion dollars. The moral resistance was real and it collapsed inside a decade — the country moved from an inherited conviction that debt for consumption was a vice to a practical judgment that a durable good yields its services over years and can reasonably be paid for over years, and it made the move quickly enough that the same household frequently contained both opinions. Rosa keeps her money in the Emigrant Savings Bank and in a coffee tin, and regards a payment book as a species of trap. Connie has one, for the radio, and considers her mother’s coffee tin a symptom of the old country.

Electricity in the home did to the household what the motor had done to the factory. By 1929 something like two-thirds of American dwellings had electric service, up from under a third in 1920, and the figure for cities was close to nine in ten. Wire in the wall made a market out of nothing: the electric iron, then the vacuum cleaner, then the washing machine in about a quarter of wired homes, then the mechanical refrigerator, which was a luxury item at six hundred dollars in 1920 and a mass product below two hundred by 1929, with production running near eight hundred thousand units a year. And the radio, which is the purest case: a consumer good that did not exist in 1920, that reached better than a third of American households by 1929, and that generated in its best year something over eight hundred million dollars in set sales.

The radio also produced the decade’s most instructive corporate story. KDKA in Pittsburgh broadcast the Harding–Cox returns in November of 1920 to an audience that could be counted in the hundreds. Within three years there were several hundred stations and a serious problem, which was that nobody knew who would pay for the programs. The manufacturers broadcast in order to sell receivers. Department stores broadcast in order to be liked. The solution turned out to be the advertising model, which was arrived at by AT&T. The phone company reasoned that a broadcasting station was a species of telephone booth, and that a man who wished to address the public should be charged for the time — and it sold the time, the first commercial going out over WEAF in New York in the summer of 1922, ten minutes on behalf of an apartment developer in Queens, for fifty dollars. AT&T then wired its stations to one another over its own long lines, which no competitor could do, and invented the network. Having built both halves of the arrangement every broadcaster in the world would use for the next century, the telephone company concluded that a public quarrel with the Radio Corporation of America over patents was poor business for a regulated monopoly, and sold the whole thing in 1926 to the Radio Corporation of America, which made it the National Broadcasting Company. David Sarnoff, who had come to America from a village in Russia at nine, sold papers in Hell’s Kitchen, gone to work at fifteen as a Marconi office boy, and made himself into the man who understood before anyone else that radio’s future lay in one transmitter and a million receivers, ran it. Owen D. Young, whom you met in Paris on the Dawes committee, was its chairman: the General Electric lawyer had assembled RCA in the first place, at the Navy’s urging, to keep American wireless out of British hands.

And the rest of the roster, quickly, because the decade was crowded. DuPont came out of the war with a powder fortune and spent the twenties turning itself into a chemical company: rayon, cellophane, lacquers, the paint that made Sloan’s annual color change possible. Charles Kettering at General Motors gave the world the electric self-starter, which sold more automobiles to women than any advertisement ever written, and then tetraethyl lead, which stopped engine knock and permitted high compression, and about which the health questions were raised at the time, loudly, and set aside. Aviation went from a stunt to an industry in five years, on the back of the Air Mail Act of 1925, which handed the routes to private contractors, and Lindbergh’s flight in 1927, which handed the industry a public. The chain store went from a novelty to sixteen thousand A&P outlets. The motion picture business, having found its voice in 1927, was selling something like eighty million admissions a week in a country of a hundred twenty million people.

This is a very great deal of building, and it was real. The houses in it are still standing. The habits formed in it — the car, the radio, the payment book, the weekend — are the habits of the country we live in. Whatever else must be said, the achievement is the durable part.

[ PAUSE FOR QUESTIONS ]

Part Four: Twenty-Five Thousand Banks

Now turn from what the decade built to the financial plumbing it built it through.

In 1929 the United States had about twenty-five thousand banks. Canada, with a tenth of the population and a comparable frontier, had eleven. Britain had five that mattered. The American figure had been over thirty thousand in 1921 and had come down mainly by way of the six thousand failures the previous lecture counted, and even at twenty-five thousand it was more banks than the rest of the industrialized world put together.

The reason is that Americans had decided, over a century, that they wanted their banks to be local to their community. Branch banking had been the losing side of an argument that ran back to Jackson and had been settled in the state legislatures, one at a time, by country bankers who did not want a branch of a city bank across the street and by farmers who believed, from long and bitter experience, that money controlled from a distance would be lent at a distance. So a majority of states forbade branching outright or confined it to the head-office town. The McFadden Act of 1927, which is the era’s principal banking legislation, was passed to let national banks compete with state banks in the cities that permitted branches — and it wrote the state-by-state rule into federal law, which is to say that the last great banking statute before the crash considered the question of fragmentation and voted for more of it.

Consider what a unit bank in a farming county actually is. It has one office. Its capital is a few tens of thousands of dollars, put up by local men. Its deposits are the deposits of people within a day’s drive. Its loans are written against the land and the businesses within that same day’s drive. It has, therefore, precisely one asset: the local economy. When wheat is two dollars, every loan it holds is good, and it is the soundest institution in the county. When wheat is a dollar, every loan it holds goes bad at the same time, and there is nothing else on the balance sheet to carry the loss. Diversification, in a unit banking system, is a thing that cannot be done at any price. Frank’s bank in Pawnee County failed in 1926 because Pawnee County failed, and no amount of prudence inside the bank could have made it otherwise.

The system was tied together by correspondent balances, and this is the part that matters for what comes later. A country bank kept its reserve as a deposit at a bank in a reserve city — Kansas City, Chicago — which kept part of its reserve in New York, which put the money to work in the one market that could absorb it and return it on demand, the call money market of Wall Street. The pyramid was old, it was rational at every level, and it meant that a cotton crop in Alabama and a call loan in New York were joined by a chain of ledger entries, and that pressure at either end traveled to the other.

The Federal Reserve had been built in 1913 to fix exactly this, and by 1929 it had fixed part of it. Its record in the decade was, by the lights of the time, excellent: it had carried the country through the war, through the 1920–21 deflation, and through eight years of stability in prices that no previous generation had known. But it was a young institution still working out what it was. About nine thousand banks belonged to it, out of twenty-five thousand; the members held the large majority of the country’s deposits and included nearly every institution of size, and the missing sixteen thousand were the small state banks in the counties, outside the discount window, outside the examination, outside the system’s view. There was no deposit insurance. Eight states had tried guarantee funds between 1907 and 1917 — Oklahoma, Kansas, Nebraska, Texas, Mississippi, the Dakotas, Washington — and every one of them was broken or dead by 1930, killed by the same rural failures, so that the experiment’s verdict, as of the twenties, was that deposit guarantees did not work.

And the Federal Reserve’s own structure was a fragmentation problem in miniature. Twelve reserve banks, each with a board and a governor and a district’s opinions, and a Board in Washington with the authority to approve and a permanent uncertainty about whether it was supposed to lead. In practice the system had been run for a decade by one man. Benjamin Strong, governor of the New York bank, was a Bankers Trust man of great force and considerable subtlety, half-consumed by tuberculosis for most of his tenure, who invented open-market operations more or less by accident in 1922 — the reserve banks had been buying government securities to earn their expenses and noticed the effect on the money market — and who understood earlier than his colleagues that the central bank of the world’s creditor nation had an international job to do. He was the friend of Montagu Norman at the Bank of England, and the two of them, with Schacht in Berlin and Moreau in Paris, reconstructed the gold standard in the middle twenties out of conversations at Strong’s rented houses.

Strong died on the sixteenth of October, 1928.

What followed his death was the argument the system had never had to settle, and it was an argument about instruments.

The Board in Washington held to the real bills doctrine — the theory that credit extended against actual goods moving in actual commerce is self-liquidating and safe, while credit extended against securities is speculative and sterile. On that theory the trouble lay in the use of the money, and the cure was to police the use. The Board’s instrument, which it called direct pressure, was a letter sent in February of 1929 to every member bank in the country, instructing it that a bank which borrowed at the discount window while lending on securities was abusing the privilege, and directing the reserve banks to examine the members’ loan books and ask questions. The New York bank, under Strong’s successor George Harrison, answered that money is fungible — a bank that borrows a dollar at the window and lends a dollar on the Street has done nothing anyone can trace, since dollars carry no labels — and that the one honest instrument is the price of the money. New York asked the Board for a rate increase ten times in the first half of 1929 and was refused ten times.

Direct pressure was tested in March, and it failed in public. Frightened by the Board’s letter, the banks pulled back from the call market; the call rate went to twenty percent on the twenty-sixth of March; brokers could not fund their positions, and the market began to break. That afternoon Charles E. Mitchell — head of the National City Bank, the largest in the country, whose salesmen had placed securities with Americans by the hundred thousand — announced that National City would put twenty-five million dollars into the call market to keep it orderly, and would borrow at the Federal Reserve’s own discount window to do it if the money were needed. The call rate came down that hour. The market steadied and resumed its advance.

Notice what the announcement was. Mitchell had taken the Board’s February instruction, which forbade precisely this, and declined it by name, in the newspapers, from the biggest bank in America — while sitting as a Class A director of the Federal Reserve Bank of New York, elected to that seat by the member banks to whom the letter had been addressed. Senator Carter Glass, who had written the Federal Reserve Act, rose in the Senate and demanded that Mitchell resign from the reserve bank’s board. Mitchell did not resign. The Board did nothing. And everyone watching drew the conclusion that direct pressure was a request.

The discount rate finally went to six percent on the ninth of August, five months late, aimed at a market that was paying twelve.

[ PAUSE FOR QUESTIONS ]

Part Five: The Money Comes Home

Pick up the German story in 1928, when the flow reversed, and it reversed for the plainest reason in finance.

A German municipal bond paid eight percent and locked your money up for twenty years. A call loan in New York paid eight percent, and nine, and twelve, and was repayable tomorrow morning. American long-term foreign lending fell by something like half in 1928 and again in 1929. The money came home to Wall Street, where the returns were better and the exit was closer. Germany’s borrowing did not stop when Germany’s need stopped, or when Parker Gilbert’s warnings were finally heeded. It stopped when the money found something else to do.

The diplomacy proceeded as though nothing had happened. The Young Plan of 1929 — negotiated by Owen D. Young, who had traveled from the Dawes committee to the chairmanship of RCA and now back to Paris — rescheduled the German payments once more, on a fifty-nine-year timetable running to 1988, and created the Bank for International Settlements to administer them. It was signed in the summer of 1929, in the same season that the mechanism it depended on was quietly shutting down.

And the thing the money had found to do is the famous part of this story. The famous version of it is wrong in a way that hides what is interesting.

Start with the size of the crowd. In a country of a hundred twenty million people, something between one and a half and two million had an account with a broker. The number of margin accounts — accounts carrying stock on borrowed money — was on the order of six hundred thousand. The shoeshine boy is a good story and a poor statistic. The great majority of Americans in 1929 owned no securities of any kind, and the great majority of those who owned securities owned them outright and meant to keep them. The speculation was a minority activity, conducted in the main by people with money. Its importance lies in what it was tied to.

Now the numbers of the thing itself. The Dow Jones industrial average stood at about 64 in August of 1921. It reached 100 in 1924, and 200 in December of 1927, and 300 by the end of 1928, and 381 on the third of September, 1929. The move of the last twenty months is the part that separated itself from the earnings, which were rising handsomely and were not rising like that.

Brokers’ loans are the vital sign. A margin account is a loan: the customer puts up part of the price, the broker lends the rest and holds the stock as collateral, and the broker in turn borrows the money in the call market, renewable daily, secured by the same stock. The total of brokers’ loans ran around a billion and a half in the early twenties, reached four and a half billion at the end of 1927, and touched eight and a half billion in the first week of October, 1929. That growth is the boom’s fuel gauge and everybody could read it, because the New York Federal Reserve published the figure every Thursday, and by 1929 the Thursday number was quoted in barbershops.

Here is the feature of the call market that deserves the closest attention, since it is the one the histories skate past. The money in it stopped being bank money. Call loans paid eight, ten, twelve percent, at times twenty, with an instant exit and the best collateral going — and a corporation with cash in the treasury, looking at a return like that against the six or seven percent it might earn on a new plant, did the arithmetic that any treasurer would do. Standard Oil of New Jersey had on the order of sixty-nine million dollars a day out in the call market. Electric Bond and Share had more. By 1929 more than half of the eight and a half billion came from lenders other than banks: corporations, wealthy individuals, foreign accounts, and a river of money from the interior arriving through those correspondent balances. It was called money “for the account of others,” and its distinguishing property was that no central bank had any authority over it whatever. The Federal Reserve could raise its rate to six percent and watch, because a company that could get twelve on the Street was untroubled by what the discount window charged its bankers.

[ PAUSE FOR QUESTIONS ]

Part Six: Trusts, Pools, and the Case for the Price

The investment trust is the era’s great financial invention, and the way to understand it is to build it in three steps.

Start with a mutual fund, which is what the original English version amounted to and what the idea eventually settled back into. You hand your money to managers, they buy a spread of stocks for you and the other investors, and you own a slice of the portfolio. The portfolio rises five percent and your holding rises five percent. Diversification and professional attention, for a fee, at a price a clerk can afford. It is a thoroughly good idea and it deserves its credit.

Now let the fund use leverage. Our trust raises a hundred million dollars, and it raises half of it by selling bonds and a quarter by selling preferred stock, both at a fixed six percent, and the last quarter by selling its own common — and the common is the piece marketed to the public as the opportunity. The whole hundred million goes into blue chips. The bonds and the preferred have fixed claims and no share in the gain, so every dollar the portfolio moves lands on the common. The portfolio rises twenty percent, to a hundred twenty; the senior claims take their seventy-five; the common, worth twenty-five in the morning, is worth forty-five at night. The portfolio moved a fifth and the common moved four-fifths. The arithmetic runs the same distance downhill. And the man holding that common has a fourfold levered position in American industry, arrived at without borrowing a dollar, signing a margin agreement at a broker’s, or being told that he is levered at all.

Now let a levered fund buy the common stock of other levered funds, and lever itself in turn. The bottom trust owns General Electric and Allied Chemical. The middle trust owns the bottom trust’s common. The top trust owns the middle trust’s common, and the top trust’s shares are what the salesman brings to your door. General Electric moves five percent; the bottom trust’s common moves twenty; the middle trust’s common, for which that twenty percent is the whole portfolio, moves eighty; the top trust’s common moves three hundred twenty. The end result is a security whose volatility is a large multiple of the volatility of the shares underneath it, sold to a man who believes he has bought a diversified interest in sound American companies — which, in a sense that would have been very hard to explain to him, he has.

The exhibit is Goldman Sachs, whose conduct in this line was ordinary for the moment and famous afterward. The Goldman Sachs Trading Corporation was launched on the fourth of December, 1928, at a hundred four dollars a share, and bought its own shares to support the price, a practice then legal. In July of 1929 it sponsored the Shenandoah Corporation, which was oversubscribed sevenfold and opened at nearly double its issue price on the first day. Three weeks later Shenandoah sponsored the Blue Ridge Corporation. Blue Ridge would take your General Electric or your Allied Chemical in exchange for its own shares, so that a man could contribute a sound security at the bottom of the ladder and receive back a claim three tiers of gearing above it. The Trading Corporation’s shares reached three hundred twenty-six dollars in the summer of 1929. They could be bought in 1932 for about a dollar and change. The purest specimen of the form was the United Founders Corporation, which had been assembled out of an initial five hundred dollars and controlled six hundred eighty-six million by 1929.

Roughly seven hundred trusts existed by 1929, selling securities at something like a billion dollars a month at the peak. And the tiers were never as clean as the round numbers suggest — each trust held other things besides the common of the one below it, so the real multipliers were untidier. The mechanism is exactly that, and its distinguishing feature is that nothing in it required the buyer to borrow, to understand gearing, or to know it was there.

The operators are worth meeting, because they were public men and the public followed them like ballplayers. The pool was the standard device: a syndicate would accumulate a stock quietly, then trade it back and forth among themselves to make the ticker show volume and a rising price, feed tips to friendly newspapermen, and sell into the crowd their activity had attracted. Michael Meehan, an Irishman out of the theater-ticket business who held the RCA specialist’s post on the floor, ran a pool in that stock in March of 1929 which is fully documented because the Senate later took the syndicate’s books: seven days of operations, and the participants divided something near five million dollars. Arthur Cutten, the Canadian farm boy turned Chicago grain speculator. Jesse Livermore, the Boy Plunger, working from a suite with a private wire and a code. William Durant, who had built General Motors twice and lost it twice and was now the biggest bull on the Street, and who went to see President Hoover in April of 1929 to ask him to call off the Federal Reserve. Durant would be operating a bowling alley in Flint in the 1940s.

And on the respectable side, the arguments for the price. They were not foolish, and this is the part that repays sympathy. The country’s output really had grown by half in eight years. Electrification and the internal combustion engine and the chemical laboratory really were new — the men saying “this time is different” were pointing at things that were, in fact, different. Edgar Lawrence Smith had published a book in 1924 showing that over long periods common stocks had beaten bonds, and the book was correct, and its lesson was widely misread as a statement about next Tuesday. John J. Raskob, the DuPont and General Motors financier who was chairman of the Democratic National Committee, published in the Ladies’ Home Journal in August of 1929 a piece called “Everybody Ought to Be Rich,” which worked out that fifteen dollars a month put into common stocks would come to eighty thousand in twenty years. Irving Fisher of Yale, the foremost economist in America and a genuinely great one, said in October that stocks had reached what looked like a permanently high plateau.

The warnings were there too, and they had been there for years, which is what made them easy to discount. Paul Warburg — one of the fathers of the Federal Reserve Act — wrote in March of 1929 that unrestrained speculation would end in a general depression, and was told in the financial press that he was sandbagging American prosperity. Alexander Dana Noyes of the Times had been sour since 1927. Roger Babson told a business conference on the fifth of September, 1929, that a crash was coming and it would be terrific, and the market fell that afternoon and rallied the next day, and Babson had been saying it since 1926, which is the trouble with Babson.

[ PAUSE FOR QUESTIONS ]

Part Seven: What a Fad Costs

Set the three exposures side by side and describe them precisely, because precision here is the whole of the historian’s job.

A banking system of twenty-five thousand single-office institutions, sixteen thousand of them outside the Federal Reserve, each one lending against one local economy, with no deposit insurance and no ability to diversify, tied to New York by a pyramid of correspondent balances. Two and a half billion dollars of German paper and four billion more of other foreign paper in American portfolios, sold hard, examined lightly, servicing dependent on a flow of new lending that had already turned around. Eight and a half billion of call loans, over half of it supplied by lenders no central bank could reach, secured by shares whose price was the collateral for the loans that were buying the shares.

Now here is what those facts do and do not entitle us to say.

They do not entitle us to say the prosperity was hollow. The prosperity was the most substantial thing that had happened to the American standard of living since the settlement of the continent, and it was built out of electricity, engines, chemistry, and management, none of which was a financial trick, and all of which was still there in 1932 when the securities were worth a tenth of their price. They do not entitle us to say the structure had to fail. A leveraged structure is a structure that transmits a shock with amplification, and whether it receives a shock, and how large a shock, and what is done about it once it arrives, are separate questions with separate answers.

The proof of that last point is sitting in the middle of the decade, and it is why I have saved it. In 1925 the state of Florida underwent a speculation in real estate that had every feature of a classic mania and several new ones. Binder boys ran contracts up and down Flagler Street, reselling the same lot four times in a morning at margins of ten percent. Subdivisions were sold in tracts that turned out to be underwater. Miami’s building permits went from a few million dollars to over sixty million. Then in the autumn of 1925 the railroads embargoed everything but food into the peninsula because the cars could not be unloaded, and the buyers stopped arriving, and the whole thing came apart through 1926, and in September of 1926 a hurricane went across Miami and killed several hundred people and finished the argument.

A great many fortunes were destroyed. Florida’s banks fell over in rows. And the United States economy in 1927 grew.

That is the fact to hold against the temptation of hindsight. A speculative collapse can be an expensive local event that the country walks past. The depression of 1920–21 was, on some measures, sharper than the first year of the one that followed 1929 — wholesale prices fell by nearly forty percent, unemployment reached near twelve percent — and it was over in eighteen months, and it did not take the banking system with it. What made the difference in the second case was made of what happened next — of what a great many men in Washington and New York and London and Berlin decided to do, over three years, one decision at a time, most of those decisions falling after the last date this series will reach.

What the exposures did determine was the shape of the channels. Given a shock, the call market would liquidate faster than any market had ever liquidated, because the collateral and the loan were the same asset. Given a fall in the securities, the investment trust’s common stock would go to nothing, because that is arithmetic. Given a contraction of American lending, Germany would face a payments crisis, because the payments were being made out of the lending. Given trouble in a farming county, a bank would fail, because the bank was the county. None of this made anything inevitable. All of it made certain things fast.

And there is one more item, which belongs to no ledger. A fad costs something even when it pays. The American investor of 1927 who bought the bonds of a German city was doing something no American investor’s father had ever done, and he was doing it on the recommendation of a salesman who had learned his trade selling Liberty Bonds and knew a great deal about closing and nothing about Rhineland municipal finance. The information was available — Parker Gilbert published it — and the machinery for using it had not been built, because nobody had needed it before. The same is true of the trusts, and of the pools, and of the Thursday brokers’-loan figure that everyone read and nobody knew how to interpret. This was a country doing several difficult things for the first time simultaneously, with institutions designed for other purposes, and the arrangements that would eventually govern them — the securities acts, the deposit insurance, the margin requirements, the modern Federal Reserve — were all written afterward, by the people who had watched.

[ PAUSE FOR QUESTIONS ]

Part Eight: September 1929

Finish where the households are, on a fine early-autumn day with the average at 381.

On the South Side of Chicago, Isaiah is past sixty, off the killing floor for six years, and owns a three-flat south of Forty-Seventh Street free and clear, which he paid off out of rents and his wife’s laundry money and a frugality his tenants regard as biblical. He owns no securities. He has never met a broker and would not be received by one. His money is in a bank on State Street owned by Black Chicagoans and lent to Black Chicagoans, a unit bank of exactly the kind this lecture has described, holding mortgages within a mile of its door in a neighborhood the rest of the city has drawn a line around. Isaiah is a rich man by the standard of the Delta cabin he left in 1910, and every dollar he owns is invested in one square mile of Chicago, and this arrangement was not a choice.

On the Lower East Side, Connie is twenty-nine, makes twenty-two dollars a week on a comptometer, and owns fifteen shares of a public utility purchased through an odd-lot house on the recommendation of a man in her office who reads the financial page aloud at lunch. She paid part down. The shares have gone up and she has told her mother nothing about any of it. Rosa keeps banknotes in a coffee tin behind the flour, on the theory, formed in Calabria and confirmed in New York in 1907, that a bank is a building where other people’s money is kept. The two of them are, in this one respect, going to have an interesting conversation in about three years.

In Boston, Henry is past seventy-five, and holds railroad bonds and utility bonds and the stock of two Massachusetts textile mills that have been losing money to South Carolina since the war, and refuses to sell them for reasons he characterizes as loyalty and his son characterizes as stubbornness. His son Charles, home eleven years from the Meuse-Argonne, has been listening to dinner guests explain that common stocks have permanently changed their nature, and has been moving out of them since the spring, and cannot fully explain why, and has said so to no one but his wife. He has heard a mechanism described as perfected once before, in the spring of 1913, and the sound of it makes his teeth hurt.

And in Pawnee County, Kansas, a man of fifty-one sits at a kitchen table after the battery radio has gone off. Two of the six farms touching his have been foreclosed. His bank in town failed three years ago, and the note is held now by a bank two counties east, owned by men who know him as a folder in a drawer. The note falls due in March of 1930. Frank owns not one share of anything, and has never in his life spoken to a person who did.

He has been reading in the papers about the stock market. He does not understand it, and he resents it, and he has formed the opinion — sitting in a house without electric light, in the ninth year of the ruin of his own trade, in the year of the greatest prosperity his country has ever known — that the men in New York are being paid a great deal of money for doing nothing at all, and that it cannot go on.

He is going to be right, for reasons that have nothing to do with why he thinks so, and it is going to do him no good whatsoever.

[ END OF LECTURE ]

End of Lecture 2.7

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Roughly speaking, we have three major political movements — the MAGA right, the socialist left, and the “woke” left. But none of these seems especially interested in the kind of smart, reasonable policies that would significantly improve the material well-being of regular Americans. Their economic programs are all pretty bad.

These factions are all “brokenist,” in that they are anti-establishment and distrustful of existing institutions. When it comes to economics, Noah Smith and I are both institutionalists, in thate we believe that mainstream economics is basically right.

When it comes to higher education, the institutionalist view is that academia has made many contributions to America. Therefore, its problems should be addressed with reforms, not wholesale replacement.

The brokenist view is that higher education is hopelessly dysfunctional. It needs to be replaced. I am inclined toward the brokenist view.

But when it comes to economics, I am against the brokenists. On the left, the brokenists advocate socialism. They are wrong.

On the right, the brokenists use “neoliberalism” as a boo-word. They claim to be superior to mainstream economists. The particular brand of right-wing brokenism that appeals to JD Vance believes that mainstream economics is harmful. As Akash Chougule writes,

JD Vance has been making an argument similar to those in DSA, simply wrapped in the language of conservatives: that free markets undermine human dignity because they are incompatible with the moral order.

In fact, the Catholic integralists, like Patrick Deneen and Adrian Vermeule, reject the Enlightenment ideas that shaped America. They want to turn the clock back to before John Locke.

Here, I am going to state three economic principles that I believe are absolutely true. Brokenists who reject these principles are wrong to do so.

1. Prices and profits serve to reward people for productive activity and to steer resources toward their best uses. Rather than being set by evil captains of industry, prices and profits emerge from decentralized activities and complex interactions within markets.

2. Living standards improve as a result of innovations that are rigorously tested by the market. New ideas are experiments. They are evaluated by the price system. Evolution, guided by profits and losses, keeps the best experiments and tosses aside failures and obsolete activities.

3. The incentives that regulate market activity work much better than the incentives that apply to government officials. The market often achieves good results that are beyond the intentions of individual households and firms. Government activity often appears to have better intentions but ends up leading to worse results.

These propositions are not intuitively obvious to the average person. Educated elites can understand them. But in the political arena, it can pay for someone in the elites to be a demagogue who caters to the average person’s lack of economic understanding. That is the problem that troubles Noah Smith and me nowadays.

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Vice President Vance Agrees with the DSA, and They're Both Wrong

Skepticism of free-market capitalism…

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America's political economy is pretty bleak right now

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Then I asked Claude to put it into a format for this article. I have not changed a word. It is uncanny the way that Claude captured the key points that I would have made had I tried to do something like this myself.

The Three Languages of Politics — and the Psychology Beneath Them

Adapted from a talk. The slide deck is attached at the end of the post.

Start with a case. On April 29, the Supreme Court ruled 6–3 in Louisiana v. Callais that Louisiana’s second majority-Black congressional district was an unconstitutional racial gerrymander, effectively gutting Section 2 of the Voting Rights Act. The vote split along ideological lines.

I am not going to ask who was right. I am going to ask a different question: how would you expect a progressive, a conservative, and a libertarian each to react?

The progressive says: this strips Black voters of meaningful representation. The Voting Rights Act was a hard-won protection for a marginalized group, and the ruling empowers the oppressors.

The conservative says: this upholds colorblind law. Race-conscious districting is itself racial classification, and the state must not sort citizens by race.

The libertarian says: government should not be engineering districts by race at all — the original gerrymander and the VRA-mandated remedy are both examples of the state sorting people by race, which is the problem, not the solution.

Notice that all three reactions are internally coherent. None of them is stupid, and none of them is evil. They are not even contradicting each other the way factual disagreements do. They are framing the same event in different moral vocabularies.

That is the phenomenon my Three Languages of Politics tries to describe.

The model

The claim is that when politically engaged Americans communicate about political issues, they tend to fall back on one of three axes — and the axis someone reaches for is a reliable signal of political tribe.

Progressives communicate along the oppressor–oppressed axis. The fundamental question: who is being victimized, and by whom? Conservatives communicate along the civilization–barbarism axis: what threatens the institutions and norms that make civilized life possible? Libertarians communicate along the liberty–coercion axis: where is the state expanding its power over individuals?

Two disclaimers, both easy to miss, both important. The model is not a theory of ideology — it does not explain why anyone becomes progressive, conservative, or libertarian, and each of those traditions is deeper than its slogan. And it is not a map of moral reasoning. The axes are not how people arrive at their conclusions. They are the language people reach for when talking about conclusions already reached.

That gap — between reasoning and language — is where the interesting psychology lives.

Here is the observation that unlocks it: everyone opposes the bad thing. No one is for oppression. No one is for barbarism. No one is for coercion. These are not competing values; they are universally shared negative values. What differs is which threat each tribe organizes its identity around — and which one it accuses the other tribes of enabling. Conservatives accuse the others of being soft on barbarism. Progressives accuse the others of defending oppression. Libertarians accuse both of expanding coercion. The three languages are less three sets of values than three axes of demonization.

Why do we talk this way?

The model describes a pattern. It does not explain it. For that, you have to go back a long way before the Voting Rights Act.

Politics precedes language. Frans de Waal’s chimpanzees build alliances, trade favors, betray partners, and reconcile — without a word. Alpha status in a chimp colony is won by coalition management, not raw strength; a strong chimp with poor alliances loses to a weaker chimp with better ones. Political instincts are products of evolution, not culture.

And our minds bear the marks. Leda Cosmides and John Tooby showed that people fail an abstract logic puzzle that they solve instantly when the identical puzzle is framed as catching a cheater. The mind is not a general-purpose reasoner. It runs specialized modules — cheater detection, us-versus-them, loyalty tracking — built for life in coalitions.

Jonathan Haidt supplies the next piece: intuition first, reasoning second. His metaphor is a rider on an elephant. The elephant — our automatic moral intuition — moves first. The rider — conscious reasoning — mostly writes the elephant’s press releases. We experience ourselves as reasoning toward moral conclusions; mostly we are rationalizing conclusions already reached.

Kurt Gray and Daniel Wegner add the template those intuitions run on. Every moral story casts two roles: a suffering victim and an intentional villain.

Each political language is a standing casting decision. Progressives cast the marginalized as victim and the powerful as villain. Conservatives cast civilization as victim and disorder as villain. Libertarians cast the individual as victim and the state as villain. Look at how progressives and conservatives frame Gaza: near mirror images, the same events with the victim and villain roles swapped.

Dan Williams completes the picture with an economic insight. You cannot believe just anything — beliefs need justifications you find genuine. But the belief usually comes first, from tribe, intuition, or emotion; the justification is hired afterward. And when millions of people need the same justifications, that demand creates a market. Political media does not sell information. It sells justification. This is why counterargument bounces off: you are not engaging a reasoned conclusion, you are engaging the rationalization of a tribal commitment. Refute one rationalization and you merely trigger a search for a better one.

The darkest product in that market is what David McRaney calls the illusion of asymmetric insight: the conviction that you understand your opponents better than they understand themselves. The progressive knows that colorblindness is really cover for preserving hierarchy. The conservative knows that climate policy is really cover for controlling people. The libertarian knows that everyone else’s compassion is really a lust for power. Asymmetric insight ends dialogue before it starts, because it declares the other side’s stated reasons not worth engaging.

Put it together and the conclusion is uncomfortable. The three languages are not reasoning. They are signaling. Speaking your tribe’s axis is good for three things: reassuring others of your loyalty, raising your status among those who agree, and whipping up hostility against the other tribes. What it is not good for is persuading anyone outside the tribe. Most political commentary does not open minds on the other side. It closes minds on its own side.

Does the model need a fourth axis?

I have come to think the three languages may not fully capture the current moment. The civilization–barbarism axis describes a conservatism with intellectual roots — Burke, Kirk, ordered liberty. Much of Trump-era politics is animated by something else: hostility to a credentialed elite seen as having captured the institutions.

Borrowing from Alana Newhouse, I call this the brokenism axis. It is not a replacement for left–right; it is a second dimension that cuts across it.

Left-institutionalists want to reform the system from within. Right-institutionalists want to restore the constitutional guardrails. Left-brokenists think the system is corrupt root and branch. Right-brokenists want to dismantle the deep state. Institutionalists want to repair the institutions; brokenists want to replace them. Whether this is a fourth language, a cross-cutting dimension, or just civilization–barbarism turned against domestic institutions is a question I regard as genuinely open.

What to do about it

The three languages are tools of fast political thinking — ready-made frames that settle questions without engaging their complexity. The prescription is to slow down.

Notice your default axis; most of us reach for the same language automatically. Learn the other two — not to convert, but to see how the issue looks from there. Try to pass the Ideological Turing Test: state the opposing view so that its actual holders would say, yes, that is our position. And when you catch yourself thinking “I know their real motives,” treat that as a warning sign, not an insight.

One last problem. If asymmetric insight is real, then I understand progressives and conservatives less well than I think I do. That applies to everything you have just read. Bear it in mind when you consume political commentary — including mine.

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One mistake that Claude made was to try to connect the boll weevil infestation to a crop in cotton prices. Once I pointed out that this was wrong, Claude admitted its mistake.

I still might not be happy with this product.

America 1914–1930

Lecture 2.6

The Cheap Loaf: Labor Peace and Farm Depression, 1920–1929

Part One: The Guarantee Lapses

On the thirty-first of May, 1920, an agency of the United States government called the Grain Corporation stopped buying wheat, and the most successful economic promise the federal government had ever made to the American farmer expired on schedule, quietly, with no ceremony and almost no notice in the eastern press.

The promise had been made in 1917. The Food Control Act authorized a minimum price for wheat; Wilson set it at two dollars and twenty cents a bushel, and the Grain Corporation stood in the market to make the figure real. The reasoning was patriotic arithmetic. The war had removed something like forty million acres of European tillage from production and put the men who had worked it into trenches or graves, and the Allies had to be fed out of North America or lose. So Washington told the American farmer to plant, and guaranteed that planting would pay, and the American farmer answered with the largest expansion of cultivated acreage in the nation’s history. Wheat went from something near forty-seven million harvested acres in 1913 to nearly seventy-four million in 1919. The plow went into the shortgrass country of western Kansas and eastern Colorado, into land that no one had ever asked to grow wheat and that would, in fifteen years, take its revenge in the form of a dust cloud visible from Washington. Herbert Hoover’s slogan was that food would win the war. The farmer believed it, and the interesting thing is that he was substantially correct.

Frank was thirty-six when the war ended, farming his father’s original quarter-sections west of the Arkansas River in Pawnee County, Kansas, plus the adjoining land he had bought in the fat years with borrowed money — four hundred and eighty acres in all. In 1919 he did what every voice he respected told him to do. The county agent said the world’s hunger was permanent. The banker in town said the same, and lent on it. The Department of Agriculture said Europe would need American bread for a decade. Land in the county was changing hands at three hundred wartime dollars an acre, and men who had held their ground for thirty years suddenly discovered that they were rich in a way that could be counted, which is the most dangerous discovery a careful man can make. Frank borrowed. He borrowed the way farm money had always been borrowed in Kansas: on a five-year note, principal due at maturity, renewed at the bank as a matter of course, because such notes had been renewed as a matter of course for forty years and because the banker had known Frank’s father before Frank was born.

Ezra — seventy-four that year, installed in a cottage in town from which he issued opinions on subjects he had not been consulted about — told his son that a man who borrows against good times has agreed to hand the bad times a weapon. Frank signed anyway. Every neighbor he had was signing.

The 1920 crop came in under the last months of a market that still remembered the guarantee, and it brought good money. Frank hauled it to the elevator in July and August at better than two dollars, and it was the last good money the farm would see for nine years, and no one standing on the elevator scale that summer had any idea of it.

What happened next happened fast, and it happened to everything, and this is the first thing to hold: the collapse of 1920 was general. In January the Federal Reserve Bank of New York put its discount rate to six percent; in June it put it to seven, the highest in the young System’s history, and the other Reserve Banks followed. The System had spent the war as an engine for financing the Treasury and had come out of it with the price level up something like a hundred percent from 1914 and its gold reserve looking thin, and in 1920 it decided to break the postwar boom, and broke it. Industrial production fell by a fifth inside a year. Unemployment, which had been near two percent, went to something like twelve. Wholesale prices fell about forty percent from their peak — the sharpest deflation in the country’s history, sharper than anything in the 1930s, compressed into eighteen months.

Industry took that blow and got up. By the middle of 1922 the factories were running again, and by 1923 the decade the country would remember had begun.

Agriculture took the same blow and stayed down for nine years, and the difference between those two sentences is the whole subject of this lecture.

The numbers on the farm side are worth saying slowly. The index of prices received by farmers, against a 1910–1914 base of one hundred, stood at two hundred eleven in 1920 and one hundred twenty-four in 1921. In a single year, farm prices fell by something over forty percent. Wheat that brought better than two dollars in the summer of 1920 brought about a dollar in the summer of 1921. Corn went from a dollar and a half to the low fifties, and in the winter of 1921 farmers in Iowa and Nebraska burned corn in their stoves, because corn was cheaper per unit of heat than coal, and a man with a crib full of a commodity nobody would buy and a cold house in February is capable of an arithmetic that will look, in the newspapers of the eastern cities, like a symbol.

Frank did not burn anything. He did the sum that every farmer in the wheat belt did that winter, and the sum came out like this: his costs — the note, the taxes, the interest, the machinery payments, the freight rate the railroads charged him, which had gone up in 1920 and showed no interest in coming down — were all written in dollars fixed in 1919. His income was written in a price set in Liverpool, in dollars that had just been made scarce and precious by his own government’s central bank. He had borrowed cheap money and would now repay in dear money, out of a crop whose price was set by strangers on another continent.

Follow the bushel he sold anyway, because he had to sell. It went into the elevator at the siding, into a boxcar, east to the terminal elevators, to a mill, and into a bakery, and on a morning in 1922 some part of it was sitting on a kitchen table on the South Side of Chicago, in the form of a loaf that cost a nickel less than it would have cost two years before.

And there, on that table, the ruin of Pawnee County appeared under a different name. It was called prosperity.

[ PAUSE FOR QUESTIONS ]

Part Two: The Raise the Employer Signed

Isaiah was in his late fifties in the middle of that decade, and he had come off the Delta in 1910 and spent a dozen years on the killing floor at Armour, and he left it in 1923 with his knees gone and an opinion of the packers that had hardened permanently. His wife took in washing from Hyde Park. In 1920 he bought a three-flat south of Forty-Seventh Street, and he paid it off in nine years out of rents, laundry money, and a frugality his tenants regarded as biblical.

Somewhere in that ledger, uncounted and unremarked, sits the cheap loaf.

Here is the arithmetic that the decade ran on, and it is worth doing slowly, because the popular version of it is wrong in a way that hides the interesting part.

Money wages in American manufacturing did move. Average hourly earnings ran about fifty-six cents in 1920; the slump cut them to about forty-nine by 1922; they were back to fifty-two and a half by 1923 and about fifty-six and a half by 1929. From the trough of 1922 to the end of the decade the money wage rose by roughly a sixth.

The cost of living, across those same years, did not move at all. From 1923 to 1929 the index sits within a point or two of itself — six years of a price level standing perfectly still, which is a thing that had not happened in the working lifetime of any man on the killing floor at Armour.

Put the two together and you have the decade: a money wage rising by a sixth against a price level that stood still, which delivered the American industrial worker a real hourly wage something like a fifth higher in 1929 than in 1920. The gain arrived by the most ordinary route available. The number on the pay envelope got bigger.

Which is where the farm depression enters, and it enters in the second half of the sentence rather than the first. Compare the boom the first series described. From the late 1890s to 1914, American money wages rose respectably, decade over decade — and the price level rose right alongside them, so that the real wage of an American workingman crawled, and he spent twenty years watching his pay go up and his standard of living stay roughly where it was, and this experience is a large part of what the word progressive was doing in his mouth. A boom that raises the money wage and the cost of living together delivers nothing. Every American boom before this one had done exactly that.

This one did not, and food is the largest single reason. The Bureau of Labor Statistics went into the homes of American wage earners after the war and did the most thorough survey of family spending anyone had yet attempted, and it found food taking something on the order of thirty-eight cents of every dollar the family spent — more than shelter, more than clothing, more than everything else by a wide margin. That thirty-eight cents held still, and drifted slightly downward, every year of the decade, because Frank and six million men like him could not stop growing what nobody would buy. The manufactured part of the budget helped: the Model T that cost eight hundred fifty dollars in 1908 cost two hundred ninety by 1926, and the price of manufactured goods generally fell as productivity ran ahead of wages. Rent went the other way, and pushed hard. The sum of it is a flat line, and the flat line is the whole of the American worker’s good fortune in the 1920s.

So the raise had two parents. The employer signed it, and the farmer kept it real, and only one of them was ever going to get the credit.

And notice how completely the credit was misassigned. The money on the pay envelope had the company’s name printed at the top of it. When the check got bigger — and it got bigger for reasons that ran from the productivity of the electrified shop floor, to Ford’s discovery that a well-paid man buys automobiles, to the plain fact that Congress had shut off the supply of new labor at the ports in 1921 and 1924 and an employer who wanted hands now had to bid for them — the man holding the check could see exactly one agent in the transaction, and it was the man who signed it. The farmer eight hundred miles away who was holding the other half of the deal steady was not visible from the kitchen and never would be.

A trade union in 1926 was therefore in the position of asking a man to pay dues for the delivery of a benefit he was already receiving, from someone else, for free. This is the fact underneath every other fact in the American labor history of this decade, and it is why the company union — which had no funds, no independence, and no power to compel anything — did not look absurd to the men inside it. It looked like the arrangement under which their wages had been going up.

The figures follow the logic. American union membership stood at about five million in 1920 and about three and a half million by 1929 — a decline of nearly a third, in a decade when the working population grew. The American Federation of Labor lost a quarter of its membership in the three years after 1920 alone and never got it back. And the strike counts, which are the vital signs of a labor movement, fall off a cliff: more than three thousand six hundred strikes in 1919, when Ralph Shaw stood at the gate of the South Works; six hundred and four in 1928, the lowest figure then on record. Man-days lost fell by something like nine-tenths.

The histories generally attribute this quiet to the open-shop drive, to welfare capitalism, to the courts, and to the Red Scare’s long shadow, and all of those belong in the account and will get their place in a moment. They are the visible instruments. They are the things men did on purpose, with meetings and letterheads and injunctions. Underneath all of them was a working family whose real income was rising about two percent a year without anybody having to fight anyone for it.

That is what a sectoral shift feels like from the kitchen. Somebody, somewhere, is paying for the cheap loaf. It is simply that he lives eight hundred miles away and you will never meet him, and his name is Frank, and he is at his kitchen table too, working on a different sum.

[ PAUSE FOR QUESTIONS ]

Part Three: Why the Bottom Stayed Down

A collapse can be a cycle. The thing that has to be explained about the 1920s is why this one refused to be one — why the price came down in 1920 and simply stayed down while everything else in American life went up.

The instinct is to reach for productivity: to say that agriculture got too good at its job, that a technological revolution in the countryside flooded the country with food. It is a satisfying story and the numbers will not support it. Output per worker-hour in American manufacturing rose in the 1920s at something like four to five percent a year — better than half again across the decade, the greatest productivity surge in the country’s industrial history to that point. The electric motor was its engine. In 1909, about a third of the mechanical drive in American factories was electric; by 1919, better than half; by 1929, better than four-fifths — which meant that the factory could at last be laid out according to the logic of the work rather than the geometry of a central steam engine and a forest of belts and line shafts, and the assembly line and the whole apparatus of scientific management could finally get into ordinary shops instead of Henry Ford’s.

Agriculture in the same decade managed perhaps two percent a year. The tractor was coming and had not come: about two hundred forty-six thousand of them on American farms in 1920, not quite nine hundred twenty thousand in 1930, against six and a quarter million farms. Hybrid corn is a decade off. The chemical fertilizer revolution is further off than that. Agriculture’s own productivity explosion belongs to the 1940s and 1950s, and the farmer of the 1920s was working with a technology only modestly improved on his father’s while the machinist across the state line was working in a different century.

So the sectoral shift cannot be carried by productivity. It has to be carried entirely by demand — and it can be, easily, because the demand gap is a chasm.

Start with the stomach. The demand for food grows with the number of people and hardly at all with their income. A prosperous man does not eat three dinners. He eats better — more meat, more fruit, more sugar — and that shift is real and it favored some farmers over others, but the total tonnage a country requires is set by the size of its population, which was growing about one and a half percent a year, and by an income elasticity somewhere around a third. So domestic demand for farm output grew perhaps two percent a year against a supply growing at least that fast, and a market that clears at all clears downward.

Now set that against the demand facing manufacturing, and the contrast is almost comic. Automobile registrations went from eight million in 1920 to twenty-three million in 1929. The radio, which did not exist as a consumer good in 1920, sat in better than a third of American parlors by 1929. Washing machines, vacuum cleaners, refrigerators, electric irons — a whole category of household objects with an income elasticity well above one, which is to say that every dollar of additional national income sent more than a dollar of additional demand their way. And the demand was amplified by an instrument that had never before operated at scale in American life: the installment contract, which let a family spend income it had not yet earned. Something like three billion dollars of installment paper was outstanding by 1929, and better than half of all automobiles were bought on time. There is no analogous instrument on the food side. Nobody buys bread on the installment plan, because you cannot repossess a loaf.

The tariff belongs in this story with its role reduced and its sign reversed. Fordney-McCumber, in 1922, raised American duties to the highest level the country had yet seen, and it obligingly put a duty of thirty cents a bushel on imported wheat, which was a gesture of such perfect emptiness that it deserves a moment’s admiration. A tariff can only raise a price if the domestic market is short of the good. The United States grew far more wheat than it could eat. The surplus had to go abroad, and it therefore sold at the world price, in Liverpool, and the price of the whole crop — including the part sold in Kansas City — was dragged to that level. The duty protected the American farmer against a competition that did not exist and left him naked against the one that did.

Worse than empty. A foreigner who cannot sell into the American market cannot earn the dollars with which to buy American wheat. What actually sustained American farm exports through the middle of the decade was not trade but lending — the great faddish flotation of German and Central European bonds through American investment houses, which put dollars into European hands with which Europeans bought American crops. It was a circular arrangement of an elegance that ought to have alarmed somebody. In 1928 the lending stopped, as the money found something more exciting to do on the New York Stock Exchange, and so, in due course, did that portion of the export market. The tariff wall and the loan boom are two halves of one arrangement, and the lecture on prosperity and its fragile underpinnings will have to take them both apart.

Foreign demand did more than weaken. It reverted, and the reversion was permanent and structural. Europe’s fields came back into production, as everyone had known they would and nobody had budgeted for. But the deeper problem was that the war’s vacuum had been filled by four suppliers, and when Europe returned, none of the four withdrew. Argentina had expanded. Canada had expanded — the prairie provinces were plowing at the same furious rate as the American plains, and Canadian wheat exports in the twenties ran at multiples of their prewar level. Australia had expanded. And Kansas had expanded, by twenty-seven million acres, at the request of the United States government. So the postwar wheat market held four large exporters, every one of them tooled up for a demand that had been temporarily doubled by a catastrophe and was now, catastrophe over, merely normal. Not one of them retreated. Each waited for the others to.

And now the piece that is the best thing in the whole story, and the one that is nearly always left out: agriculture’s own modernization destroyed its own largest customer.

In 1915 there were something like twenty-six million horses and mules at work in the United States, and they ate. Feeding them consumed roughly a quarter of the nation’s harvested cropland — on the order of ninety million acres growing oats and hay and corn for animals. The horse was, by a wide margin, the single biggest consumer of American farm output.

Every tractor sold killed a customer. Every truck that replaced a team on the road to town killed a customer. Every automobile that replaced a buggy in a small city killed a customer. And when the horse died, the acres that had fed him did not go out of production — they went into growing food for people, in a market that could not absorb what it already had. By 1930 the draft-animal population was down by a quarter and falling fast, and tens of millions of acres had been quietly transferred from the horse’s dinner to the world’s wheat glut.

So mechanization in agriculture worked on both blades of the scissors at once. It raised the supply of the farmer’s product and it destroyed the demand for the farmer’s product, and the demand it destroyed was demand for the farmer’s own crop, from the farmer’s own barn. No other sector in American history has ever had that problem in that form.

Frank’s tractor stood beside his barn, bought used, and it was a small working model of his entire predicament. It let him farm four hundred and eighty acres with less hired help. It also ate nothing.

Which brings us to the supply side, and to the thing that made the depression permanent. A manufacturer facing a falling price cuts output. It is the most ordinary reflex in commerce: you close the third shift, you bank a furnace, you wait for the price to recover, and because you are one of four firms in the industry you can be reasonably confident that your competitors are doing the same arithmetic.

A farmer facing a falling price raises output. He does it because his mortgage payment is a fixed number that arrives whatever the price does; because his own labor and his wife’s and his children’s has no alternative employment worth the name and therefore costs him nothing at the margin; because the machinery is bought and the taxes are due; and because the marginal cost of putting another forty acres in wheat, when you already own the tractor and the drill and the labor is your son, rounds to very nearly zero. The only way to meet a fixed payment out of a falling price is volume.

And here is what makes it a tragedy rather than a mistake: every one of those six and a quarter million men was reasoning correctly. Any one of them who cut his acreage would have taken the loss and moved the national price not one cent, because he was one producer in six million and could no more affect the price of wheat than he could affect the weather. Agriculture in the 1920s was the last genuinely competitive sector of American life — the last place where the textbook conditions actually held, where the seller was a price-taker in the pure sense, where no one could administer anything. And its reward for being the one honest market left in the country was to be the only sector that did not share in the boom.

That reframes the whole politics of the decade, and I want to put it as plainly as I can. The farmer’s complaint was not really about the tariff, or the railroads, or the middlemen, though he complained about all three and had reasons. The farmer’s complaint, correctly stated, was that everybody else had gotten out of the market and he was still standing in it. Steel could hold its price. Glass could hold its price. Shoes, cement, copper, plate — concentrated industries with a few firms, a tariff at their backs, and a habit of watching each other’s price lists could take the productivity gain of the 1920s and divide it between profit and wage. Agriculture could hold nothing, so the entire productivity gain of American farming escaped instantly to the consumer as a lower price, and the man who created the gain was ruined by having created it.

The farmer’s tragedy in the 1920s is that he did exactly what the country asked of him, precisely as well as it asked, and the market punished him for it with perfect efficiency.

The measurement of it. The Department of Agriculture eventually built an index to capture the thing, and the index is called the parity ratio: the prices a farmer receives divided by the prices he pays, with the whole thing set to one hundred in the golden prewar years of 1910 to 1914. It stood near one hundred in 1919. It fell to about eighty in 1921. And then, for the rest of the decade, it sat around ninety and refused to move — better than the trough, permanently below the standard, a chronic condition rather than an acute one. Which is exactly why the country could ignore it.

And one last measurement, which is the strangest. The number of farms in the United States barely fell: about six and a half million in 1920, still about six and a quarter million in 1930. Consolidation, which every economist would have predicted, essentially did not happen. The farms stayed.

The children left. Something like six million people walked off American farms in the 1920s, net of everyone who arrived — the first sustained absolute decline in the American farm population in the history of the republic. What the country did, instead of liquidating unviable farms, was to run off a generation and keep the acreage in production. Frank’s eldest boy finished the consolidated high school, the first in the family to do so, and went to Wichita to build airplanes, and wrote home cheerful letters that his father read twice and did not answer for a week.

[ PAUSE FOR QUESTIONS ]

Part Four: The Instruments of Peace

The cheap loaf explains why the American worker in 1926 was not angry. It does not explain why he was not organized, and for that we need the visible instruments — the things that men did on purpose.

The peace begins in a defeat. This must come first or the rest is sentimental. The depression of 1920–21 was, for labor, a massacre: unemployment near twelve percent, wage cuts across every industry in the country, and a labor movement that had just spent 1919 losing the greatest strikes in its history and being called Bolshevik for its trouble. The AFL went from about four million members in 1920 to under three million by 1923. The unions did not lay down their arms in the 1920s. They were disarmed in eighteen months, in the slump, and the cheap loaf then made sure that nobody much noticed the absence of the weapons for the next eight years. Deflation broke the unions; deflation kept the workers from missing them.

The American Plan. In January of 1921, with the slump running, the employers’ associations of twenty-odd states met in Chicago and agreed on a campaign for the open shop, and on a name for it. The name was the campaign. To call the open shop the American Plan was to make the union shop un-American by simple grammar, and after 1919 that grammar had teeth. The plan ran on employers’ association blacklists, on labor spies — a genuine industry, with agencies and salesmen and quotas — on the yellow-dog contract, and on the assertion, repeated in every chamber of commerce in the country, that the American workingman wished to deal with his employer as an individual, as a free man, and required no foreign-born intermediary to do it for him.

The courts made the yellow-dog contract into a weapon of extraordinary reach, and this is the piece of the decade that most repays attention, because it was done in the driest possible language and it decided more than the strikes did. A yellow-dog contract is a promise, extracted as a condition of employment, that the worker does not belong to a union and will not join one. The Supreme Court had held in 1917, in the Hitchman case out of the West Virginia coalfields, that such a contract was enforceable — and, crucially, that a union organizer who persuaded a man to break it was committing a tort, which meant that he could be enjoined. The organizer, in other words, could be stopped by a federal judge before he opened his mouth.

Then came a run of decisions across the decade that finished the job. In 1921, Duplex Printing read the labor sections of the Clayton Act — the sections Samuel Gompers had called labor’s Magna Carta when they passed in 1914 — down to nearly nothing, holding that they protected only the workers in immediate dispute with their own employer and left the secondary boycott exposed to the antitrust law. In the same year, Truax v. Corrigan struck down an Arizona statute that had tried to limit injunctions in labor disputes, on the ground that it denied the employer the equal protection of the laws. In 1922, Coronado Coal opened the union’s own treasury to antitrust damages. And in 1927, Bedford Cut Stone held that stonecutters who declined to handle stone from a struck quarry were engaged in a conspiracy in restraint of trade — that a workman’s refusal to work on a particular piece of rock was a violation of the Sherman Act.

Felix Frankfurter and Nathan Greene sat down at the end of the decade and counted the labor injunctions, and the count ran to hundreds — something over nine hundred in the decade, more than in the entire preceding history of the country. The strike, as a legal instrument, had been quietly disassembled in chambers, one motion at a time, without a single national debate. William Howard Taft presided over the Court from 1921, and his correspondence contains the reported observation that he had to stay on the bench to keep the Bolsheviki from getting control of it, which tells you the emotional weather of the whole enterprise. This was the Red Scare, continued by other means, in a room with no reporters in it.

Welfare capitalism was the other face of it, and it was not a fraud. This matters, because the temptation is to treat it as a trick, and the men who built it were in earnest, and a great many workers took the benefits and were glad of them.

Its founding text was a catastrophe the first series described: Ludlow, Colorado, in April of 1914, where the militia and the guards of a Rockefeller property fired on a strikers’ tent colony and women and children died in a pit under a burning tent, and John D. Rockefeller Jr. — who had testified before Congress that he knew nothing of the conditions at a mine he owned — discovered that his family name had become, in the space of a week, a synonym for something he could not bear to be. He hired a young Canadian labor expert named William Lyon Mackenzie King, later the prime minister of Canada, and the two of them designed the Colorado Industrial Plan: a structure of elected employee representatives who would meet management regularly, air grievances, and be heard. It had no independent funds, no outside affiliation, no power to strike, and no capacity to compel anything. It also, in Colorado in 1915, was an enormous improvement on being shot.

The plan became the model, and the model spread through the decade until something like a million and a half American workers were covered by a company union of one kind or another. Around it grew the rest of the apparatus: group life insurance, covering better than four million workers by 1928; company pensions; employee stock purchase plans, so that the man at the machine might own eleven shares of the company and read the dividend notice with a proprietor’s satisfaction; safety departments, medical departments, cafeterias, athletic leagues, company magazines, mortgage assistance, English classes, and in a few celebrated cases company towns of genuine decency.

Its great house was General Electric, where Gerard Swope became president in 1922 and Owen D. Young was chairman — two men who believed, sincerely and articulately, that the large corporation had become a social institution with obligations that ran past the dividend, and who said so in public, in language that a New Dealer could have used and eventually did. And Ford, having astonished the world with the five-dollar day in 1914, astonished it again in 1926 by putting his plants on a five-day week, on the argument — which was both humane and shrewd, and which he stated in exactly those terms — that a man with a day off and a wage in his pocket is a man who will buy an automobile.

The bargain underneath all of it was explicit, and the workers understood it exactly. The company will give you security, dignity, a doctor, a pension, and a hearing. In return, the company will give them to you, as a gift, on its own terms, revocable at its pleasure, and you will not organize. It was a real bargain, offering real goods, and it held for as long as the goods kept coming — which is to say, until the autumn of 1929, when the whole structure was revealed to rest on nothing but the profits that had funded it, and the pensions and the plans and the group insurance evaporated in eighteen months, and the men who had been given security discovered the difference between a gift and a right. The generation that built the industrial unions of the 1930s was, very largely, the generation that had accepted welfare capitalism in the 1920s and watched it dissolve.

The labor movement’s own answer was to become respectable. Gompers died in December of 1924, in San Antonio, on his way home from a labor congress in Mexico City, having insisted on being carried to the border so that he could die on American soil, which he did — the immigrant Jewish cigar maker from Spitalfields, seventy-four years old, at the end of a fifty-year argument. His successor, William Green, was a former official of the mine workers, a Baptist and a Mason and a man of impeccable mildness, and under him the Federation offered American industry a doctrine called union-management cooperation: the union as a partner in raising productivity, its expertise placed at the service of efficiency, in exchange for recognition. The showpiece was the Baltimore and Ohio Railroad, where an engineer named Otto Beyer worked out an arrangement with the machinists in 1923 that produced real gains and real cooperation and was studied by everyone. Almost nobody copied it. Why would an employer buy from a union something the American Plan was offering free?

And the third leg is the one this series has already built. The quota acts of 1921 and 1924 shut off the supply of labor that had fed American industry for eighty years. Immigration fell from over eight hundred thousand in 1921 toward a ceiling near a hundred fifty thousand. Set that beside the fact that the countryside was releasing six million people in the same decade, and the shape of the thing is complete: the farm depression supplied the hands that Ellis Island no longer did, on terms industry liked, at the exact moment Congress closed the alternative. Gompers, who was a restrictionist to the end for precisely this reason, would have called that a vindication. His successors got the benefit and lost the members anyway.

[ PAUSE FOR QUESTIONS ]

Part Five: The Industries That Had No Peace

Labor peace held where an industry could administer its price and pay for quiet out of the productivity gain. Where an industry could not administer its price, the 1920s looked exactly like 1919, and the country did not notice, because the places in question were Williamson County, Illinois, and Gaston County, North Carolina, and nobody in New York had any reason to go there.

Bituminous coal was agriculture wearing a different hat. Look at the structure and the resemblance is nearly perfect. Thousands of producers — better than nine thousand mines, most of them small, many of them a hillside and a mule and a man with a bank loan. No possibility of coordination. Enormous overcapacity, built at government urging during the war exactly as the wheat acreage had been: a national capacity somewhere near nine hundred seventy million tons against a demand near five hundred. Inelastic demand, and worse than inelastic — falling, because oil and natural gas and hydroelectric power were taking coal’s markets away, and because the engineers were getting better every year at extracting more heat from less coal, so that the country could grow its industry and shrink its coal bill at the same time. A commodity that could not be differentiated. A price in free fall. And a marginal cost, once the mine was open and the men were desperate, of very nearly nothing.

So coal got agriculture’s economics, and it therefore got agriculture’s politics, which in coal meant war. The United Mine Workers went from a half million members in 1920 to a remnant by 1930 — under a hundred thousand, its southern fields gone entirely, its West Virginia locals destroyed. John L. Lewis took the presidency in 1920 — the great black-browed Welsh-descended autocrat with the Shakespeare and the Bible and the voice, who would rule that union for forty years and build the CIO out of it in the next decade — and in the 1920s he was beaten, comprehensively, by arithmetic. He won the Jacksonville Agreement in 1924, holding the daily wage at seven and a half dollars in the union fields, and it was a triumph, and it was fatal: with the union operators paying seven-fifty and the non-union operators in Kentucky and West Virginia paying whatever hunger would accept, the business simply moved south, and by 1927 the operators repudiated the agreement and Lewis had nothing to enforce it with.

And in June of 1922, in the coal country of southern Illinois, a strip-mine operator named William Lester, in Williamson County, decided to break the national strike by bringing in guards and strikebreakers behind a wire fence. There was shooting, and two union men were killed, and the next morning several hundred armed miners took the mine, and the strikebreakers surrendered under a white flag, and what followed is called the Herrin Massacre. Something like nineteen of them were killed — marched down a road, shot, some of them hunted through the woods and finished at a fence, others left hanging in the cemetery. Southern Illinois was a union county; the coroner’s jury was a union jury; the trials were held before neighbors, and no one was convicted of anything at all. The country read about it for a week and was appropriately horrified and drew the conclusion the newspapers offered, which was that the union man was a savage.

The railroads produced the other great collision of that summer, and out of it came the decade’s one durable settlement. In July of 1922 some four hundred thousand shopmen — the men who repaired the locomotives — struck against a wage cut ordered by the Railroad Labor Board. Attorney General Harry Daugherty sought and obtained an injunction from a federal judge in Chicago which essentially broke the strike; its terms were the most sweeping ever issued in an American labor dispute, reaching picketing, assembly, and the use of the telephone and the mails in aid of the strike. But four years later the same industry produced the Railway Labor Act of 1926, which the railroads and the unions drafted together and Coolidge signed — affirming the right of railway workers to organize free of employer interference, and setting up machinery for mediation. It worked, and its descendants are still the law of American railroading. The lesson the railroads drew from 1922 was that breaking a strike on a national rail system costs more than settling one. Nobody else in American industry drew it, because nobody else’s strike could stop the mail.

There was strife in the Chicago meatpacking industry in 1922, where the packers cut wages, broke the Amalgamated Meat Cutters, and with it destroyed the organizing drive William Z. Foster had built in the yards during the war — running a company union of their own, and setting Black and white workers against each other with a skill sharpened by the summer of 1919. Isaiah’s son carried a card in that drive, was blacklisted out of the industry his father had given twelve years to, and went to Pullman, where in 1925 he took a card in the porters’ brotherhood a magazine editor named A. Philip Randolph had founded in a hall in Harlem, and where he paid dues for a decade before the union had anything to give him.

And there was strife in the Piedmont in 1929, where the textile industry had fled New England for the mill villages of the Carolina hill country — company house, company store, company constable — and was driving what the workers called the stretch-out, more looms per weaver, the speed-up as a substitute for capital. Elizabethton in March, led by teenage mountain girls. Gastonia from April through the summer, with the National Guard in the streets. Marion in October.

Strife in those days meant violence and death. At Gastonia a chief of police was shot dead in a confused night raid, and in September a truckload of armed men ran a car of unarmed strikers off a road and shot to death a twenty-nine-year-old balladeer and mother of nine named Ella May Wiggins, in daylight, in front of witnesses; five men were tried for her killing and all five were acquitted. At Marion, six strikers were shot dead by deputies, most of them in the back. That was 1929 in the Piedmont, in the same months as the peak of the bull market, four hundred miles away, in the same country.

[ PAUSE FOR QUESTIONS ]

Part Six: Equality for Agriculture

The countryside, meanwhile, went into politics, and it went in behind a word.

The farm bloc formed in May of 1921, in a room at the Willard Hotel, at the invitation of the Farm Bureau’s Washington man: something over twenty senators, Republican and Democrat, corn belt and cotton belt, agreeing to vote together on farm questions and let party discipline go hang. Its first chairman was William Kenyon of Iowa. Its most durable figure was Arthur Capper of Kansas, a publisher of farm papers who understood exactly what he was doing and who had, in his newspapers, a direct line into a million farm kitchens. The bloc was a genuine novelty in American politics — an openly sectoral formation, voting its interest across party lines in a party system designed to prevent exactly that — and it worked immediately. It put through the Capper-Volstead Act in 1922, exempting farmer cooperatives from the antitrust laws. It put through the Agricultural Credits Act of 1923 and the Intermediate Credit Banks. It got a duty on wheat that was worth nothing.

The word was parity, and it comes out of a plow works in Illinois. George Peek was the president of the Moline Plow Company, and he had a business problem that focused his mind wonderfully: he made plows, and after 1920 nobody in the wheat belt could buy one. Peek’s line — the whole of agricultural politics compressed into eight words — was that you cannot sell a plow to a busted customer. Beside him was the company’s general counsel, Hugh S. Johnson: a cavalryman, a West Point man who had helped draft the Selective Service Act, a writer of boys’ adventure novels on the side, a spectacular drinker, a man of volcanic prose and volcanic temper, who would in 1933 run the National Recovery Administration and put his face beside the Blue Eagle in every shop window in America. In 1922 the two of them published a pamphlet called Equality for Agriculture, and its slogan was: make the tariff effective for agriculture.

Parity was the pamphlet’s central quantity, and it has never left American law. It named the purchasing power that farm crops had held against industrial goods in the five years from 1910 to 1914, and it proposed that ratio as the just and permanent relation — the standard to which the price of wheat was entitled to be restored and at which it was entitled to stay. The bill that Charles McNary of Oregon and Gilbert Haugen of Iowa attached their names to was, underneath its machinery, a federal price support for the basic crops, set at parity, financed by dumping the surplus abroad and billing the growers for the loss. For five years it was the most divisive question in American politics that was not about liquor.

Watch the coalition assemble, because it outlived everything else in the story. The House defeated the bill in 1924. Congress defeated it again in 1926. And then its managers did the thing that reorganized American politics: they added cotton, and tobacco, and rice, and went south. The corn belt and the cotton belt had spent sixty years on opposite sides of every question since Appomattox, and in the McNary-Haugen fight they learned to vote together. The farm coalition that came out of that arithmetic — Midwest and South, corn and cotton, in a bloc — wrote the Agricultural Adjustment Act, and its lineal descendants are writing farm bills still.

It passed in February of 1927. Coolidge vetoed it. It passed again in May of 1928, by larger margins. Coolidge vetoed it again, and the second message was the harsher.

The veto messages were right. Coolidge — and Hoover, who fought the bill from inside the cabinet and supplied much of the argument — objected that the scheme was price-fixing by the federal government; that its financing was a tax laid on a private group for a private benefit, and probably unconstitutional; that it would require a bureaucracy of alarming size and put Washington permanently into the business of buying and selling half the crops in America; that dumping the surplus abroad would invite retaliation; and — the objection that has aged best of all — that a guaranteed price above the market is an instruction to plant, heard by every farmer in the country at once, and would therefore call forth precisely the surplus it was designed to dispose of. There is one way to stop that loop, and it is to tell a man standing on his own land how many acres of wheat he may sow. That was unthinkable to the bill’s own supporters in 1927, and it was federal law by 1933, because the logic of the guarantee had required it from the beginning.

Set the soundness of the veto beside the other fact, which is that Coolidge was privately reported to have said that farmers had never made money, that he did not believe anyone could do much about it, and that he saw no reason to try. Both are true at once. The veto was intellectually respectable, and it was delivered by a man who did not care.

And there is a defect the veto messages missed, which brings this lecture back around on itself. A support paid to agriculture is a support paid to farmland: raise the price of wheat permanently and the value of a wheat acre rises to capture it, immediately and almost exactly, so that the gain goes once to whoever holds the deed on the morning the bill passes, and every man who buys in afterward pays it back in the purchase price and stands exactly where Frank stood in 1926. Frank’s boy, if he came home from Wichita, would buy his father’s farm at a price inflated by the subsidy and spend his working life paying for a benefit he would never receive. And the money to do it comes out of the grocery bill, which takes thirty-eight cents of a working family’s dollar and some far smaller fraction of a rich one’s. Stated without the machinery, parity was a proposal to raise Isaiah’s cost of living in order to raise the value of Frank’s land. The two halves of the coin were in the same fight, on opposite sides, and neither man knew it, because the transaction was invisible from both ends. The cheap loaf on the South Side was the farm depression. To end the one by statute was to take back the other.

Hoover’s alternative was cooperation without coercion, which was the answer to every question Herbert Hoover was ever asked. The Agricultural Marketing Act of June 1929 created a Federal Farm Board with a five-hundred-million-dollar revolving fund to lend to cooperatives and, if necessary, to buy and hold surpluses in order to steady the price. It was the largest peacetime intervention in a market the federal government had ever attempted, and it was offered as the conservative alternative, which tells you how far the argument had already traveled. It began operations in the autumn of 1929, bought wheat and cotton into a falling market, and was destroyed inside a year — because an agency that buys a surplus and has no power to limit next year’s planting is a public warehouse for a private problem, which is what Coolidge’s veto message had said, from the other direction, about the bill Hoover helped him kill.

And George Peek, beaten all decade, was appointed in 1933 the first administrator of the Agricultural Adjustment Administration, and carried parity into the Department of Agriculture in his briefcase, where it remains.

One thing more, because the farmers were not fools. Everything this lecture has said about the cure — that the adjustment was already working, that six million people leaving the land was the market doing exactly what a market is for — describes a cure administered entirely at the expense of the people who had done nothing wrong. Frank plowed the shortgrass because his government asked him to, in a war, and the demand that justified the plowing evaporated for reasons that began in a castle in Silesia. His remedy would have failed, and would have taxed Isaiah to pay for the failing. The question underneath his remedy was a real one, and no one answered it: whether a country that asks a sector to double itself for a war owes that sector anything when the war’s market goes away, and whether the something owed might have been a road out rather than a price. The country said no to the price. It never took up the second question, and the countryside noticed, and remembered.

[ PAUSE FOR QUESTIONS ]

Part Seven: Where the People Went

Two more things, and they are the two that the decade’s own account of itself gets wrong, and they belong together because they are the entrance and the exit of the same room.

First: the boom created almost no factory jobs.

Employment in American manufacturing in 1919 was somewhere near ten and a half million. Employment in American manufacturing in 1929, after the greatest industrial expansion in the history of the republic — after output nearly doubled, after the automobile industry became the largest in the world, after the electrification of the shop floor — was somewhere near ten and a half million. Ten years, essentially no net gain.

Which is exactly what the arithmetic of this lecture predicts. Manufacturing demand grew fast. Manufacturing productivity grew faster. The residual — the demand for labor — was flat. The machine that made the decade prosperous made it prosperous by needing fewer hands per unit of everything, and the extra output walked out the door as goods rather than as jobs.

So the six million people who walked off the farm did not, in the main, walk into a factory. This is the received image of the decade — the farm boy at the assembly line, the Ford plant absorbing the countryside — and the arithmetic will not carry it. Frank’s eldest boy in Wichita, building airframes for an aircraft company that did not exist when he was born, is the exception; he went to one of the handful of genuinely new industries, and there were not enough of those to matter demographically.

Where the rest of them went was into the sectors where productivity grew slowly and demand grew fast, which is precisely the combination that hires people. Trade: the chain store, which went through the decade like a flood — the Atlantic and Pacific Tea Company ran something like forty-six hundred stores in 1920 and better than fifteen thousand by 1929, and every one of them had a counter and every counter had somebody behind it. Construction, which built the suburbs the automobile made possible. The office: the clerical workforce exploded, on typewriters and adding machines and filing systems, and it was where a great many farm daughters went, because a girl who had finished the consolidated high school could type, and typing was clean work in a city. Personal service, restaurants, laundries, garages, filling stations — a filling station on a corner is a job that did not exist in 1910 and there were a hundred thousand of them by 1929. Teaching, nursing, government, the professions.

The farm boy of the 1920s went to the sales counter. His sister went to the typing pool. It is a less heroic picture than the one the decade painted of itself, and it is what the numbers say. The factories were producing more every year and hiring nobody. The counters and the offices were producing very little more per person and hiring everybody. That is where the decade’s new jobs were, and the movement of American employment out of making things and into selling them, moving them, financing them, and waiting on them starts here and has not stopped since.

And the migration this series has followed had the same engine. Southern agriculture had every disease the wheat belt had and one of its own, and the one of its own worked by the opposite mechanism, which is worth being exact about. The boll weevil crossed the Rio Grande in the 1890s and reached the Atlantic seaboard by 1922, eating its way across the cotton South a county at a time, and what it destroyed was the crop in the field: yields cut by a third and worse where it arrived, the cost of making a bale driven up by the poisoning and the early planting and the clean culture it forced, districts of the old cotton belt taken out of cotton altogether. A pest that destroys a crop does nothing whatever to lower the price of it. Had the weevil been the South’s only trouble, the surviving growers would have sold a small crop dear, which is roughly what happened in some counties in some years.

The price collapse arrived from somewhere else entirely — from the same deflation of 1920 that took the wheat market, and from the same postwar return of world supply, Egypt and India and Brazil coming back as Europe’s wheat fields came back. Cotton brought thirty-five cents in 1919 and sixteen in 1920, and after the enormous crop of 1926 it went under twelve. So the Southern tenant took both diseases at once and from opposite directions: a smaller crop, because of the insect, and a worse price, because of the Federal Reserve and the world. Neither was any part of his doing, and the two together are why a man would sell a mule and take a train.

And the men working that land were, in the main, tenants and sharecroppers, without title, without recourse, and in debt to the commissary — the arrangement Isaiah had walked away from in 1910 because its arithmetic could never be retired. Put a farm depression on top of that structure and it does not produce a political movement. It produces a departure. Half a million Black southerners went north in the war decade and nearly a million more in the twenties, and the depot on the South Side where Isaiah had once stood as the man who knew where a room could be had received a migration that no longer needed him.

The closed Atlantic and the broken cotton price were the two halves of one labor market. Congress shut the door in 1924, and the Delta opened one.

Second: the rot in the floorboards.

The sectoral shift explains the farmer’s income. It does not, by itself, explain the foreclosures, and the difference between those two mechanisms is worth being exact about, because the second one is what actually took the farms and what put the first crack in the American banking system three years before anyone noticed there was a crack.

Farm mortgage debt roughly doubled during the war years, and it was contracted against land valued at 1919 prices. Iowa farmland that traded near two hundred twenty-five dollars an acre in 1920 traded near half that in 1930. The debt did not fall with the land, because debt never does. It was written in dollars that the deflation of 1920–21 then made forty percent more valuable, so that a man who had borrowed eleven thousand dollars found himself owing, in real terms, something closer to fifteen — against security worth half its appraisal, out of an income permanently ten percent below its standard.

That is a debt-deflation problem, and it is a different animal from a sectoral shift. A parity ratio of ninety is survivable on a clean balance sheet. It is fatal on a leveraged one. Which is why the farmers who went under in the 1920s were, very largely, the ones who had done the modern thing — who had believed the county agent, borrowed against the future, bought the adjoining quarter section, and mechanized. Prudence, in the 1920s countryside, was indistinguishable from having been too poor to expand in 1919.

And when the farmer failed, his bank failed. Nearly six thousand American banks failed between 1921 and 1929 — overwhelmingly small, overwhelmingly rural, unit banks with no branches, no diversification, and their entire loan book written against the land within twenty miles of the front door. Six thousand banks, in the years the country calls the boom. And the country managed to treat it as a series of local misfortunes, six thousand times, because each one was small, and each one was somewhere else, and the men in New York who might have drawn a general conclusion had a stock ticker to watch. The lecture that follows this one will have to explain how a financial system that had already lost six thousand of its members before the crash was described, in the autumn of 1929, as fundamentally sound.

So set the two halves of the coin down side by side, and this is the decade.

The American worker’s standard of living rose about a fifth across the decade. His employer handed him most of it, in the pay envelope, for reasons of productivity and of a labor supply that Congress had shut off at the ports. And a third of his country, unable to stop producing food that nobody would buy, held the cost of living still underneath it and made the raise real — the first time in the history of American booms that a rise in money wages was allowed to survive the trip to the grocery. The countryside supplied the hands the factories needed and got nothing for them. The courts disassembled the strike; the employers offered security as a gift; and the man who signed the check collected the entire credit for a transaction he had only half performed. That is what labor peace was made of. Not agreement. Arithmetic.

And in Pawnee County, Kansas, in the summer of 1929, a man of fifty-one sits at a kitchen table after the radio has gone off — the radio is battery-powered, because the power lines have never come and show no sign of coming, and nine American farms in ten are still without electric service in the year of the greatest prosperity the country has ever known. Two of the six farms touching his have been foreclosed and one abandoned. The school district has consolidated. The church shares a minister with two towns. His father is five years dead and his son builds airplanes in Wichita. Beside the barn stand a truck and a tractor, bought used, and the tractor has helped to release, across the country, tens of millions of acres from the work of feeding horses, which is one of the several reasons the price of wheat will not rise, so that the machine in his own yard is a partner in his own ruin.

The note falls due in March of 1930. It is held by a bank two counties east, owned by men who have never seen his land and know him as a folder.

He has been reading in the papers about the stock market.

[ END OF LECTURE ]

End of Lecture 2.6

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if you look at the world, say, around 800, at the time of Charlemagne, the difference between Europe and China isn’t very large. At some point, during the Middle Ages, you can see this divergence getting started. What’s happening is that, in Europe, there is more and more of a decline in the extended family or the extended kinship group, we call it clan, and instead, people get together and cooperate with other people to whom they are not related and with whom they do not share an ancestor.

Recall that Mark Weiner’s Rule of the Clan made a very strong impression on me.

On Great Britain and the industrial revolution, Mokyr emphasizes a sort of freedom of apprenticeship.

Every young lad who’s looking for a master, can go around and choose the master that he likes best and that is most suitable to him. What you get is that because this market is competitive, you get a quality of education to these people, which is vastly better than it is in continent. People are more diverse. They’re more flexible. They’re better trained. Certainly, by the middle of the 18th century, this is what everybody is saying. The French and the Germans and the Dutch and the Austrians and the Spanish, all know that if you want to build a sophisticated piece of equipment, you need an English engineer to run it.

John Cochrane and Amit Seru write,

Risky investments should be funded by equity and long-term debt. Deposits and other runnable liabilities should be backed by safe, liquid assets or much larger capital cushions. Such plans can end private sector financial crises forever.

This sounds good, but I think it is simplistic. My view is that the public wants to issue risky, long-term liabilities (a mortgage, for example) and hold riskless, short-term assets (a bank deposit). Financial intermediaries have a balance sheet that takes the opposite side. No matter how you structure it, unless you can completely outlaw financial intermediation, somewhere in the system you will have runnable institutions and the potential for crisis.

Many economists write,

1. Economists, policymakers and technology leaders must act now to understand the economics of transformative AI and to build the incentives, guardrails, and institutions needed to steer AI in a direction that complements humans and benefits society.

I suggest that you apply a small reduction in the respect that you had for every economist who signed this “We must act now” petition. How could Daron Acemoglu sign it, when his main claim to fame concerning AI is his view that it does not amount to much? How could Tyler Cowen sign it, when any libertarian could tell you that this is not an effort that will end well? I think he was just expressing mood affiliation about AI.

I give credit to Noah Smith for not signing.

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Noahpinion

Why I didn't sign the "We Must Act Now" statement (yet)

“We must do something. This is something. Therefore, we must do this.” — the Politician’s Fallacy…

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10 days ago · 168 likes · 15 comments · Noah Smith

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The Grumpy Economist

Warsh's Challenges, Financial Regulation

I wrote two opeds on the future of the Fed for the Washington Post. Full text of the first one, focusing on monetary policy, in my previous post here. The second focusing on financial regulation is joint with Amit Seru. Now that 30 days have passed, I can post the full text…

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15 days ago · 27 likes · 1 comment · John H. Cochrane

any task in the economy that you can specify precisely enough for it to even be legible as a task is going to be done by AI. …What jobs will mean in the future is what economists sometimes call interstitial tasks: the things that lack a precise specification, where maybe part of the task is even to figure out what should be done next, things that maybe have never been done before. Those are the kinds of things we think will be in the domain of humans. The reason I think we will be very unlikely to leave those things to AI is because of unknown unknowns. You can’t be sure that when you task AI with doing something so different from anything that’s been done before, it’s going to do a halfway reasonable job.

He points out that even now, a lot of our jobs do not serve basic needs.

In affluent societies, 95% of jobs are things we do because we need things for people to do, not things we do for people to survive. I’m saying that in the future, that 95% will go to 99%, maybe even 100%.

…what actually has value, it’s just very contingent on what happens to be scarce at any particular point in history. Things like light and clothing—things at the bottom of Maslow’s hierarchy—used to be extremely scarce because they were hard to produce, and they employed a very large fraction of the workforce.

…I think a lot of the things people do today are scarce and valuable precisely because human labor is scarce. I disagree with the premise that in the future AI systems will be creating most of the value. That’s not consistent with my understanding of economics. I agree that AI systems will be doing most of the work. But any work AI can do is infinitely reproducible, and when it’s infinitely reproducible, it doesn’t have a lot of value, because its cost is going to come down to the market—anybody can provide it at very low cost. So the value is going to shift to the kinds of things that are scarce.

One reason he thinks that the impact of AI on business will take longer than expected to materialize:

CEOs often build prototypes of some product and think, this is amazing, Claude Code built for me in twenty minutes what it took a team of two people two weeks to produce. But what the CEO doesn’t see is the last 90%, or even the last 99%, of what it takes to go from that prototype to an actually functioning, maintainable product. That’s what the line-level employees deal with every day. A lot of this information is not floating up from everyday workers, who actually have a much better perspective on these things

Andrey Mir writes,

Projecting medieval scarcity onto a technological future doesn’t hold up because the level of technological sophistication required to make such missions viable would simultaneously make their stated goals obsolete. By the time mankind could routinely mine asteroids or colonize distant worlds, it would also be able to synthesize virtually any material and, more consequentially, transcend biological existence altogether into digital form.

You don’t cross the cosmic ocean for iron ore or black pepper when you can print it.

Kai Williams writes,

unlike humans, who can only solve problems one at a time, OpenAI ran separate agents to solve every problem in parallel. Minaiev acknowledged that this gave OpenAI an advantage. But he argued that the AI solved the first four problems quickly enough that it would have won even without that advantage.

He describes a coding tournament, won by OpenAI. But then he circles back to Narayanan and a co-author, who see software development as a “sandwich,” with coding in the middle while requirements development and deployment are on either end.

Today, AI systems are mostly useful in the middle of the sandwich — execution — which is exactly what competitive programming focuses on. Competitors are given well-specified tasks to solve, and ultimately, all they need to deliver is code (no matter how messy) which passes automated tests.

So even if AI systems are well beyond the best humans at competitive programming, it doesn’t necessarily mean that they’ll be able to do tasks humans currently do in other parts of the sandwich. For instance, AI agents can’t yet organize a focus group to learn about the needs of real users, nor can they negotiate with colleagues about the best way to deploy a new version of their software.

Hollis Robbins writes,

Aristotle had his day. His premises (and Ben Sira’s and Burke’s) were that wisdom requires leisure and that verbal skill is scarce. It used to be hard to produce a scribe. There were fewer Jeffersons than Shermans back in the day, which is why Jefferson got the main drafting job. For two millennia nothing dislodged the primacy of verbal ability, until now. Now shape rotators may very well rule the next era, though wordcels will still be needed to create prestige TV as this era’s circuses. I’ve advocated that students should be able to go to college to study English and then go be a plumber. Jonathan Rose’s great 2001 book The Intellectual Life of the British Working Classes is all about not assuming anything about the civic virtues of those who work with their hands.

And so I’m bearish on the knowledge economy and bullish on rotating shapes.

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America 1914–1930

Lecture 2.5

The Great Silence and the Closing Door: Plague and Restriction, 1918–1924

Part One: Camp Devens

Rosa’s household, measured in the summer of 1929, turned on a chair that was never filled and never moved, and a photograph above the bed of a young man in uniform with a palm frond behind the frame, renewed every year. That was Salvatore — Rosa’s American project made flesh, the cutter uptown with an eye on a foreman’s job and a girl from Mulberry Street. He enlisted in the spring of 1918 over his mother’s objection, wearing, the family always said, a look of unbearable satisfaction. He was sent to train with the artillery at Camp Devens, thirty-five miles northwest of Boston, and he died there on the fourth of October, 1918, at twenty-five, having never left Massachusetts and never heard a shot fired in anger. He was one of six hundred and seventy-five thousand Americans the influenza killed. And the place where he died was the exact place where American medicine first understood what it was facing, which makes Camp Devens the entrance to the largest single mortality event in the recorded history of the United States, and one of the strangest.

Devens had been thrown up in 1917 to hold about thirty-six thousand men. By that September it held closer to forty-five thousand — packed barracks, shared blankets, the ordinary overcrowding of a nation raising an army faster than it could build for it. The influenza reached the camp in the second week of September, and it did not behave like influenza. It behaved like something the physicians there had no name for. Men reported to sick call with what looked like an ordinary heavy cold, and within hours — hours, not days — some of them were turning a color the doctors described, groping for words, as heliotrope, a dusky blue-purple that began at the ears and the lips and spread across the face as the lungs filled and the body starved for oxygen. A young army physician at Devens named Roy Grist wrote a letter that week to a friend, a fellow doctor. He wrote that the men came in looking as though they had an ordinary grippe, that they developed the most vicious pneumonia anyone had ever seen, that once the blueness appeared it was only a matter of a few hours until the end, that the camp was losing something like a hundred men a day, that it took special trains to carry away the dead, and that for a stretch there were no coffins at all and the bodies stacked up in a way he could not make himself describe except to say it was horrible. He signed it and apologized for his handwriting. On the worst single day, sixty-three men died at Devens alone.

The camp’s own doctors, overwhelmed, sent to Washington for help, and Washington sent the most eminent men it had. In the last week of September a small party came up from the capital and from Baltimore: Victor Vaughan, one of the great figures of American public health; Rufus Cole, head of the hospital at the Rockefeller Institute; and at their center William Henry Welch — the founding dean of the Johns Hopkins medical school, the man who had, more than any other single person, built modern scientific medicine in America, a man who in a long life had seen every disease the earth had to offer and been frightened by none of them. They walked the wards. And then they went down to the autopsy room, where the bodies of young soldiers were laid out, and they opened the chests, and they looked at the lungs.

The lungs were wrong. They were swollen, blue, wet, frothing, heavy with bloody fluid — lungs that looked, one of the men present said, less like pneumonia than like some new and violent thing. And Welch — Welch, who had seen everything — straightened up from the table and said, to the younger men around him, that this must be some new kind of infection, or plague. And the thing the younger doctors remembered for the rest of their lives, the thing they wrote down, was not the sentence. It was that Welch was rattled. The man who had never been alarmed by any disease in half a century was alarmed. Cole said afterward that it frightened him to see Welch frightened. Vaughan, looking back on that autumn, wrote one of the darkest sentences an American man of science ever committed to paper: that if the epidemic kept multiplying at the rate it was then multiplying, human civilization could disappear from the face of the earth within a matter of weeks.

Hold that sentence beside Henry’s faith in progress — the ratchet that turns one way, the Hague conferences, the world that reasonable men improve. Here are the best-trained scientific minds the American nineteenth century produced, standing over an autopsy table in Massachusetts in the autumn of 1918, calculating in cold arithmetic the possible extinction of the species. Charles came home from the Argonne having lost the ability to believe the ratchet turned one way. Vaughan lost it over a dead soldier’s chest in his own country. The war and the plague taught the same lesson from opposite ends of the ocean, and taught it to the two kinds of men — the soldier and the scientist — least prepared to receive it.

[ Lecturer’s voice ]

The pandemic came in three waves. The first, in the spring of 1918, was mild — a fast-moving grippe that filled the camps and the factories, laid men low for a few days, and killed comparatively few; it drew little notice in a nation girding for a summer of war. Where it first emerged as a human disease is genuinely unsettled: the candidates argued over by serious people include an army camp in Kansas in March of 1918, a British staging base on the French coast, and points further east, and the honest position is that the origin is contested and may never be fixed. What is not contested is the second wave, which is the one that reached Devens — which surfaced almost simultaneously in late August at three points on the Atlantic rim, Boston, Brest, and Freetown in Sierra Leone, all of them ports through which the war moved men — and which had somewhere in the intervening months acquired the capacity to kill that the spring wave lacked. The second wave, that autumn, did the overwhelming bulk of the dying. A third wave followed in the winter and early spring of 1919, lethal still, and then the thing burned down and let go.

And it was called the Spanish influenza, and it was not Spanish, and the reason it was misnamed is telling. Spain was neutral in the war. Spain, being neutral, did not censor its newspapers. So when the disease swept Spain in 1918 — it made King Alfonso himself gravely ill — the Spanish press reported it fully and freely, while the newspapers of every belligerent nation, France and Britain and Germany and the United States, were operating under wartime censorship that treated an epidemic among the troops as intelligence to be suppressed. The world therefore read about the plague first and most vividly from Spain, and concluded, wrongly, that Spain was where it lived. The name is a monument to censorship — the same wartime machinery that packed two hundred thousand people onto Broad Street in Philadelphia also decided that the American public did not need to be told, in plain and timely language, that it was in mortal danger.

The toll. About six hundred seventy-five thousand Americans died — more than all the American battle deaths of the First World War, the Second World War, Korea, and Vietnam combined, administered in roughly a year. Worldwide the low estimate is fifty million and the high estimate is twice that; either way it killed more human beings faster than any event in history, more than the war whose shipping lanes it traveled. And it killed against precedent. Ordinary influenza is a killer of the very old and the very young; you can graph its mortality by age as a gentle U. This one killed the old and the young too, but it also killed, catastrophically, the strong young adults in the middle — men and women in their twenties and thirties, the soldiers and the new mothers and the workers at the peak of their vigor — so that its mortality graph traces a W where the gentle U belongs, with a savage spike in the middle. Salvatore was in that spike. So was Randolph Bourne, who died five weeks after the Armistice. Roughly half the Americans the flu killed were between twenty and forty years old. The modern guess at why — and it is a guess, offered as one — is that the very robustness of a young immune system became the weapon that turned on its owner, the healthy body’s own defensive fury flooding and drowning its own lungs. If that is right, then the plague reserved its worst for exactly the people best equipped, in every ordinary reckoning, to survive it. Life expectancy at birth in the United States fell by about twelve years in the single year 1918, then snapped back. There is no other mark like it in the tables.

[ PAUSE FOR QUESTIONS ]

Part Two: The Cities, One by One

When a novel shock arrives from the environment — and nothing was more purely a shock from outside than a virus no one had immunity to — what does it meet when it reaches the American institutions that must respond? In 1918 it met almost nothing at the national level, and everything at the local one, and the difference between one city and the next was, quite literally, the difference between living and dying.

There was, in 1918, no federal machinery worth the name for confronting a national epidemic. The United States Public Health Service was a small body, better known for inspecting immigrants at the ports than for commanding a national defense; its Surgeon General, Rupert Blue, presided over resources that were laughable against the scale of what came. Congress, that October, appropriated a single million dollars — against a plague killing thousands a day. Above all, the war had first claim on everything: on the doctors, a quarter of whom were in uniform; on the nurses; on the trains; on the newsprint; on the attention of a President who, across the whole catastrophe, said essentially nothing about it in public, because to speak of it was to admit a weakness the war effort could not afford. Woodrow Wilson would himself be knocked flat by this same influenza in Paris the following spring, in the middle of the peace conference — and even his own illness was reported to the world as a cold. The silence went all the way up.

So the response was local, improvised, and wildly uneven, and the variation is where the dying was decided. Philadelphia and St. Louis stood at the two extremes, and history rarely hands out a controlled experiment this clean.

Philadelphia first. On the twenty-eighth of September, 1918 — with the flu already in the city, already in the navy yard, with the city’s own physicians pleading in print that the thing be called off — Philadelphia held a Liberty Loan parade to sell war bonds. It was enormous: two hundred thousand people packed shoulder to shoulder along two miles of Broad Street, bands, floats, marching troops, the full apparatus of wartime enthusiasm the government had spent a year perfecting. The director of public health, a man named Wilmer Krusen, had the authority to stop it and did not, because the bond quota was sacred and the pressure to hit it came from the same war machine that had built the crowds in the first place. Within seventy-two hours every hospital bed in Philadelphia was full. Within a week the city was recording hundreds of deaths a day and then more than a thousand. The morgue, built for a few dozen bodies, held several hundred, stacked and rotting, and the city ran out of coffins, and then ran out of gravediggers, so that bodies lay in row houses for days while families waited, and in the end the archdiocese sent horse-drawn carts through the streets and priests called on the living to bring out their dead, and steam shovels dug trenches for mass burial. In roughly six weeks Philadelphia buried on the order of twelve thousand people. The parade that was meant to fund the war became one of the deadliest civic decisions in American history.

Now St. Louis. When the flu appeared there in early October, the city’s health commissioner, a physician named Max Starkloff, did the opposite of Philadelphia, and did it early, against real resistance from merchants and clergy who stood to lose. He closed the schools, the theaters, the churches, the pool halls; he banned public gatherings; he staggered the hours of factories and stores to thin the crowds on the streetcars; and he did it before the wards filled rather than after. St. Louis suffered — no American city escaped — but its death rate ran to something like half of Philadelphia’s, and the demographers who have gone back over the fifty largest cities and lined up the timing of their interventions against their eventual mortality have found the pattern holds across the whole country: the cities that acted early and sustained it fared markedly better than the cities that hesitated.

And the texture of it, city to city, is a portrait of a modern society improvising with whatever was at hand. Gauze masks appeared everywhere, of doubtful benefit against a virus but universal as a public ritual, and San Francisco, which had made them compulsory by ordinance, discovered a new offense: the mask slacker, fined or jailed for a bare face, and then, when the ordinance was renewed after a premature celebration of victory let the disease roar back, an actual Anti-Mask League that filled a downtown hall in January of 1919 to protest the requirement as an assault on liberty — every argument of our own recent memory, conducted in 1919, in wing collars. Whole towns posted guards on the roads and turned away strangers. Telephone companies begged subscribers to place only urgent calls, because the operators were sick and a city could not run without a switchboard. Barns and armories and college gymnasiums became wards. Volunteer women drove soup through the streets to houses where every adult was too sick to cook. It was the nineteenth-century community — the church auxiliary, the fraternal lodge, the neighbor — meeting a twentieth-century mass-mortality event, because the twentieth-century state was focused on the war.

[ Lecturer’s voice ]

And then — and this has puzzled every historian who ever took the pandemic seriously — the country put it down and walked away and, for the better part of two generations, declined to remember it.

Consider the strangeness. Six hundred seventy-five thousand dead, more than every American war of the century combined, concentrated in a single autumn, reaching into very nearly every family in the nation — Rosa’s, and hundreds of thousands like hers — and it produced almost no literature, no monuments, no anniversaries, no place in the national story remotely proportionate to its size. The war, which killed a fifth as many Americans, got the parades and the memorials and the shelf of novels and the Tomb and the poppies. The plague got silence. The great historian of the subject titled his book, accurately, America’s Forgotten Pandemic, and the forgetting is itself a historical fact that demands explaining. Some of the explanation is the war, which swallowed the flu into a general season of death and then monopolized the mourning that followed. Some of it is the sheer speed — a thing that comes and kills and goes inside a year does not lay down the slow sediment of memory that a four-year war does. And some of it, I think, is that there was no story to tell that anyone wished to hear: no enemy to blame, no victory to claim, no meaning to extract, only a vast meaningless subtraction that arrived, took the young and strong by preference, and left. A nation raised on Henry’s faith that suffering is the price of progress had no shelf to put this on, and so it put it nowhere. Rosa’s neighborhood buried eleven of its own in a single month, understood exactly what to do, did it — and then almost never spoke of it again. Multiply that street by the country, and you have the silence.

The silence bears directly on the second great subtraction of these years, the closing of the immigrant door. It would be a tidy thing — and it is often asserted — to say that the plague of 1918, having terrified the nation with the spectacle of a foreign contagion carried along the shipping lanes, drove Americans into the arms of the men who wanted the immigrant door shut. It is tidy, and the evidence does not support it. The remarkable fact, once you look, is how little the 1918 flu was blamed on immigrants at the time. It killed too democratically, too fast, and too obviously along the paths of the American army itself to be pinned on the newcomer; there was no great wave of nativist scapegoating riding the pandemic, and the men already laboring to close the door barely troubled to invoke it. The door was closing anyway, for reasons laid down long before the virus, and it would have closed had the virus never come.

[ PAUSE FOR QUESTIONS ]

Part Three: The Germ and the Foreigner

From 1891, federal statute barred from entry any alien suffering from a “loathsome or dangerous contagious disease,” and the phrase — loathsome, a word of moral disgust doing the work of a medical category — sat in the immigration code for a generation, marrying contagion to unworthiness in the language of the law itself. You have already stood, in the first series, on the medical line at Ellis Island: the six-second physical, the public-health officers watching the steerage passengers climb the stairs and chalking a letter on the coat of anyone who faltered — E for the eyes, H for the heart, a circled X for a suspected disorder of the mind — and the most dreaded of them, the officer who everted the eyelid with a buttonhook to hunt for trachoma, the eye disease that was the single largest medical cause of exclusion, common in exactly the regions of southern and eastern Europe from which the new immigration came. The immigrant arrived, in American law and in the American imagination, as a body to be inspected for infection before the person inside it could be considered at all.

And the enforcement, when fear ran high, fell along the lines of origin with a precision that gave the game away. In 1892, when typhus and then cholera arrived on ships out of the Baltic, New York clamped a twenty-day quarantine on steerage passengers that fell, in practice, almost entirely on the Russian Jewish arrivals who filled the steerage of those particular vessels, while the cabin passengers of the same ships walked ashore. In 1900, when bubonic plague appeared in San Francisco, the authorities threw a cordon around Chinatown — and drew it, on the map, so that it enclosed the Chinese and Japanese residents and released the white residents who lived inside the same lines, quarantining a race rather than an infection, until a federal judge struck it down for doing exactly that. And through those same years the country invented, in Mary Mallon — the Irish immigrant cook the newspapers named Typhoid Mary — the perfect fusion of the two fears: a healthy carrier, an immigrant, a woman, confined by the state on an island in the East River for the better part of a quarter century, longer than any danger she posed could justify, because she had become a symbol before she was a patient. The disease-bearing foreigner was a fixture of American public life a full generation before the influenza, encoded in the statutes, enacted at the ports, mapped onto the neighborhoods. The flu did not create that channel. It arrived in a country where the channel had long been dug.

[ Lecturer’s voice ]

One modern idea belongs here, on a short leash and plainly labeled as speculation. There is a body of recent psychological research — it travels under the name of the behavioral immune system — which proposes that human beings evolved a set of automatic responses to the cues of contagion, and that these responses include not only physical disgust but a wariness of the unfamiliar: that the mind, sensing pathogen threat, tightens toward the in-group, toward conformity, toward suspicion of the outsider whose different customs and different bodies might carry what the group has no defense against. On this account the equation of the foreigner with the infection would run deeper than any prejudice learned in a particular time and place — a general reflex, switched on by the perception of disease. It is a suggestive idea, and it hovers over any account that puts a plague and a closing border in the same room. Its standing, though, is weak. The evidence is largely correlational; a good deal of the experimental work that seemed to show disease cues directly shifting attitudes belongs to a school of social psychology whose findings have suffered badly in the great replication reckoning of the last fifteen years, where result after result proved unable to reproduce. So the behavioral immune system stands as a modern hypothesis about mechanism, a lens with no claim to proof — a possible deep grammar under the old and abundantly documented American habit, which needs no theory to establish it. It cannot be converted into the cause of the Immigration Act of 1924. The causes of that act are on the record, in the open, spoken by named men.

[ PAUSE FOR QUESTIONS ]

Part Four: The Arithmetic of Belonging

Return to Rosa’s street. In the fiscal year that ended in June of 1914, one million two hundred eighteen thousand immigrants entered the United States — the high-water mark of the greatest movement of peoples in the history of the world, a flow that had run for thirty years and that no one on the Lower East Side believed could ever stop. By 1918 it had fallen, from the war, to a comparative trickle; the Atlantic was closed by submarines and troop convoys. And then the war ended, and the flow began to climb back — four hundred thirty thousand in 1920, eight hundred five thousand in 1921, rising toward the old torrent — and the sight of it climbing was the immediate trigger that set the door swinging shut. But the mechanism that shut it had been built, piece by piece, over thirty years, and 1924 is legible only against the whole assembly.

The oldest piece was intellectual and it was a Boston piece. In 1894 three young Harvard men — Prescott Hall, Robert DeCourcy Ward, Charles Warren — founded the Immigration Restriction League, and found in Senator Henry Cabot Lodge their patron in Washington, and gave the restriction cause the thing it had lacked: respectability, an address on Beacon Hill, a scientific vocabulary, and a single legislative demand, the literacy test — a requirement that the immigrant be able to read, in some language, a short passage, on the theory, only half-concealed, that this would sieve out the peasant south and east of Europe while passing the literate north and west. The literacy test became the white whale of American politics for twenty years. Grover Cleveland vetoed it in 1897. William Howard Taft vetoed it in 1913. Woodrow Wilson vetoed it twice, in 1915 and again in 1917, on the old American ground that a nation of immigrants does not turn away the illiterate whom it had once welcomed. And in February of 1917, over Wilson’s second veto, Congress passed it into law at last — and folded into the same act a provision drawing a line on the map of the globe, the Asiatic Barred Zone, excluding from entry almost the whole of Asia, a formalization of the Pacific-facing prejudice that would soon reach Kenji. The literacy test, fought for across two decades as the great instrument of restriction, turned out to be the last weapon of the old order rather than the first of the new — for even as it passed, the men who wanted the door shut had found a better tool than literacy, and its name was the quota.

The scaffolding for the quota had been laid between 1907 and 1911 by a body called the Dillingham Commission, a joint congressional inquiry that produced forty-one volumes and a conclusion its structure had built in from the start: that there were two immigrations, an “old” one from northern and western Europe — the commission’s word for it was assimilable — and a “new” one from the south and east, which it presented as a distinct and lower order, complete with a Dictionary of Races or Peoples that ranked the breeds of humankind for the convenience of legislators. The commission’s forty-one volumes were the respectable data on which the coming statutes would stand. And onto that scaffolding, in the postwar panic, three currents converged.

The first was labor, and it complicates any picture of restriction as a purely patrician or reactionary project. Samuel Gompers, the immigrant Jewish cigar-maker who built the American Federation of Labor, was himself a committed restrictionist, and his logic was the plain economic logic of the workingman: every fresh boatload of desperate labor was a downward pressure on the wage and a fresh supply of strikebreakers, and the union man who had clawed his way to a decent day’s pay saw the open door as adversely affecting his standard of living. Restriction, in 1924, was carried by a coalition that ran from Beacon Hill patricians through the labor unions to the small-town Protestant West.

The second current was eugenics, and it returned a figure from the first series: Madison Grant, the New York patrician, the conservationist, the founder of the Bronx Zoo, whose 1916 book The Passing of the Great Race dressed a theory of Nordic supremacy in the borrowed prestige of biological science and sold through edition after edition. In the immigration fight, Grant’s world supplied Congress with an expert, and the forgotten hinge on which a great deal turned was Harry Laughlin, of the Eugenics Record Office at Cold Spring Harbor, who was appointed the “Expert Eugenics Agent” of the House Committee on Immigration and who testified before it, at length and with charts, that the new immigrants carried hereditary defect — feeblemindedness, criminality, insanity — in their germ plasm, and were degrading the biological stock of the nation. His data were, we now know, a tissue of misclassification and motivated arithmetic, and they were demolished by careful critics even at the time. But they wore the white coat, and they gave the men who wanted the door shut what the Immigration Restriction League had wanted from the start: a way to say that the objection to the Italian and the Jew and the Pole was a matter of science rather than of taste.

The third current was the war’s own residue — the fever known as one hundred percent Americanism, the wartime demand for absolute conformity that had criminalized the German language in Iowa schoolrooms and now, with the German enemy defeated, went looking for its next object and found it in the unmelted foreigner in the American city, speaking his own tongue, reading his own newspaper, voting, some feared, to his own foreign purposes.

[ Lecturer’s voice ]

These currents met in two statutes, and the second of them is one of the most consequential laws in American history, and almost no one can name the men who wrote it.

The first was the Emergency Quota Act of 1921, rushed through in the panic of the returning flow. Its principle was the quota, and its arithmetic was this: each nationality already present in the United States could send, each year, a number equal to three percent of the people of that nationality recorded in the census of 1910. It cut the total at a stroke to around three hundred fifty thousand, and — because it was pegged to a population already heavy with the pre-war southern and eastern European arrivals — the restrictionists regarded it as a stopgap that did not yet do the real work. The real work waited three years.

The Immigration Act of 1924 — the Johnson-Reed Act — was written by two men whose names have faded. Albert Johnson, a Republican congressman from the state of Washington, chaired the House Immigration Committee and gave the act his name; he was a newspaperman by trade, a restrictionist by conviction, and a friend and ally of Grant and Laughlin. Beside him worked a New Yorker named John Trevor, who supplied the crucial statistical machinery. And the machinery was a masterpiece of arithmetic disguised as neutrality. The 1924 act set each nation’s quota at two percent — and pegged it, no longer to the census of 1910, but to the census of 1890. 1890 was chosen for one reason and everyone in the chamber knew it: it predated the great wave. In 1890 the United States was still populated overwhelmingly by the stock of northern and western Europe, because the Italians and the Poles and the Russian Jews had not yet arrived in force. To key the quotas to 1890 was to award the overwhelming share of the permitted immigration to Britain and Germany and Scandinavia, and to cut the nations of southern and eastern Europe to a token — Italy, which had been sending hundreds of thousands a year, was allotted under four thousand. And the act’s ultimate mechanism, the “national origins” system that took full effect in 1929, went further still: it fixed a total ceiling of about one hundred fifty thousand and apportioned it according to the supposed national origins of the entire white population of the United States as of 1920, an almost metaphysical calculation that purported to freeze the ethnic composition of the country as it stood and to admit newcomers only in the exact proportions of the existing blend. The country did more than decide to admit fewer people. It wrote into law a definition of what the American population was, keyed to a chosen year, and resolved to admit the future only in the image of that definition. It made the nation’s ethnic composition a thing to be legislated and held.

The 1924 act did to Kenji something it did to no European, and its origin lay at the peace conference. At Paris in 1919, Japan had asked for a single sentence in the Covenant of the League — a clause affirming the equality of the races among member nations. A majority of the commission voted for it. Wilson, in the chair, ruled that so grave a matter required unanimity, and killed it. Five years later, Congress put that same Wilsonian race prejudice into statutory practice. The 1924 act contained a clause excluding from entry, altogether and by name in effect, all “aliens ineligible to citizenship” — and who was ineligible to citizenship had just been settled by the Supreme Court. In 1922, in the case of Takao Ozawa — a Berkeley-educated man who had argued, in a brief he wrote himself, that his American life and American family and light skin had made him white within the meaning of the naturalization law — the Court ruled unanimously that he was not white and could never be a citizen. In 1923, in the case of Bhagat Singh Thind, an Indian who pointed out that the anthropologists of the day classified the peoples of northern India as Caucasian, the Court ruled that it did not matter what the anthropologists said — that “white” meant white as the common man understood it, and Thind was not — thereby holding, within a single year, that an applicant lost for not being Caucasian and another lost though he was, which showed that the scientific language had always been a costume over a folk decision about who belonged. The 1924 exclusion clause took those rulings and slammed the gate: it ended the “Gentlemen’s Agreement” that had governed Japanese immigration since 1907 and shut Japan out entirely, gratuitously, over the protest even of the State Department, which foresaw the diplomatic cost. Japan understood the message exactly. The government in Tokyo declared the day the act took effect a day of national humiliation; flags flew at half-mast; the American ambassador had warned that the exclusion would carry “grave consequences,” and the Senate, choosing to read the warning as a threat, hardened its vote in response. For Kenji, in the Santa Clara Valley, the exclusion clause was the capstone on the structure of legal subtraction that had closed around him across the first lecture — the alien land laws, the denial of citizenship, and now the sealing of the door behind him, so that his community could grow in exactly one way: by the birth of his American children.

And one door the act pointedly left open: the whole of the Western Hemisphere. Mexico, Canada, the nations of Latin America — the quota system did not touch them, at the insistence of the southwestern growers who needed the labor and the diplomats who wanted hemispheric goodwill. So even as the Atlantic door swung shut, the land borders to the south and north stood open, and the labor that had come from Naples and Warsaw would, over the coming decades, come increasingly from Sonora and Jalisco. The men who built the wall left a gate in it, exactly where their fields needed one.

[ Lecturer’s voice ]

The plague and the door become one image in a man the series has already buried.

In July of 1916, in the Atlantic Monthly, the hunchbacked young essayist Randolph Bourne — Dewey’s brilliant student, who had broken with his teacher over the war and paid for it with his career — published an essay called “Trans-National America,” and it named the road the country was closing. Bourne looked at the same immigrant cities that terrified the restrictionists, the same unmelted neighborhoods speaking their own languages and reading their own papers, and he saw in them the germ of something the world had never had: a nation that let its newcomers keep their inheritances instead of dissolving them into a single Anglo-Saxon mold, and weave those inheritances into a richer, federated, cosmopolitan whole — an America that was the first international nation, strong precisely in its refusal to be one thing. It was, alongside Horace Kallen’s argument for what he called cultural pluralism, the fullest statement anyone made in that generation of the alternative to the melting pot and to the closed door alike — a vision of belonging by addition rather than by subtraction. It was a road proposed, and it was not taken. The country chose, in 1924, the arithmetic of 1890 instead.

And Bourne did not live to watch it choose. The influenza — the same plague that took Salvatore at Camp Devens — killed Randolph Bourne in his rented room in Greenwich Village in December of 1918, five weeks after the Armistice, at the age of thirty-two, with his great essay on the State breaking off unfinished on the desk beside him. The man who wrote the most generous American answer to the question of the foreigner was carried off by the same disease, in the same season, as the immigrant boy in the photograph above Rosa’s bed. The plague took the prophet of the open door, and the door closed behind him, and the country that did both folded the one into silence and wrote the other into permanent law, and told itself, on Henry’s porch in the summer of 1929 with the radio playing, that the mechanism had at last been perfected.

[ END OF LECTURE ]

End of Lecture 2.5

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America 1914–1930

Lecture 2.4

The Future That Worked: America and the Bolshevik Revolution, 1919–1920

Part One: The Gate at South Chicago

It is before dawn on the twenty-second of September, 1919, and Ralph Shaw, who is twenty years old, is standing outside the gate of the South Works in a crowd of men deciding, each of them privately and all of them together, whether to go in. Ralph is invented — a composite, like the five figures who walked through the first series — but everything that happens to him happened to men whose names we know, and I will be careful to tell you where the composite ends and the record begins.

He has worked here since he was sixteen. His father came from a village in Galicia — the Austrian Galicia, not the Spanish one; keep the two straight, because the map of Europe these men carried in their heads is about to become one of the pretexts for what happens to them — and his father is inside already, or was, on the night turn, because the night turn at the South Works in 1919 is a real thing and not a figure of speech: the mills of the United States Steel Corporation run on two twelve-hour shifts, seven days a week, and once a fortnight, when the shifts change over, a man works the long turn, which is twenty-four hours in a row, standing beside molten metal, and then he goes home and sleeps and comes back and does it again. Ralph knows men who have fallen asleep on their feet at the end of the long turn. One of them is dead of it.

That is the first thing to hold about the great steel strike of 1919, and I put it first because the histories, when they get to the strike, get to it through the words radical and Bolshevik and un-American, which are the words the strike’s enemies chose, and by the time you have read those words for three pages you have forgotten to ask the question the strikers were asking, which was not about Moscow. It was about the twelve-hour day. In the year of our Lord nineteen hundred and nineteen, in the largest and richest industrial enterprise on the face of the earth, the men who made the steel worked twelve hours a day, seven days a week, and a Sunday off was a rumor from another industry.

So when the call went out — three hundred sixty-five thousand men, in the end, walked out of the mills from Pennsylvania to Colorado, the largest strike the country had yet seen — the thing that moved most of them was not a doctrine. It was a schedule. Hold that, because the whole lecture turns on the distance between what the strike was to the man at the gate and what it was made to mean by the men who broke it.

Ralph goes out. So does his father. So do the Poles and the Slovaks and the Croatians and the Serbs and the Italians and the Lithuanians who make up the bulk of the unskilled labor in the mills — and here is the second thing to hold, because it is the hinge on which the strike breaks. The men at the South Chicago gate that morning speak, among them, something like a dozen languages, and the strike must be conducted in all of them at once, and the United States Steel Corporation understands the arithmetic of that fact far better than the union does.

The Man Running It

The strike was organized by a National Committee assembled out of two dozen separate craft unions of the American Federation of Labor — an unwieldy thing, because the AFL was built on the crafts, on the skilled trades that guarded their membership like a guild, and the steel industry by 1919 was an industry of the unskilled, of the immigrant at the furnace who belonged to no craft and whom the crafts did not especially want. The man who did the actual work of holding this contraption together was the committee’s secretary, and his name was William Z. Foster.

Foster is worth your attention, because his life is the argument of this lecture compressed into a single biography. In 1919 he is thirty-eight, a lean, spare, controlled man from Philadelphia by way of every hard job and hard philosophy the American West had to offer. He had been a Wobbly — a member of the Industrial Workers of the World, the revolutionary union your first series met in the western mines, the union that the war and the Espionage Act had just finished destroying, as the last lecture described. He had been a syndicalist, a believer in the idea that the unions themselves, by the general strike, would one day simply take the economy away from its owners. He had cooled from that into something more practical, and in 1917 and 1918 he had done the near-impossible: he had organized the packinghouses of the Chicago stockyards, the same polyglot immigrant mass, and he had won.

He was, in short, the best organizer in America, and everyone who watched him work said so, including the men who hated everything he believed. And what he believed was the trouble. Because the pamphlet Foster had written years earlier, in his syndicalist youth — a little tract called Syndicalism, arguing that the workers would seize the means of production and that they need not be too fastidious about the means — that pamphlet was sitting in a drawer, and the United States Steel Corporation was about to find it, and reprint it, and mail it to every newspaper in America.

What the Strike Broke On

The strike lasted a hundred and eight days and it lost, completely, and it lost for three reasons that were braided together so tightly that you cannot pull one out without the others following.

The first was force. In the mill towns of western Pennsylvania — the heart of the strike, the towns U.S. Steel owned outright — the men were simply not permitted to assemble. The sheriff of Allegheny County deputized the company’s own guards. Meetings were banned; halls were closed; strikers were clubbed and arrested for standing on the public street. In Gary, Indiana, the state militia came in and then, in early October, federal troops under General Leonard Wood, and Gary was placed under something the newspapers were willing to call martial law because that is what it was.

The second was the racial and ethnic fracture, worked with cold expertise. The steel companies brought in strikebreakers — by the tens of thousands, and a great many of them Black men from the South, for whom the northern mill at strikebreaker’s wages was the best offer the American economy had ever made, and who owed the union nothing, because the craft unions of the AFL had spent fifty years making sure the Black worker understood he was not wanted. The union had, in the mills, no answer to this, because the union had helped build the thing it was now impaled on. And among the immigrant strikers themselves the companies played the old game, the Serb against the Croat, the Pole against the Lithuanian, with foremen and labor spies and the quiet word that the other fellows were going back in.

The third was the word Bolshevik, and this is the one that matters for us, because it is the moment the Russian revolution reaches the gate at South Chicago. The strike began on the twenty-second of September. The Communist parties of the United States — there were, by then, two of them, and I will come to why there were two — had been founded in that very city three weeks earlier. Foster’s old syndicalist pamphlet was produced and waved. The Senate opened an investigation and hauled Foster before it and asked him, in effect, whether he believed in God and private property, and Foster, who was too honest and too proud to grovel, gave answers that made the headlines the companies wanted. The strike of three hundred sixty-five thousand men for a shorter day was refiled, in the public mind, as the opening skirmish of the revolution — and once it had been so refiled, the clubs and the troops and the injunctions were no longer strikebreaking. They were national defense.

By January the men were back at the twelve-hour day, those the companies would take back, and Ralph Shaw’s father was not among them, because the long turn and the strike between them had used him up, and that is a different kind of casualty and it appears on no list.

What Foster Learned, and What Ralph Learned

Here is the thing to watch. Foster drew a conclusion from the defeat, and the conclusion was that the syndicalist and the reformer had both been wrong, that a strike could be broken by the state whenever the state chose to call it a revolution, and that therefore what the workers needed was not a better strike but a different state — and within two years William Z. Foster had joined the Communist movement, and he spent the remaining forty years of his life inside it, ran for President of the United States on its ticket three times, and led the party through every twist the next four decades would inflict on it. The best organizer in America was radicalized into Communism by the experience of being called a Communist. Sit with that sentence, because it is the feedback loop this entire lecture is about, appearing here for the first time in a single man’s life: the accusation helped produce the thing it accused.

And Ralph Shaw drew the same conclusion, in a smaller way, at the gate. I am going to tell you the rest of his life now, in one paragraph, and then set him down and not pick him up again until a later series — because his life is the clearest illustration I have of the double thing I most want you to carry out of this room, and it is better shown whole than doled out.

Ralph became an organizer. He found, in the Communist movement of the nineteen-twenties and thirties, the one institution in American life that would send a man like him into a mill town knowing he might be beaten, and expect him to go, and honor him for going. He was good at it — as good, in his way, as Foster. He organized in steel and he organized in Chicago, and on a spring afternoon in 1937, on the Southeast Side, not two miles from the gate where this lecture finds him, he was in the crowd on the prairie outside the Republic Steel works when the Chicago police fired into it and killed ten people and shot and clubbed a hundred more, the thing the country would come to call the Memorial Day Massacre — and Ralph, eighteen years older, watched the same power break the same kind of strike in the same neighborhood, and was more certain than ever that he had been right at twenty. He helped build the great industrial union that finally, at long last, won in steel. And then, at the end of the nineteen-forties, when the Congress of Industrial Organizations decided that it could not survive the new Red Scare with Communists in its house, the union Ralph had bled for expelled him, and the movement that had made him useful found him inconvenient, and he spent his last working years in a wilderness, cast out by both sides. And here is the detail I will not let you forget, the one that keeps him from being either a hero or a fool: for the rest of his life, into the nineteen-sixties, he received private letters from men who had risen high in American labor, men who could not afford to be seen with him, and the letters were warm, and what they remembered, what they thanked him for across thirty years, was that when it came to the point Ralph Shaw had been willing to fight — and they meant with his fists, in the street, when standing there cost blood.

Now hold the two halves of him together, because they are not two things. They are one thing seen from two sides. The courage that made him go into the mill town and the rigidity that made him serve a line handed down from abroad; the discipline that let him hold a picket line under the clubs and the discipline that let him swallow, in 1939, the news that the Soviet Union had signed a pact with Hitler and that he was therefore to stop being an anti-fascist until further notice; the loyalty his old comrades wrote him letters about and the loyalty that made him, when the line changed, capable of reading a friend out of the movement for a deviation — these grow from a single root. This is the finding I want to plant here and harvest across the lecture and across the series: that the very qualities that made the Communists, by the testimony even of their enemies, the bravest and most effective labor organizers America produced were inseparable from the qualities that made them impossible allies and easy enemies. The movement could not do the work without such men, and it could not survive them, and neither, in the end, could they survive it. John L. Lewis, the great chieftain of the miners who used the Communist organizers to build the CIO and then discarded them, was asked how he could bear to work with them, and he is supposed to have answered with a hunter’s proverb: Who gets the bird — the hunter or the dog? Lewis thought he was the hunter. The purge of 1949 was the American labor movement deciding, finally, that no one had ever been quite sure whose hunt it was.

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Part Two: The Future That Worked

Leave the mill gate now and cross the ocean, because there is a second American reaction to the Russian revolution that the histories, fixed on the raids and the deportations, tend to underplay, and without it the whole story tilts into melodrama — the raiders as villains, the radicals as their prey. There was, in these years, a genuine and serious body of American opinion that looked east at what was happening in Russia and saw not a menace but a birth. Not a large body. But not a marginal one either, and it contained some of the most gifted minds in the country, and to understand the fear you must first understand the hope, because the fear was in part a response to the hope.

Understand, first, where the hope came from. You met its source in the last three lectures. The war had promised a crusade and delivered a slaughter; the peace had promised a new world and delivered, at Paris, the old one with the borders moved; and a whole generation of American progressives and intellectuals — the people who had believed, with John Dewey, that the war could be steered toward reconstruction — came home from that disillusionment looking for somewhere to put a hope that the war had cashed and not redeemed. Charles, at the ship’s rail in the first lecture, carried the disillusionment. A certain number of his contemporaries carried it eastward, and found, in the Russian revolution, a place to set it down. The revolution was, to these men, the thing the war was supposed to have been: a clean break, a chance to pour the melted institutions of the world into a better mold. The very catastrophe that had made others cynical made these few utopian, because it had proved that the old order deserved to fall.

Steffens, and the Line He Wrote Before He Looked

The perfect specimen is Lincoln Steffens. You know the type from your first series: Steffens was the greatest of the muckrakers, the journalist who had exposed the corruption of the American cities in The Shame of the Cities, a man who had spent twenty years looking hard at the actual machinery of American power and coming away disenchanted. In the spring of 1919 he got to go to Russia, and the circumstances of that trip I will come back to in a moment because they matter to the foreign policy of the whole affair. What I want first is the sentence.

Steffens came back from Soviet Russia and delivered himself of the single most famous thing anyone ever said in praise of the Bolshevik revolution: I have been over into the future, and it works. It became the epitaph of a whole cast of mind. And the detail that makes it perfect — the detail that Steffens himself later confessed, with the rueful vanity of a man who cannot help admiring his own phrases — is that he had composed the line before he arrived. He had it ready. He tried it out on a fellow passenger on the way in. He had made up his mind what the future would look like before he had seen it, and then he went and saw it, and it looked the way he had decided it would look. That is not a scandal peculiar to Steffens. That is the psychology of the whole believing party, laid bare in one man’s honesty about his own best sentence: they saw what they had come to see. The revolution was a screen onto which a disappointed idealism projected the world it could no longer find at home.

Reed, Who Died There

Around Steffens stood younger and hotter figures. John Reed is the one the story remembers. A Harvard man, a poet, a war correspondent of enormous gifts, Reed had been in Petrograd for the October revolution itself and had written it up in a book — Ten Days That Shook the World, published in 1919 — that remains, whatever you think of its politics, one of the great pieces of eyewitness reporting in the language; Lenin himself endorsed it. Reed threw himself body and soul into the American movement, helped found one of its two warring communist parties, was indicted, fled the country, and made his way back to Russia, where in October of 1920 he died of typhus at the age of thirty-two and was buried at the wall of the Kremlin — the one American laid in that ground, a Portland boy under the Soviet wall. His widow, Louise Bryant, a fine journalist in her own right, wrote her own account of what she had seen. They believed, and Reed paid for the belief with his life.

The Mission That Ties the Knot

In February of 1919, while the peacemakers sat in Paris unable to decide what to do about a Russia they had helped invade — and they had. American soldiers were on Russian soil in 1919, and they were not alone. A few thousand had landed at Archangel in the frozen north the previous autumn and a larger force at Vladivostok in Siberia, sent on a tangle of motives: to guard the Allied war stores piled up at the ports, to rescue a stranded Czech legion strung out along the Trans-Siberian Railway, and to keep a wary eye on the Japanese, who had poured in tens of thousands of their own troops with designs on the Russian Far East. Alongside them were the British, who led the northern expedition, and French, Canadian, Italian, and other contingents scattered across the theaters. The original purpose had been the war against Germany — to hold an Eastern Front together, or salvage what remained of one — not the war against Bolshevism. But with Germany beaten that November the distinction blurred, and in London the Secretary of State for War, Winston Churchill, argued openly for turning the intervention into a crusade to strangle the Bolshevik revolution outright. He did not get his crusade; the war-weary democracies would not supply one. The northern force came home in 1919 and the Siberian force in 1920, and they changed nothing on the ground — the Bolsheviks won their civil war — but they left behind a grievance the Soviet state would nurse for decades, and it was in that atmosphere of suspicion, with foreign armies only just off Russian soil, that a very young American diplomat was sent quietly to Moscow to find out what terms the Bolsheviks would accept. His name was William Bullitt. He was twenty-eight. And the graybeard sage he took along to lend the mission wisdom was Lincoln Steffens, which is how Steffens came to write his sentence.

Bullitt saw Lenin, and came back with an actual offer — real terms on which the fighting might have stopped and some accommodation been reached. And nothing happened. Wilson, sick and besieged in Paris, would not receive him. Lloyd George, who had encouraged the mission, disavowed it in the House of Commons when it became politically inconvenient. The terms died in a drawer. And Bullitt, a proud and headlong young man, resigned in a fury, came home, and sat down in September of 1919 before the Senate committee that was then tearing the Versailles Treaty apart, and gave testimony so damaging — about how the treaty had really been made, about Wilson’s retreats — that it helped sink the thing. So the same mission produced the era’s most famous line of praise for the revolution and one of the sharpest weapons used to kill the President’s peace. Hold Bullitt in your eye, because his own life is going to run the entire arc this lecture describes: the young enthusiast of 1919 became, in 1933, the very first American ambassador to the Soviet Union — and then, having lived in it, became one of the most bitter and implacable anti-Communists in the whole American establishment. He is the believer and the disenchanted in one skin, and he is not the last we will meet.

The Revolution Splits Its Own Church

Ironically, the Russian revolution’s first great effect on the American left was not to unite it. It was to shatter it.

The Socialist Party of America — Debs’s party, the party that had polled nearly a million votes, the party the last lecture left with its leader in a federal penitentiary — tore itself to pieces in 1919 over the single question of whether to bow to Moscow. Through the spring and summer the fight raged, and at the conventions in Chicago that very September, the same weeks the steel strike began, the thing came apart in three. There was left a rump Socialist Party, gutted. And there rose, out of the wreckage, not one communist party but two — the Communist Party of America and the Communist Labor Party — which promptly hated each other with the special ferocity reserved for factional disputes within a small ideological movement. Their combined membership, such as it was, sat overwhelmingly in the foreign-language federations, in Russian and Lettish and Lithuanian locals whose members in many cases could not follow a meeting conducted in English and could not have told you the difference between the two parties they were quarrelling over. What was perceived as a powerful international conspiracy was in reality a handful of exhausted immigrants splitting into factions in rented halls.

The Grain

One more thing before we cross back, and I place it here because it is the most devastating single fact in the lecture and it belongs beside Steffens’s sentence, touching it, so that the two strike a spark.

Steffens said the future worked. Within two years the future was starving. The Russian famine of 1921 to 1923 killed something on the order of five million people, and it was broken — the dying was stopped — in large part by American food, administered by the American Relief Administration, at its peak feeding something like ten million Soviet citizens a day. And the man who ran that relief, the organizing genius behind it, was Herbert Hoover: the most prominent anti-Bolshevik in American public life, a man who loathed the Soviet system and said so and helped feed it anyway, on the principle that children should not be starved for their government’s ideology.

A single forward glance, and then we turn to the hunters. The believers’ cast of mind did not die with the famine; it renewed itself in each decade, and its darkest master was still to come — a correspondent named Walter Duranty, who in the next decade would win the highest honors of American journalism for dispatches from Moscow that, when the greater famine came in the thirties, told the world there was no famine at all. But Duranty belongs to the nineteen-thirties and to a later reckoning. In 1920 the genre was still innocent, still Steffens’s, still a hope and not yet a cover-up.

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Part Three: The Hunters

Now the reaction, and I will ask of it exactly what I asked of the Communists in Part One — that we see it whole, with both faces, and resist the temptation to make it a simple villainy. What were the anti-Communists thinking? What did they do? And what did it cost the country and leave behind? Those three questions organize this part.

The Fear Had an Object

The Red Scare is easy to narrate as a hysteria, a fright over nothing. It was not over nothing. Set out on the table what an ordinarily prudent American actually saw in the year after the Armistice:

• Abroad, a revolutionary government that openly proclaimed itself the enemy of every existing state, that in March of 1919 founded the Communist International for the express and published purpose of overthrowing those states by revolution, and that in 1919 watched short-lived Soviet republics flare up in Hungary and in Bavaria. World revolution was not a paranoid fantasy projected onto the Bolsheviks. It was their announced program, printed in their own manifestos.

• At home, a genuine wave of terrorist violence — real bombs, thrown by real people. In April of 1919 some thirty-six bombs were mailed to prominent Americans — a senator, the Attorney General, judges, industrialists — timed to arrive around May Day; most were caught, but one blew the hands off the maid of a senator in Georgia. And on the night of June the second, 1919, bombs went off in eight cities within the same hour, one of them destroying the entire front of the Attorney General’s house in Washington — and across the street, close enough to feel the blast, lived a young assistant secretary of the Navy named Franklin Roosevelt and his wife Eleanor, who helped tend the scene. The bomber had blundered and blown himself to pieces on the Attorney General’s steps.

• And a country convulsed by labor: the Seattle general strike in February, the steel strike you have already stood inside, a great coal strike in the autumn, and — most unnerving of all to ordinary opinion — a strike by the police of Boston in September, which left a great American city for a few nights with no one guarding it, and produced looting, and made a national hero of the Massachusetts governor who broke it, a taciturn man named Calvin Coolidge, whose entire national career was built on the sentence he wired about it. Nineteen-nineteen saw more than three thousand strikes; something like one American worker in five was out at some point in the year.

Now, a careful man would have noticed a distinction that the scare was about to erase: the actual bomb-throwers were not Communists. They were followers of an Italian anarchist named Luigi Galleani, a movement with no connection to Moscow and contempt for its discipline. The men who threw the bombs and the men who joined the communist parties were different men with different and mutually hostile philosophies. But the distinction did not survive contact with the fear. In the public mind, and soon in the policy of the government, anarchist and Communist and syndicalist and foreign-born striker melted into a single enemy, red and alien, and the enemy was to be hunted as one.

That is the first face of the reaction, and it is a human face: men frightened by things that were genuinely frightening, reaching for the country’s safety. The failure was not that they were afraid. It was what they did with the fear.

The Method: A Statute Without a Jury

The central figure is the Attorney General whose house was bombed, A. Mitchell Palmer — a Pennsylvania Quaker and progressive who had refused the post of Secretary of War on pacifist grounds, and who now, with his own front wall blown into the street, became the hunt’s commander. Palmer had, we should be fair, an object lesson in his own hallway. He also had ambitions: the Democratic presidential nomination was open for 1920, and a man who visibly saved the Republic from revolution might reach for it.

His method deserves your close attention, because it is the most lasting institutional lesson of the whole episode, and it turns on a distinction that the last lecture set up precisely. The wartime Sedition Act — the one that had jailed Debs — was repealed in 1920, and no peacetime sedition act took its place, because the country would not have one. A criminal prosecution for radicalism required a jury, and a standard of proof, and the protections of the Bill of Rights, and juries were unreliable and trials were slow. So the hunt reached instead for a different and far more efficient tool: deportation. The immigration laws allowed the government to expel an alien who was an anarchist or who advocated the overthrow of the government — and deportation was not a criminal punishment. It was an administrative proceeding. No jury. No indictment. A hearing before an official of the Labor Department, a lower standard of proof, and a ship. By this route the internal-security state that the country refused to build out of the criminal law was built instead, quietly, out of the immigration law. The foreignness of the radical was not incidental to the scare. It was the legal mechanism of the scare. You could not easily imprison an American for his opinions. You could deport an alien for them, and hundreds of thousands of the radicals were aliens, and that was the door the hunt went through.

The intellectual architect of the legal case was not Palmer. It was a twenty-four-year-old lawyer newly installed at the head of a new Radical Division within the Bureau of Investigation, a young man of ferocious energy and organizational genius who built, in a matter of months, a card index cross-referencing every radical organization and publication and suspected member in America — a file that grew to some two hundred thousand entries and then past it. His name was J. Edgar Hoover, and the card index was the seed of a surveillance apparatus and a personal career that would outlast every other figure in this lecture by half a century. Of everything the Red Scare built and then abandoned, Hoover is the piece that never came down.

The Raids

The hunt proper ran in two great sweeps, and I will describe them and then list the rest in short compass.

The first sweep came on the seventh of November, 1919 — chosen, with a propagandist’s eye, for the second anniversary of the Bolshevik revolution — and struck the Union of Russian Workers in a dozen cities, hauling in hundreds. Its most famous fruit sailed on the twenty-first of December: a chartered army transport, the Buford, which the newspapers gleefully christened the Soviet Ark, carried two hundred forty-nine deportees out of New York harbor bound for Russia. Among them were the two most celebrated radicals in America, the anarchists Emma Goldman and Alexander Berkman — and here the lecture’s central irony completes another of its circuits, because Goldman and Berkman arrived in the revolutionary Russia they had championed for thirty years, looked hard at it with the same unillusioned eyes Goldman had always turned on power, were appalled by what they found, and left, and wrote the books to prove it. My Disillusionment in Russia, Goldman called hers. The deportation confirmed her lifelong indictment of the American state at the very moment it removed her from the country — and then delivered her to a disillusionment that confirmed her critics. Everyone in this story keeps arriving at the future and finding it is not what they were promised, from whichever direction they come.

The second and greater sweep came on the second of January, 1920. In a single coordinated night the Bureau’s agents and local police raided across more than thirty cities and took several thousand people into custody — targeting now the two communist parties themselves, the membership lists that Hoover’s men had in many cases helped compile through informers. Men were seized without warrants, held for days and weeks in crowded and filthy makeshift pens, denied counsel, in some cities marched through the streets in chains for the newspapers. Citizens were swept up alongside aliens. People who had wandered into a raided hall to attend a night-school class in English found themselves accused of revolution. It was the high-water mark of the hunt, and it was also, though no one yet knew it, the beginning of the ebb — because the sheer lawlessness of it began, at last, to alarm people whose alarm counted.

The rest, in brief:

• The states did what Washington could not. Some two dozen states passed criminal syndicalism laws making it a felony to advocate revolutionary doctrine, and these long outlived the federal scare — the machinery Washington abandoned, the states kept oiled for decades.

• The Post Office and the mails continued the wartime work of simply denying circulation to radical publications, killing them by administrative fiat.

• New York’s legislature expelled five duly elected Socialist assemblymen for the crime of being Socialists — an act so nakedly indefensible that even Charles Evans Hughes, no radical, led the bar in protesting it.

• The Bureau turned its gaze on Black America too, opening files on Marcus Garvey and on the young radicals of the Harlem magazine The Messenger, on the theory that discontent among Black Americans must be the work of Bolshevik agitators rather than of anything Black Americans had actually experienced.

• And in May of 1920 two Italian anarchists, followers of that same Galleani, were arrested near Boston for a payroll robbery and murder; their names were Sacco and Vanzetti, and what their case became — the great cause célèbre of the decade, the trial that put the whole American conscience in the dock — belongs to a later lecture, but the arrest belongs here, in the season of the hunt that produced it.

The Second Face: The Hunt Checked From Within

And now the face the villain’s-version omits, the one that keeps this from being a story of a captured government crushing a helpless people. The hunt was stopped, and it was stopped in large part by men inside the government and the legal establishment who would not go along.

The pivot was a seventy-one-year-old man named Louis Post. Deportations were the Labor Department’s jurisdiction, not Justice’s, and when the January raids sent the cases flooding up to Labor for the final signature, they landed on the desk of the Assistant Secretary, Louis Post — an old reformer, a single-taxer, a man of the nineteenth-century radical-liberal school who believed, quite simply, in due process. Post read the cases. And case after case, he found no evidence — a man deported for belonging to an organization he had been signed into automatically when his old union was absorbed, a man who could not read the manifesto he was accused of embracing — and Post canceled the warrants. Thousands of them. Of the thousands seized in the great raids, only a few hundred were in the end actually deported, and the difference is very largely one stubborn old man reading files and refusing to sign. For this, Palmer’s allies in Congress moved to impeach him. Post was hauled before the House in May of 1920, seventy-one years old, expected to be a doddering obstructionist — and instead he dismantled his accusers from the witness chair with such calm and such command of the facts that the impeachment collapsed and the hunt’s political momentum collapsed with it. It is one of the great and forgotten performances of American public life.

He did not act alone. In Philadelphia the United States Attorney, Francis Fisher Kane, resigned his office in protest at the raids rather than prosecute them. In Boston a federal judge, George Anderson, presided over a habeas case arising from the raids and wrote an opinion excoriating the government’s methods in language that still scalds — a judge of the system telling the system it had behaved lawlessly. And in May of 1920 twelve of the most eminent lawyers in America, including Roscoe Pound and Felix Frankfurter of the Harvard faculty and the young free-speech scholar Zechariah Chafee, signed a Report Upon the Illegal Practices of the United States Department of Justice, documenting the warrantless arrests and the beatings and the denial of counsel in cold, sourced, professional detail, and published it under their own names. The legal establishment, in short, split, and its most respectable wing turned on the hunt.

The Prophecy That Failed

The hunt died, in the end, of a specific and almost comic humiliation. Palmer, riding his fame toward the nomination, made a prediction. He announced that the radicals were planning a vast uprising to overthrow the government on the first of May, 1920 — May Day. The country braced. Cities put their police on alert; troops stood ready; public buildings were guarded in New York and Boston and Chicago.

And May Day came, and nothing happened. Nothing at all. It was an ordinary spring day, and the men had all gone home. Palmer, who had cried wolf to a nation now suddenly aware of how it had been frightened, was finished — his presidential hopes evaporated, his name became a byword, and the scare he had ridden so hard broke under him and receded almost as fast as it had risen. By the summer of 1920 the fever was breaking; by the time Warren Harding was elected that November on the promise of normalcy — the same repudiation of the whole emergency temper that the last lecture watched dismantle the wartime economic state — the Red Scare was spent. It had lasted, at its height, about a year.

But mark what it left behind, because the feedback loop of this lecture does not resolve into a happy ending. The economic war state came down, as the last lecture showed; the repressive apparatus proved stickier. Hoover kept his index and his career. The state syndicalism laws stayed on the books. The habit of equating dissent with treason, the deportation machinery, the conviction that a bad idea was a police matter — these did not sail away on the Buford. They went dormant, waiting for the next enemy, and the man who would preside over their revival thirty years later, when the enemy came back in a colder war, was the same J. Edgar Hoover, filing his first cards in 1919. Ralph Shaw, you will remember, met that revival at the far end of his life. The hunt of 1919 and the hunt of 1949 were, in one literal sense, the same hunt, conducted by some of the same hands, and the dog between them never entirely stopped running.

[ PAUSE FOR QUESTIONS ]

Part Four: The Argument That Lost

I want to end on a courtroom, and on a defeat, because the most durable thing the Red Scare produced was manufactured by the men who failed to stop it — and understanding how a losing argument became, over the following half-century, the settled law of the land is, I think, the deepest lesson this whole convulsion has to teach about how American institutions actually change.

Return to the Supreme Court, where the last lecture left it. In the spring of 1919, in the Schenck and Debs cases, a unanimous Court had upheld the wartime convictions of men jailed merely for speech, and Justice Oliver Wendell Holmes had written the opinions, giving American law both the phrase clear and present danger and the enduring, misleading image of the man who falsely shouts fire in a crowded theater. The law of the First Amendment, as 1919 opened, barely protected dissent at all. The government won, and won unanimously, and Holmes was the government’s pen.

And then, in the autumn of that same year, something happened inside Holmes. In November of 1919 the Court decided Abrams v. United States — the case of a handful of Russian-Jewish immigrant radicals in New York who had thrown leaflets from a rooftop protesting the American intervention in Russia, the very intervention Part Two mentioned, and had been sentenced to twenty years for it. The Court, seven to two, upheld the convictions, exactly as it had in the spring. But this time Holmes dissented — and Louis Brandeis with him — and the dissent he wrote is one of the pivotal documents in the history of American liberty. He had been reading, over that summer; he had been arguing with Chafee and with Learned Hand; and he had changed his mind. He wrote that the ultimate good is better reached by the free trade in ideas, that the best test of truth is the power of a thought to get itself accepted in the competition of the market, and that the Constitution is an experiment, as all life is an experiment, and that we should be eternally vigilant against attempts to check the expression of opinions we loathe unless they so imminently threaten the country that an immediate check is required to save it.

He lost. The men went to prison. The dissent changed no verdict and freed no one. But the dissent was written down, and it entered the bloodstream of the law, and it began, slowly, over years and then decades, to win. This is how the American constitutional order digests a shock: not by a thunderclap of reversal, but by a defeated minority setting down, in a dissent rather than a concurrence, the argument that a later generation will pick up and make into the rule.

Watch it travel. In 1925, in Gitlow v. New York — a Communist prosecuted under a state anarchy law — the Court upheld the conviction again, and Holmes dissented again, insisting that every idea is an incitement and that if the radicals were destined to win the argument they were entitled to their chance to win it. But buried in that same losing case was a sentence that changed everything: the Court announced, almost in passing, that the free-speech protections of the First Amendment applied against the states, and not just against Congress — so that from 1925 forward, the whole apparatus of state syndicalism laws that the scare had built stood, for the first time, exposed to federal constitutional challenge. The radicals lost the case and the doctrine of liberty won the war, in the same paragraph.

And in 1927, in Whitney v. California — a woman convicted under California’s criminal syndicalism law merely for helping organize a Communist Labor Party — Brandeis wrote what may be the greatest single passage on freedom of speech in the American canon, and he wrote it, extraordinarily, in a concurrence: he agreed, on a technicality, that this particular conviction must stand, and then spent his opinion demolishing the philosophy behind it. Those who won our independence, he wrote, believed that the final end of the state was to make men free to develop their faculties; that fear breeds repression, and repression breeds hate, and hate menaces stable government; that the remedy for evil counsels is good ones, and that the fitting remedy for a dangerous idea is more speech, not enforced silence. Fear of serious injury, he wrote, cannot alone justify suppression of free speech; men feared witches and burned women.

He, too, technically lost that case. And these dissents and concurrences — Holmes in Abrams, Holmes in Gitlow, Brandeis in Whitney — were the losing side of the argument in the nineteen-twenties. But they were the winning side of the argument by the middle of the century, and Anita Whitney’s conviction, upheld in 1927, was resting on a doctrine the Court would finally and explicitly bury in 1969. The whole modern American law of free speech — the widest protection for dissent of any nation on earth — was built, brick by brick, out of opinions that changed no verdict at the time they were written, by judges who could not save the people in front of them.

So set the two things side by side. Nineteen-nineteen produced J. Edgar Hoover’s card index — the seed of the American surveillance state, the machinery of the hunt, the apparatus that never came down. And nineteen-nineteen produced Holmes’s Abrams dissent — the seed of the American law of free speech, the argument that lost every case it was written in and then, over fifty patient years, won the country.

Ralph Shaw lived his whole life inside that tension, hunted by the one child of 1919 and protected, when he was protected at all, by the other. Steffens saw a future that worked and Hoover fed it and Goldman fled it and Bullitt came to hate it, and every one of them was, in his own eyes, the realist and the others the dupes. And the country, measured across the whole convulsion, did what the country does: it neither embraced the revolution nor purged itself of the impulse the revolution answered to; it took a genuine fright, overreacted, checked its own overreaction with its own institutions, and came out the other side with new machinery for surveillance and new machinery for liberty, bolted onto the same government, aimed in opposite directions.

[ END OF LECTURE ]

End of Lecture 2.4

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Session one

Session two

Session three

Session four

Session five

In explaining the readings of the fourth session, ChatGPT wrote, in part,

All four authors reject the picture of human beings as fixed preference-maximizers.

Instead, they assume

people become different kinds of people depending on the institutions, practices, and technologies that surround them.

Education shapes us.

Freedom shapes us.

Political institutions shape us.

Technology shapes us.

Note ChatGPT’s use of the use of word “us.”

Explore the conversations linked above. Do you think that ChatGPT’s presence at the seminar would help or hurt?

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what is the correct way to model what they would have done had Trump and Netanyahu not attacked? And what is the correct way to model our optimal response to that? The terrible things that are happening now, do they not reflect an underlying equilibrium that would have emerged anyway within a few years’ time, or do we hold some hypothesis here of extreme path-dependence, suggesting the Iranian government would have been less bellicose on more or less a permanent basis?

The question is how well the Iranian regime would have behaved had there been no war.

One can imagine a scenario in which it would have behaved tolerably from our point of view. But the probability of such a scenario is something we can argue about.

As an aside, one can have different viewpoints of what “behaved tolerably” means. For some people, nuking Israel but leaving us alone would count. Or maybe even putting all of Europe under sharia law would be acceptable. Or occasionally throwing its weight around and obtaining concessions by threatening the U.S. with nuclear-armed ICBMs might be ok with some of you.

But there has to be some definition of “behaved tolerably” that is not all-inclusive. There has to be some conceivable behavior of the Iranian regime that one thinks is intolerable.

Tyler’s question then becomes: how do you think that the war in Iran affected the probability of intolerable behavior by the Iranian regime?

I think that it lowered that probability for at least a few years. This is based on a guess that it took out much of Iran’s military and nuclear capability.

Where I am coming from is a dark view of Iran’s intentions. This comes from:

• a reading of Islamic history. It is filled with conquest by the sword and demands for submission. Muslims kill in the name of God. Say what you will about the West, we don’t do that any more. Islamic history is filled with using ceasefires as temporary respites from defeat, followed by resumption of war. The October 7 massacre broke a ceasefire, and people blame Netanyahu for counting on Hamas to keep the ceasefire.

• The history of Iran’s regime. Starting in 1979, it committed an act of war, holding American diplomats hostage. Since then it has sponsored terrorism and murdered its own people at will.

• The regime’s stated objectives. They repeatedly have called for the defeat of America and the destruction of America as a political power.

My model of Iran’s regime is that its long-term mission is to achieve world hegemony under its brand of Islam. My model of the United States is that it does not want to take this threat seriously. Solve for the equilibrium, as Tyler might say.

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No country commands the full stack of technical inputs required to unlock superintelligence, or even serve today’s AI models to billions of monthly active users. The United States may design the world’s most advanced chips and produce its frontier AI models, but U.S. labs depend on Taiwan to manufacture them, on South Korea for high-bandwidth memory, on the Netherlands for lithography, and on Japan for specialty chemicals used to print circuit boards. The Gulf states bring energy and capital; Australia and Nordic states bring rare minerals; and Israel brings a robust chip design ecosystem

The American Institute of Economic Research reports,

Archaeologists have recovered more than twenty thousand clay records from Kanesh. Most are business documents: receipts, loan contracts, shipping orders, correspondence, lawsuits. The economy they reveal is not primitive or embryonic, but teems with complete stories familiar to the modern mind. Partners sued each other in commercial courts. Husbands wrote home about prices. Wives wrote back, noting that the husband had been gone too long. A woman named Ahatum lent silver to four different men over nine years, keeping her own records, extending credit on her own terms, building a portfolio of receivables with no bank behind her and no theory to guide her — only prices, trust, and the accumulated discipline of knowing which borrowers repaid.

People bought other merchants’ loan documents and used them as collateral for new loans.

I wonder about this. If prehistoric humans had these institutions, it seems to me that they were lost during some periods since. Pointer from Tyler Cowen.

Brian Chau writes,

Broadcast is one-to-many while the internet is peer-to-peer. Some consequences are obvious, while others are well-hidden. Past technologies inherently distorted information in a narrative and projective direction, favoring authoritarian egalitarianism. The internet, revealing the full extent of other players’ values, behavior, and social organization, favors self-improving order. Unlike television or print, the internet is an environment with natural peers, natural friends and enemies. The internet is a new system of moral relations.

…The internet revealed to everyone that the underclass cannot exist without mass subsidization and exception from the rule of law. Western regimes follow the moral rules of the TV dinner, and as a result have accumulated a political Looter class with two constant demands.

1. Reduction of standards to accommodate the criminal underclass

2. Arbitrary persecution of the most productive members of society

Andy Hall writes,

Drawing on Derek Willis’s archive of political fundraising emails, we analyzed roughly 280,000 candidate emails sent since 2017 to trace how anti-billionaire populism became a major component of Democratic fundraising rhetoric, and how, more quietly but unmistakably, AI is starting to follow the same path.

Pointer from Tyler Cowen. I noticed in Austin that the progressives hate AI.

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substacks referenced above: @

Free Systems

AI is the Democratic Party's Next Villain

Something is shifting in the Democratic party. A string of primary upsets has fed a growing narrative that the party’s base now rewards a more aggressive brand of economic populism, one aimed squarely at billionaires, corporate power, and the political influence that money buys. And a number of sharp observers, including…

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17 days ago · 32 likes · 2 comments · Andy Hall

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From the New World

Technological Opportunity

Many believe that when technology truly changes, opportunity is over. They are trapped in “the permanent underclass…

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15 days ago · 5 likes · Brian Chau

America 1914–1930

Lecture 2.3

The Health of the State: America Mobilized, 1917–1919

Part One: The Man in the Black Cape

In the summer of 1917, in the pages of a small magazine called the Seven Arts, a hunchbacked young essayist of twenty-nine — misshapen at birth by a doctor’s forceps, curved further by childhood tuberculosis of the spine, four feet or so of a man who wore a black student’s cape and whom strangers turned to look at on the street — published the first of a series of essays against the war that his own teachers and heroes had just endorsed. His name was Randolph Bourne. He had been the brightest ornament of the new intellectual world your first series watched being built: a Columbia man, John Dewey’s student and evangelist, a critic who wrote about youth and education and the promise of a cosmopolitan America with a freshness that made him, before he turned thirty, one of the two or three most exciting essayists in the country. And in 1917 he watched Dewey — and Dewey’s whole pragmatist school, the philosophers of intelligence applied to human affairs — line up behind Wilson’s war, on the argument you heard in the last lecture: that the catastrophe was a plastic moment, that trained intelligence could climb aboard the war and steer it toward reconstruction. Bourne thought this the great betrayal of his life, and he said so, and it cost him everything — the magazines closed to him, the friends fell away, the surveillance began — and then, in December 1918, five weeks after the Armistice, the influenza killed him at thirty-two, with his best essay unfinished on his desk.

From that unfinished manuscript comes the sentence that has outlived everything else he wrote, and that will hang over this entire lecture: War is the health of the State.

I want to be careful and honest about what Bourne meant by it, because the sentence has had a second life larger than its first, and the two meanings are not the same. We will come back to the sentence at the end, when you have seen the thing it describes. For now hold only this: at the very moment the American state was about to expand faster and further than it ever had in peacetime — to seize the railroads, ration the coal, set the price of wheat, conscript four million men, and prosecute the printed word — one of the most gifted minds the progressive movement ever produced was warning, from inside that movement, that his friends had mistaken what they were climbing aboard. This lecture is the story of the machine they built. His verdict on it can wait for the end, where his life put it.

Part Two: The Progressive Dream Made Real

Begin with the thing itself, and begin by seeing it as its builders saw it — not as a menace but as a fulfillment.

For fifteen years the reformers your first series followed had been arguing a single proposition against the grain of American habit: that the modern economy had grown too large and too interlocked to be left to the blind scramble of the market and the courts, and that trained men, armed with facts and vested with public authority, could manage it toward the general good more wisely than the invisible hand. They had won pieces of this argument — a railroad commission here, a pure-food law there, a Federal Reserve — but always against fierce resistance, always partially, always hemmed in by courts that read the Constitution as a wall around private property and by a public that distrusted concentrated government as the first instinct of its political character. The progressive intellectual entered 1917 with a national economy he believed he knew how to organize and no political mandate remotely large enough to let him try.

The war handed him the mandate overnight. Here is the transformation stated as the reformers experienced it: a country that in peacetime would not let Washington set a railroad rate without a decade of litigation now, under the pressure of national emergency, allowed Washington to set nearly every rate, wage, and price that mattered — and thanked it for the service. The war, in the reformer’s eyes, was the laboratory the Constitution had always denied him. Everything he had claimed in theory about planning and expertise and the public interest he could now test at continental scale, with the full coercive and moral power of a nation at war behind him. This is the frame to keep through everything that follows: the American war state of 1917 was not built by militarists or reactionaries. It was built, staffed, and celebrated by progressives, as the proof of concept for the managed society they had spent a generation demanding. Whether the proof succeeded, and what the country decided about it, is the whole question of the lecture.

Take the three organs where the dream was realized most fully.

The War Industries Board was the managerial showpiece — the attempt to plan the entire industrial economy from one desk. Created in 1917 and floundering until Wilson, in March 1918, put a Wall Street speculator named Bernard Baruch in charge of it with sweeping authority, the WIB set out to do what no American agency had ever attempted: to decide, for the whole nation, what got made, from what materials, in what quantities, at what price, and in what order of priority. It standardized products with a ruthlessness that delighted the efficiency men — the number of automobile tire types cut from dozens to a handful, the styles of buggy wheels reduced by the hundreds, the colors of typewriter ribbons collapsed toward one, whole categories of goods simplified out of existence to save steel and labor. Baruch governed less by command than by leverage: his control of raw-material priorities meant that a manufacturer who defied the board simply found he could get no steel, and the defiance ended. It was, on its surface, exactly the rational planned economy the progressives had described — and Baruch, who understood theater, made sure it looked the part. Hold the surface for a moment; we will come back to what was underneath it, because the WIB is also the best evidence for the case against the dream.

The Food Administration built the war’s great administrative reputation, and it did so under a man this series will meet again and again: Herbert Hoover, the mining engineer who had organized Belgian relief and come home a hero, and who now took charge of feeding America, the army, and the Allies from a single agency. Hoover’s method became a national style. He disdained the ration card and the police-enforced quota that Europe used; he believed, with a characteristic mixture of idealism and shrewdness, that American abundance and American voluntarism could do the job that European coercion did, if the public could be organized to choose sacrifice. So America got meatless Tuesdays and wheatless Wednesdays, victory gardens, the housewife’s pledge card signed and displayed in the window, the children reciting the gospel of the clean plate — an entire apparatus of voluntary self-denial, coordinated nationally, enforced by nothing but publicity and social pressure and patriotism, and startlingly effective. “Hooverize” entered the language as a verb meaning to economize. And underneath the moral pageant ran a hard economic engine: to call forth the food, Hoover’s agency guaranteed farm prices, and guaranteed them high.

Which brings us to Frank, on his Kansas wheat, and the best single view we have of the war state touching an ordinary American life. You met Frank in the first lecture of this series on a rising floor; the war is the floor rising fast. The government sets a guaranteed price for wheat — better than two dollars a bushel, more than double what he had known in the lean years — and it holds that price and stands behind it with the full faith of the United States. For Frank this is not oppression; it is the answer to a prayer his father’s whole political generation had prayed in vain. The Populists Ezra rode with had demanded, twenty years before, that the government intervene in the grain economy to give the farmer a fair and stable price, and had been called cranks and anarchists for it; now a Republican-neutral wartime Washington does exactly that, and Frank plants fence to fence, borrows against the certainty, buys the adjoining quarter-section, and reads the government’s price guarantee as the nation and the market and Providence all arriving at the same conclusion at once. He is planting for the Allies and for his own future in the same motion, and both feel boundless. The Food Administration, from the Kansas end, is the progressive dream working precisely as advertised: the expert in Washington and the farmer on the plains, cooperating through the machinery of the state to their mutual and the nation’s benefit. Frank has never been so prosperous, so useful, or so certain. Remember him exactly here.

The Railroad Administration was the boldest stroke of all, and the plainest. The nation’s railroads — the largest industry in the country, the very emblem of private corporate power, the thing the progressives had spent two decades merely trying to regulate — snarled into gridlock under war traffic in the winter of 1917, and Wilson simply took them. In December 1917 the federal government seized the entire railroad network and ran it directly, as one nationalized system, under Treasury Secretary McAdoo. Not regulated — operated: the government set the schedules, the rates, the wages, unified the equipment, and cut the competitive duplication that a century of private enterprise had built. For the socialists it was a dream and a provocation; for the railroad men it was expropriation with a patriotic label; for the progressives it was the ultimate demonstration that the state could run even this. And it ran — imperfectly, expensively, but it moved the troops and the coal. Keep the railroads in view above all, because their fate after the war is the sharpest test in the whole story of whether the ratchet held.

Around these three stood the rest: the Fuel Administration under Garfield, rationing coal, ordering the “heatless Mondays” and the shutdown of factories east of the Mississippi in the desperate fuel crisis of January 1918; the War Labor Board, which for the duration gave organized labor a seat at the national table and a federal blessing for the eight-hour day and collective bargaining that it had never enjoyed and would lose again the moment peace returned; the War Finance Corporation; the emergency fleet; a dozen more. The federal budget, which had run under a billion dollars in 1916, passed eighteen billion in 1919. The government that Americans had built to be small became, in nineteen months, the largest single force in their economic lives.

That was the dream made real. Now the two things that lived inside it.

Part Three: The Manufacture of Consent

The war state needed the public’s belief, and it did not leave belief to chance. One week after the declaration, Wilson created by executive order the Committee on Public Information, and put it under a former muckraking journalist named George Creel — an energetic, combative, wholly sincere man who threw himself into the work of selling the war with the zeal of a convert and few doubts about the enterprise. The CPI was the first modern propaganda agency in American history, and its scale, invented from nothing in nineteen months, still astonishes.

Creel understood that a country of a hundred million, many of them recent immigrants reading foreign-language papers, many more scattered across a rural vastness the newspapers reached late if at all, could not be persuaded by argument alone; it had to be saturated. So the CPI saturated it. It produced its own daily paper of official war news, its own posters — the pointing Uncle Sam, the ravening Hun, the violated Belgium — commissioned from the best commercial illustrators in the country. It made films with titles like The Kaiser, the Beast of Berlin. It printed pamphlets by the tens of millions, in a dozen languages, and pushed them through every channel a modern society offered. And its most inventive instrument was human: the Four-Minute Men, a volunteer army that grew to seventy-five thousand speakers, each trained to deliver a tight four-minute patriotic address — the length of time it took to change a reel — in the nation’s movie houses, between the pictures, to a captive audience in the dark. Loan drives, food conservation, the meaning of the war, the perfidy of Germany: the message reached the citizen where he sat, from a neighbor’s mouth, in the one mass medium that touched nearly everyone. It has been estimated the Four-Minute Men gave over seven million speeches to audiences totaling in the hundreds of millions of attendances. No government had ever spoken to its people so continuously or so intimately.

Two features of Creel’s operation deserve the historian’s particular attention, because they outran anyone’s intention. The first is that persuasion shaded into something harder. The CPI’s material grew more lurid as the war went on — the atrocity stories, many unverified and some invented, the systematic portrayal of Germans not as an enemy but as a subhuman menace, the cultivation of a fear that treason lurked everywhere. Creel meant to inform and inspire; a good deal of what he actually manufactured was hatred and suspicion, and the suspicion did not stay pointed at Germany. It came home. The public taught to see the Hun abroad learned to look for him next door — in the neighbor with the accent, the pacifist, the man who would not buy a Liberty Bond — and the machinery of official persuasion thereby fed directly into the machinery of repression that is this lecture’s next subject. The line from the poster to the vigilante was short and well traveled.

The second feature is the one with the longest afterlife. Working inside and alongside the CPI were men who would carry its lessons into the peace and build an industry on them. A young publicist named Edward Bernays — Sigmund Freud’s nephew, as he never tired of mentioning — served the CPI and emerged from the war having concluded that the techniques used to sell a war to a nation could sell anything to anyone; he went home and, in the twenties, more or less invented the profession of public relations, wrote a book he was candid enough to title Propaganda, and spent the decade teaching American business how to engineer consent. The war’s discovery — that a mass public could be moved, reliably, by the scientific management of images and words — did not die with the CPI when it was shut down in 1919. It moved into advertising, into public relations, into the machinery of the consumer economy whose explosion the later lectures will chart. The crusade thus provided a template for marketing to the masses. That was among its most durable products, and among the least intended.

Part Four: The Cost

Now the thing that lived inside the dream and gave it a permanent shadow: the suppression of dissent, conducted not as an excess or an accident but as national policy, written into law and enforced with enthusiasm from Washington down to the smallest town.

It began with statute. The Espionage Act of June 1917, whatever its title suggested about spies, contained provisions that criminalized speech — it became a crime to obstruct recruiting, to cause insubordination in the forces, to interfere with the war effort, and the language was elastic enough to reach almost any discouraging word. The Sedition Act of May 1918 removed even the pretense of a military nexus: it made it a federal crime, punishable by up to twenty years, to utter, print, write, or publish any disloyal, profane, scurrilous, or abusive language about the government of the United States, the Constitution, the flag, or the uniform. Read that list of forbidden targets again and notice that it criminalized criticism of the government as such. This was not the regulation of espionage. It was the abolition, for the duration, of the First Amendment’s core, and it was upheld: in 1919 a unanimous Supreme Court, through Justice Holmes, affirmed the conviction of a socialist named Schenck for distributing anti-draft leaflets, and gave American law the “clear and present danger” test and the enduring, misleading image of a man falsely shouting fire in a crowded theater — an opinion Holmes himself would begin, within months, to retreat from in the dissents that eventually built the modern law of free speech, too late for the men already in prison.

And men were in prison. The most famous was Eugene Debs, four times the Socialist candidate for president, who in June 1918 gave a speech in Canton, Ohio, defending the men already jailed for obstructing the draft and saying that the master class had always declared the wars and the subject class had always fought them. He was careful; he knew the law was watching; he said nothing that named a means of resistance. It did not matter. He was convicted under the Espionage Act and sentenced to ten years, and the Supreme Court affirmed it, and Debs went to the federal penitentiary at sixty-three, from which — in the single most telling detail of the whole episode — he would run for president once more in 1920 and receive nearly a million votes as convict number 9653. The Wilson administration kept him locked up past the Armistice, past the peace; it was Harding, the normalcy man, who let him out at the end of 1921.

Around the prosecutions ran something worse, because it was lawless: the deputizing of private hatred. The American Protective League, a volunteer organization of some quarter-million self-appointed loyalty vigilantes, operated with the semi-official blessing of the Justice Department — its members carried cards implying federal authority they did not possess, opened their neighbors’ mail, reported disloyal talk, and in September 1918 conducted the “slacker raids” in New York, sweeping up tens of thousands of men off the streets to demand their draft papers, holding those who could not produce them until a soldier or an agent of the Bureau of Investigation — the leaguers themselves having no power to arrest — could take them into custody. The Post Office, under Postmaster General Burleson, simply denied the mails to publications it found objectionable, killing socialist and radical papers by administrative fiat without trial. The Industrial Workers of the World, the radical union your first series met in the western mines and mills, was destroyed as an organization — its halls raided, its entire leadership tried en masse and imprisoned, the wartime emergency serving as the occasion to break a labor movement that employers had wanted broken for other reasons entirely. And in the towns, the vigilant citizen policed his neighbors: German-Americans pressured to buy bonds and kiss the flag, sauerkraut renamed “liberty cabbage,” the German language driven out of schools and pulpits, and in the ugliest single case, a German-born man named Robert Prager lynched by a mob near St. Louis in April 1918, the mob’s leaders acquitted by a jury that deliberated forty-five minutes while one juror was heard to call the killing patriotic.

Set this beside the managerial dream of Part Two and you have the war state entire: the same emergency, the same expansion of federal power, the same public enthusiasm produced the rational planning of the War Industries Board and the lynching at Collinsville, the guaranteed wheat price and convict 9653. La Follette, whom you watched predict in April 1917 that war would empower everything the progressives had fought and criminalize much of what they represented, had the grim satisfaction — from inside a Senate expulsion investigation of his own — of watching the forecast come true in detail. Whether the country would keep the dream and shed the shadow, or shed both, or keep both, was the question the Armistice suddenly posed.

Part Five: The War and Black America

One home-front story must be told here, though this lecture will tell it briefly and factually and leave its explosion to the next.

The war remade Black America, chiefly by moving it. When the guns of 1914 closed the Atlantic and cut off the European immigration that had fed the northern factories for forty years, and when the draft then pulled white workers out of those factories and into the army, the mills and packinghouses and foundries of the North faced a labor famine — and for the first time sent their agents south, actively recruiting Black workers off the Delta and out of the cotton South with free tickets and the promise of a wage undreamed of in Mississippi. The result was the first great surge of the Migration you met through Isaiah in the opening lecture: something on the order of half a million Black southerners moved north during the war years, into Chicago, Detroit, Cleveland, and the other industrial cities, transforming the demographic map of the country in a handful of seasons and planting the urban Black communities whose politics and culture the later lectures will inhabit.

The movement produced immediate collision, and the war years saw the first of the violence. In July 1917, in East St. Louis, Illinois, white mobs — inflamed by the use of Black workers in a struck plant and by the general friction of the migration — attacked the Black district in one of the deadliest racial massacres of the century, burning homes and killing dozens, perhaps far more; the exact toll was never established, which is itself a fact about how the deaths were counted. In response, that same month, some ten thousand Black New Yorkers marched in silence down Fifth Avenue behind muffled drums, the Silent Parade, carrying signs asking the government that was making the world safe for democracy to make America safe for the Black citizens who were about to fight for it.

For fight they did, and here the war’s central irony pressed hardest. Some four hundred thousand Black Americans served; those who reached France in combat units often served with distinction, and found in France a society that treated them, to their astonishment, as men — an experience that could not be unlearned on the voyage home. W.E.B. Du Bois, who in your first series was building the case against accommodation, made in July 1918 the most anguished decision of his career: in an editorial titled “Close Ranks,” he urged Black Americans to set aside their special grievances for the duration and stand with the nation, in the belief that loyalty in the war would be repaid with justice after it. The bet was reasonable and it was wrong. The Black soldier came home in 1919 to a country that had not moved an inch toward the justice Du Bois had staked his credibility on — came home, many of them still in uniform, into the bloodiest racial summer the country had yet seen.

That summer belongs to the next lecture, where it joins the larger convulsion of 1919. Here it is enough to record that the war set Black America in motion, armed it with a new experience of what citizenship might feel like, and raised its expectations to a height the peace would betray. The migration was the war state’s most lasting demographic act, accomplished not by any board or agency but by the simple wartime arithmetic of labor — and unlike the boards, it did not dissolve at the Armistice. It was permanent.

Part Six: The Fever Breaks

Everything in this lecture so far has described a state expanding — seizing, planning, rationing, prosecuting, persuading. The last movement is the one the buildup does not prepare you for, and it is the heart of the matter: how fast nearly all of it came apart.

The Armistice fell on November 11, 1918, and the demolition began almost the next morning — not by plan, for there was no plan, but by a kind of national reflex. The War Industries Board, the great planning engine, voted to dissolve itself on the first of January, 1919, seven weeks after the guns stopped; Baruch went home; the priorities system, the standardization orders, the whole apparatus that had governed American industry from one desk simply switched off. The cost-plus contracts were canceled, tens of billions of dollars of them, often abruptly. The War Labor Board lapsed, and with it the federal blessing that had given the unions their brief seat at the table; membership would soon be falling and the open-shop drive rising. The Fuel Administration wound down, the food controls came off, Hoover’s guaranteed wheat price was honored through its promised term into 1920 and then withdrawn — remember that date; it is the ledge from which Frank’s world will fall, and the fall is the next farm lecture’s to narrate. The Committee on Public Information was abolished in 1919, its presses stopped, its Four-Minute Men disbanded back into the darkened theaters they had lectured.

The railroads are the clearest case, because the stakes were the highest and the decision the most deliberate. The government had run the railroads — the boldest single act of state socialism in American history — and there was a real constituency, including the railroad unions and a good many progressives, that wanted to keep them public, or at least to keep the unified national system the war had built. The debate was genuine and it was brief. The Transportation Act of 1920 handed the railroads back to their private owners, with some enhanced regulation as a consolation to the planners, and the largest experiment in nationalization the country had ever conducted was over, deliberately liquidated, in a little over two years.

The federal budget tells the same story in a number: from its 1919 peak above eighteen billion dollars it fell, within three years, to about three billion, and the government demobilized its economic self nearly as violently as it demobilized its army — four million soldiers turned out into the labor market in a matter of months, with no transition and little thought, to find work or not as the postwar economy allowed. This was a repudiation, broad and bipartisan and popular, of the whole apparatus — an expression of the same instinct that would elect Harding by the widest popular margin yet recorded on the promise of a word, normalcy, that meant, more than anything, the end of the emergency state. The progressive intellectuals who had seen in the war the proof of their managed society watched the country dismantle the proof with relief and even glee, and understood, many of them, that the verdict was in and it had gone against them. The managed economy would not return until another and greater emergency, fifteen years off, revived it — and that is a story for the series that follows this one.

But — and this is the necessary qualification, the thing that keeps the teardown from being a clean and comforting story — not all of it came down. The economic state dissolved; the repressive state proved stickier. The Espionage Act was never repealed; it is on the books today. The Sedition Act was repealed in 1920, but the habits it had licensed did not lapse with it: the surveillance networks, the deportation machinery, the conviction that dissent was disloyalty and that the remedy for a dangerous idea was a prison cell or a ship back to Europe — these survived the Armistice in full working order, went looking for a new enemy to replace the defeated German, and found one, ready-made and terrifying, in the Bolshevik. Debs sat in prison through it all. It turned out to be far easier to give the railroads back than to give back the conviction that the wrong opinion was a crime — and where that conviction went in 1919, once the war that bred it was over, is exactly where the next lecture begins.

Part Seven: The Sentence

Return, at the end, to Bourne’s sentence: War is the health of the State. He meant something narrower than it is now taken to mean. His unfinished essay was about intellectuals — about Dewey and the pragmatists who thought they could ride the war and steer it, when the war was riding them, the steering wheel connected to nothing; the State, dead abstraction in peacetime, comes alive only when war lets the herd feel it, and the price of that vitality is the surrendered mind. Only later did pacifists and a growing libertarian tradition broaden the line into a law about the State as such: that war ratchets its power upward and never lets it back down.

That broader claim this lecture can test, and the verdict cuts both ways. The economic state proved a fever that broke — the boards dissolved, the railroads went back, the controls vanished, the government shrank almost as fast as it had grown. But the machinery of repression did not retreat on schedule: the statutes stayed, the surveillance found new targets, and the citizen taught for nineteen months to watch his neighbor did not unlearn it. It was easier to return the railroads than the conviction that dissent was treason — and where that conviction went looking for a new enemy in 1919 is the next lecture.

Bourne saw none of it. The influenza killed him five weeks after the Armistice, at thirty-two, the essay breaking off mid-argument, so that his most quoted sentence survives from a manuscript he never finished and never saw in print.

[ END OF LECTURE ]

End of Lecture 2.3

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All of the chats that I have had with Claude are also conducted within the project. That way, Claude “remembers” previous chats that pertain to the project. It figured out that I am attracted to stories of people or incidents who were very important at the time but are not much remembered today. For example, Robert LaFollette’s Biden-like breakdown in 1912, which opened the way for Theodore Roosevelt’s third-party run.

I treat Claude as a co-author. Our conversations go back and forth on how to present the material. For each part of each lecture, we have a discussion about what should go into the draft. I make a lot of the decisions during these conversations. What to emphasize, what to include, the choice of opening scene, and so on.

When I finally give the go-ahead to draft, what comes out typically requires only minor edits. I would say that over 95 percent of the wording is Claude’s. I intervene when I think that a phrase should be cut, or when I see an opportunity to say something more clearly and effectively.

As an aside, I cannot read a long essay nowadays without saying to myself “That sounds like Claude.” I’ll give Kyle Saunders on substack as one example. Or this post. I am not questioning the originality of thought in these examples. But the rhythm of the writing, and to some extent the verbosity, remind me of Claude. Either people are using Claude or else Claude-like writing is just normal.

One of my goals for the lectures covering 1898-1914 was to try to bring the audience into the America of 125 years ago, before shopping malls and chain stores and electronic communications. I asked Claude to give a statistical portrait, emphasizing demographics and elements of the standard of living.

I wanted to get across how heterogeneous America was, with a Kansas farm a very different experience from a New York tenement or a Boston mansion. So we came up with characters to try to exemplify this variation. I am not sure that fictional characters will be as useful when we are dealing with later periods, when America starts to share the same media and the more of the same goods and services.

Claude likes melodrama. This is particularly attractive in cases where normal beliefs at the time clash with what we know today. As the first World War begins in Europe, I wanted Henry shown to be confident that it would soon be settled. Claude wanted to go on and point out how wrong Henry proved to be. Instead, I trusted the audience to figure it out without being told.

Claude sometimes wanted to make the audience sit through overly long narratives. For example, it wanted to describe every twist and turn of the debate that led to the creation of the Fed and of the debate over whether to join the League of Nations. I instead made Claude focus on the key elements of controversy and how they were resolved.

On history itself, Claude knows much more than I do. But I have strong views on which issues to focus. I want to make sure that Claude does not reinforce the narrative in which Progressives are heroes and business leaders are villains. I also want the audience to see how some modern political groupings have long antecedents. For example, black American leaders weighing the strategy of self-improvement vs. making demands on white America.

I wanted to correct the usual story of the creation of the Fed as some great solution to the problems of financial crises. Instead, it merely formalized the clearing-house approach to interbank settlement that was in place prior to the Fed. I needed to exert some effort to get Claude to do this, but once I had it describe how banking worked immediately “before” and “after” the Fed, this exposed how incremental was the change.

Claude wanted to describe working people as suffering in a capitalist dystopia. Instead, I wanted data on living standards. And I pointed out that immigrants were flooding here to work in this alleged dystopia.

At some point during this discussion, Claude let drop the fact that some immigrants came here with the intention of returning to their home countries. They maintained their homes in Western Europe and went back and forth to America. They came here just to work—for America’s capitalists. I thought this was important to get this into our narrative. The contrast between the Italian immigrants coming as guest workers (so to speak) and the Russian Jews leaving pogroms behind is one of the most interesting phenomena that is left out of most textbook histories of immigration.

Before I invite Claude to draft a lecture, I ask questions about issues that make me curious. For example, how could progressives simultaneously be elitists favoring independent commissions and populists favoring giving voters a more direct say? Eventually, it became apparent that there were several strands of progressivism (I sorted these into five).

I asked questions about how America came to join the first world war. After a lot of back and forth, I finally accepted the textbook answer that unrestricted submarine warfare was the decisive factor. That policy shift by Germany was a strategic blunder, ultimately making its enemies stronger.

If I keep this project moving forward, I will have the material for a book or a podcast series that covers American history in the twentieth century in its entirety. There is actually very little out there to compete with such a project. Existing books only cover some periods, not the entire twentieth century. And many of these are strongly biased in favor of the narrative of progressives good, capitalists bad.

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America 1914–1930

Lecture 2.2

An Unwilling Power: America and the World, 1914–1929

Part One: The Castle in Silesia

It is the ninth of January, 1917, and the most consequential meeting of the twentieth century so far is taking place in a castle at Pless, in Upper Silesia, where the German Supreme Headquarters has installed itself amid the hunting trophies of a Polish prince.

The men around the table: Kaiser Wilhelm II, nominally the All-Highest, in practice increasingly a signature in a uniform. Field Marshal von Hindenburg, the wooden titan of the eastern victories, and General Ludendorff, the pale, driven quartermaster-general who does the thinking the field marshal lends his face to — between them, since August, the actual government of Germany in everything that matters. Admiral von Holtzendorff, chief of the naval staff, carrying the memorandum. And Chancellor Bethmann Hollweg, tall, stooped, gray — the civilian who has fought this decision for two years and who arrives at Pless knowing he has already lost.

The memorandum is the reason for the meeting, and it deserves description, because it is one of the most consequential documents ever produced by a planning staff. Two hundred pages of appendices: British wheat stocks, week by week. World shipping tonnage, flag by flag. The failure of the Argentine harvest. The psychology of neutral crews — how many sinkings before Scandinavian sailors refuse to sign on for Atlantic runs. And a conclusion of beautiful arithmetical clarity: let the submarines sink without restriction, and they will destroy six hundred thousand tons of shipping a month; at that rate England — the memorandum says England — will be forced to sue for peace within five months, before the next harvest, and therefore before the United States, should it come in, can land a single soldier in Europe. America appears in the calculation as a risk already discounted. The navy’s spokesmen will shortly assure the Reichstag’s budget committee that American military assistance will amount to zero — and Holtzendorff, by an account that has passed into legend and should wear the label, gives his word as an officer that no American will set foot on the Continent.

Bethmann speaks against it, one last time, without hope. The generals are immovable; the Kaiser, who now defers to them in all things, signs. Unrestricted submarine warfare will resume the first of February. The chancellor is heard to say — the witness is a court official, writing later, so file this one too — finis Germaniae: this is the end of Germany.

He was right, and the memorandum was wrong, and the wrongness is worth itemizing because it set the rest of the century in motion. The submarines very nearly performed to specification — April 1917 was the worst month in the history of British seafaring, and there was a moment that spring when London’s grain reserves were measured in weeks. Everything else in the document failed. Britain adapted: convoy, rationing, plowed-up pasture, redirected tonnage — the curve bent within six months. And the American contribution the memorandum had scored at zero arrived in exactly the sequence Germany could least afford: money within weeks, rescuing Allied credit at the moment of its exhaustion; destroyers within months, making the convoys work; and in the second year, two million soldiers — the schedule of whose arrival, as much as their fighting, broke the logic of Germany’s last offensives. The decision at Pless was designed to make American power irrelevant. It made American power decisive, on a timetable Germany itself set.

So the question this lecture must answer is visible right there on the table in Silesia, and I want to put it precisely. The admirals were wrong about nearly everything, and they were mad in no respect. Their memorandum treated the United States as a power whose weight was already fully committed against Germany — feeding the Allied armies, arming them, and lately financing them — so that formal American belligerency would add little beyond a flag. Twenty-nine months of American neutrality had produced, in Berlin, that assessment. Three months later it would produce, on the floor of the United States Senate, a strikingly similar assessment from a senator from Wisconsin, offered as the reason his country should stay out. How did American neutrality come to look like that — to its enemies and to its own dissenters at once?

Rewind to August 1914.

[ Lecturer’s voice ]

The proclamation of neutrality issued from a White House preoccupied with a private grief — Ellen Wilson died two days into the war — and it rested on nothing but itself. There was no neutrality statute, no legislated rulebook; there was the President’s proclamation, his August appeal to Americans to be impartial in thought as well as in deed, and behind these the traditional law of nations, a body of maritime custom built across two centuries of war under sail. Every collision between that custom and this war would therefore land on one desk, to be resolved case by case. Keep that institutional fact in view: it is the mechanism by which a thousand small accommodations could accumulate into a posture nobody ever chose whole.

The collisions began at sea, where the two belligerent systems diverged in a way that would organize everything. Britain’s weapon was the surface fleet, and its method wore the old legal costume even while bursting the seams: contraband lists that swelled until food was on them; the North Sea declared a military area and mined; orders in council extending the doctrine of continuous voyage until cargo bound for neutral Rotterdam was seized as cargo bound for Germany; and, from March 1915, a declared intention to intercept all commerce into or out of Germany, however routed — a measure Britain carefully declined to call a blockade, since it satisfied none of the legal tests for one. The American response was a file of protest notes that grew steadily in length and legal brilliance — the great note of October 1915 pronounced the whole system ineffective, illegal, and indefensible, language about as strong as diplomacy owns — and every note ended the same way: the United States reserves its rights and claims. Cargoes were docketed for postwar adjudication. Lawyers would settle it when peace came.

Germany’s weapon could not wear the costume at all. The submarine survived by stealth; it could stop and search a steamer only by surfacing, at which point a single deck gun or a ramming bow could kill it. The old law required a warship to see a merchant crew to safety before sinking; a U-boat had no room for prisoners and no safety to offer. So when Germany declared the waters around the British Isles a war zone in February 1915, the method arrived stripped of every legal form — and the American answer to it, within six days, used a phrase that appeared in none of the notes to London: Germany would be held to strict accountability for American lives and property. There is the asymmetry, stated in the correspondence itself, in the second winter of the war. One belligerent’s violations were booked as claims; the other’s were booked as casus belli.

The lecture owes you the reasons rather than the mere fact, and honesty ranks them with the crudest first. Bodies against cargoes: the British system confiscated property and killed, when it killed, slowly and statistically, by hunger inside Germany; the submarine drowned identifiable people, some of them American, suddenly and photographably. When the Lusitania went down in May 1915 — you know this story, so I will spend one sentence on it — she took 128 Americans with her, and the survivor accounts ran in the papers for weeks; no seized cotton shipment ever generated a widow’s testimony. The legal forms mattered to a governing class made of lawyers: British overreach came with prize courts, hearings, and eventual compensation; German method came with dead civilians and no process at all — which is to say, the old institution of maritime law had a category for Britain’s conduct and none for the submarine, and the United States enforced the boundary of the category rather than any balance between the belligerents. The money ran one way: by 1916 American sales to the Allies had multiplied several times over while trade with Germany had fallen to roughly nothing, throttled by the very blockade Washington’s notes were protesting — so the constituency injured by British practice shrank toward zero while the constituency enriched by acquiescence included the munitions belt, the wheat farmer, the cotton South (whose price London quietly supported when cotton went on the contraband list — a masterpiece of applied diplomacy), and, after the administration relaxed its early scruples against war loans, the banks, with the House of Morgan serving as Allied purchasing agent and financier. And the story itself arrived pre-sorted: in the war’s first week a British cable ship cut the German transatlantic cables, so that for the entire period of American neutrality the news of Europe reached America routed through London — an environmental fact about information that no one legislated and everyone lived inside. Set against all this, the voices pointing at the asymmetry — Bryan, who resigned the State Department in 1915 rather than sign a Lusitania note he judged a war message in diplomatic dress; the German-American and Irish-American press; the socialists — carried the permanent handicap that their argument could always be recast as pleading for the Fatherland, while the tilt they described never had to defend itself as a tilt, because it wore the costume of neutrality enforced through proper channels.

I said the accommodations accumulated into a posture nobody chose whole, and the record of 1916 shows the administration itself straining against it. The blacklist of American firms that summer angered Wilson more than any German measure had — he wrote privately that his patience with the Allies was at an end — and Congress armed him with retaliatory powers against British commerce, which were never once used. In November the Federal Reserve formally warned American banks against further unsecured Allied credits, the one American protest of the entire neutrality period with coercive teeth, and for a few weeks the United States held genuine financial leverage over the Allied war effort and had begun, gingerly, to squeeze. Meanwhile the country had spent two years arguing with itself about readiness — the citizens’ training camp at Plattsburg filled each summer with young men of a certain class and education, our own Charles among them in 1916, drilling under regular officers at their own expense while the anti-preparedness coalition marched against what it called militarism by installment — and the President had signed the largest peacetime military expansion in the country’s history while campaigning behind a slogan, He kept us out of war, that he privately disbelieved; his remark that any German commander could put America into the war by some calculated outrage survives in several versions, all secondhand, so into the file it goes. The deeper truth about the war planning is stranger: when a newspaper reported in 1915 that the General Staff was preparing plans for a war with Germany, the President — by the later account of an assistant secretary of war, another entry for the file — turned white with anger and threatened to relieve every officer involved. The nation whose entry Berlin was calculating had an army forbidden, in effect, to imagine the assignment.

And the winner of that 1916 election spent his victory on peace. In December he asked both alliances, publicly, to state their terms — the Allies were privately furious at the implied equivalence — and in January, before the Senate, he laid out the design he would carry for the rest of his ruined life: a peace without victory, among equals, guaranteed by a concert of power in which America would at last take its seat. That address was delivered on the twenty-second of January, 1917.

The men at Pless had made their decision thirteen days earlier.

So the rewind returns us to the castle, and you can now read the memorandum as its authors did. They looked at American food in Allied ports, American shells on Allied guns, American credit under the whole Allied war economy, and an American army the size of Portugal’s with orders, more or less, to avert its eyes — and they concluded that the United States was a belligerent in everything but name and expense, whose formal entry could be discounted against five months of arithmetic. The calculation was an institution mistaking a spreadsheet for the future; it omitted adaptation, which is to say it omitted history. But the picture of American neutrality it rested on had been assembled in Washington, choice by defensible choice, over twenty-nine months. Germany selected the moment of the collision. The trajectory had two authors.

What followed ran fast, and I will give it to you in five sentences, because the appendix to this lecture carries the full chronology and the next part of the lecture owns the destination. Germany announced the resumption at the end of January; the United States severed relations within three days, and the President — still hoping the announcement might remain a bluff — tried for two months to hold a middle position of armed neutrality, arming the merchantmen by executive authority after a Senate filibuster killed the bill and drew from him the era’s most quoted denunciation, aimed at a little group of willful men. In the first days of March the press published an intercepted telegram in which the German foreign secretary, insuring against the American entry his government had just invited, offered Mexico an alliance and the recovery of Texas, New Mexico, and Arizona — British naval intelligence having decrypted it and delivered it, with exquisite timing, into American hands. In mid-March the submarines sank three American merchant ships in three days. On the twentieth the cabinet voted unanimously for war; the President summoned the new Congress; and on the evening of the second of April, through streets lined with flags and rain, he drove to the Capitol to ask for the declaration.

He got it. But he got it after four days of the most serious debate the Congress of the United States has ever conducted on a question of war — and that debate, the men who made it, and what it cost them, is where this lecture goes next.

[ PAUSE FOR QUESTIONS ]

Part Two: Four Days in April

On the evening of April 2, 1917, the President drove through a light rain to the Capitol, past cavalry and crowds and flags, and asked a joint session for war. The address lasted thirty-six minutes and contains most of the sentences Americans still know from this era: armed neutrality had proven worse than ineffectual; the world must be made safe for democracy; America would fight without rancor against the German people themselves, whose government had never consulted them; the right was more precious than peace. The chamber, packed to the galleries, many members wearing small flags, gave him an ovation that observers described as unlike anything the room had ever produced. Chief Justice White, a Confederate veteran, wept openly. And the President, by his secretary’s later account — the file receives another entry — remarked that night that his message had been a message of death for young men, and how strange it was to hear it applauded.

Then the Constitution did something it has done rarely since: it made the applause wait four days while the legislature actually deliberated. What follows is the substance of that deliberation, and I will say at the outset what makes it precious to a historian — for once in this series, the flagged file stays closed. Every quotation in this part comes from the Congressional Record, spoken in the open, on the record, by men and one woman who knew the price of every word.

The Senate took up the resolution on April 4. The case for war needed little floor time, since the events of February and March had made it for most members: the announced submarine campaign, the sunken ships, the Zimmermann offer of American territory to Mexico — the argument, in essence, that Germany had already commenced war upon the United States and the resolution merely recognized an existing fact, joined to the President’s larger frame that a concert of free peoples might make this the last such war. The interesting speeches came from the other side, because the six who voted no knew they were speaking for the record of the future, and constructed their arguments accordingly.

Robert La Follette of Wisconsin held the floor for four hours, and his speech repays sorting into its five distinct claims, because each one has a different fate ahead of it.

The first was the argument from unneutral neutrality, and everything in Part One of this lecture was preparation for hearing it fairly. Both belligerent systems had violated American rights, La Follette argued; the administration had acquiesced in one and armed against the other. Britain had mined the North Sea and starved a continent behind an interdiction our own notes called illegal; we had answered with reserved claims. Germany’s method killed Americans; so, La Follette insisted, would running the British mine barrier, yet no strict accountability had ever been addressed to London. The submarine campaign now cited as the cause of war was, on this reading, the foreseeable answer to a blockade we had chosen to tolerate and provision. You have seen the record; the senator had read it too. His characterization of the asymmetry was close to the one the German admiralty had reached from the other shore, which is precisely what made it intolerable to his colleagues.

The second was the argument from class. The war’s advocates, La Follette said, were the press, the financiers, and the comfortable; its cost would fall on farm boys and workingmen who commanded no editorials and held no bonds. He read into the record a letter from a constituent asking who had demanded this war, and answered: not the people. George Norris of Nebraska compressed the same claim into the deadliest sentence of the debate — we are going into war upon the command of gold — and then went further, into the image that nearly got him expelled: we are about to put the dollar sign upon the American flag. The chamber erupted; there were cries of treason; Norris offered to resign his seat and stand for reelection on the question, an offer his enemies declined to arrange.

The third was the argument from consent. If this war was for democracy, let democracy be asked. La Follette claimed a referendum would fail by ten to one — a figure no one could verify and no one rushed to test — and pressed the awkward chronology that the sitting Congress had been elected five months earlier alongside a President campaigning on peace. He pressed, too, on the company: an alliance including the British Empire, with Ireland under martial law a year after the Easter executions, made an imperfect vehicle for self-government, and had included the Tsar until three weeks before — the March revolution in Petrograd having conveniently improved the coalition’s complexion just in time for the war message, a point the war party used and the opposition noted with some acid.

The fourth was the argument from reform. War, the insurgents predicted, would suspend the progressive project and empower everything it had fought: the trusts would run the mobilization, the banks would fund it, dissent would be policed, and the machinery built for the emergency would not be dismantled by the men it enriched. Norris and La Follette had spent twenty years building the insurgent wing of their party against organized wealth; they now forecast, in detail, the wartime state whose construction and career the next lecture in this series will trace. Judge for yourselves in ninety minutes how the forecast performed.

The fifth was the argument from tradition and from constituents. Washington’s Farewell Address was quoted repeatedly across the four days — the great rule of conduct, the warning against permanent attachments to any portion of the foreign world — and behind the six senators stood the communities of the upper Midwest: German-Americans and Scandinavians who had left Europe’s conscription for Wisconsin and the Dakotas, Irish-Americans unwilling to bleed for the empire next door, socialists who read the war as capital’s quarrel. Honesty requires the ledger’s ignoble entry: James Vardaman of Mississippi grounded his opposition partly in a white supremacist’s horror at the prospect of training and arming Black soldiers, and said so with his customary want of embarrassment. The opposition was a coalition, and coalitions are not auditioned for purity.

Against the five arguments stood an answer from inside progressivism itself, and this is the collision to hold onto, because it organizes the intellectual history of the next decade. John Dewey — the philosopher of the age, the man whose pragmatism your first series left standing triumphant — made the case in the New Republic that the war was a plastic moment: the great catastrophe had melted the world’s institutions to liquid, and intelligence, entering now, could pour them into better molds — international organization abroad, social reconstruction at home. The magazine’s circle liked to believe their arguments had walked into the war message itself. So the true debate of April 1917 set progressive against progressive: one wing holding that war would devour reform, the other that war, rightly steered, would complete it. A young essayist of Dewey’s own school was already composing the reply that the steering wheel, once the machine was moving, connects to nothing — he arrives in the next lecture.

The Senate voted at eleven minutes past eleven on the night of April 4: eighty-two to six. La Follette, Norris, Gronna of North Dakota; Stone of Missouri, chairman of Foreign Relations, breaking with his own administration; Vardaman; Lane of Oregon, gravely ill, dead within seven weeks. The House debated through the fifth into the small hours of Good Friday, April 6, and produced the day’s two indelible moments. Claude Kitchin of North Carolina, the Democratic majority leader — the administration’s own floor general — rose to vote no, in tears, telling the chamber he would rather go down in history condemned for this vote than secure his fame by the other, and the House, which had hissed lesser men that week, heard him in silence and let him keep his post. And Jeannette Rankin of Montana, the first woman ever to sit in an American Congress, four days into her service, answered the second call of the roll: I want to stand by my country, but I cannot vote for war. The final count was three hundred seventy-three to fifty, Meyer London, the House’s lone Socialist, among the noes. Fifty-six members of Congress, all told, voted against entering the World War.

Set that number in the ledger of American declarations and its size becomes visible. The near-unanimous votes in our history belong to wars that had, in effect, already arrived: Mexico in 1846, where the war bill declared hostilities to exist by the act of Mexico and bundled the question with supplies for troops then under fire, so that fourteen noes required real nerve; Spain in 1898, whose formal declaration — your first series covered the fever that produced it — passed without a recorded dissent; December 1941, when a fleet lay burning at Honolulu and the sole no in either chamber was Rankin’s second. The divided votes belong to the wars America reasoned its way toward: 1812, House seventy-nine to forty-nine and Senate nineteen to thirteen, the closest war vote of the nineteenth century; and 1917. There was no Pearl Harbor in April 1917, no Maine, no army under fire — there were drowned citizens, an intercepted telegram, and a chain of argument, and Congress was asked to think the country into the largest war in human history. Fifty-six members concluded aloud that the reasoning failed. The pattern holds across two centuries: unanimity attends the wars that come to America; argument attends the wars America goes out to meet.

What the vote cost its casters came due immediately, and the accounting belongs here rather than in the next lecture, because it began before a single wartime statute passed. La Follette was burned in effigy in Illinois, expelled from clubs, condemned by the faculty of his own state university in a petition of some four hundred names, and made the subject of a Senate expulsion investigation — occasioned by a garbled press report of a speech in St. Paul — that hung over him until 1919, when the Senate dismissed it and paid his counsel’s costs. Stone died in the spring of 1918 with his loyalty still under public question. Rankin’s district was legislated out from under her within the term, and her House career ended at one term’s length, resumed a generation later just in time for her second no. These punishments, note well, were the work of civil society running ahead of any law; the statutes that would organize such fury into machinery — Espionage, Sedition, the rest — belong to the next lecture, which is one reason this vote matters so much to the historian: it is the last measurement of American anti-war sentiment taken while dissent was still merely expensive, before it became indictable. Fifty-six is therefore a floor, and what the true number was, no one would be free to discover for years.

And the arguments themselves had the strangest career of anything in this lecture. La Follette remained an icon for progressives, who created a third-party presidential candidacy for him in 1924; he garnered over sixteen percent of the national vote. Within a decade the revisionist histories were respectable; within twenty years a Senate committee had hardened the command-of-gold thesis into a tale of munitions makers scheming the country into war — an overcorrection so crude that scholars have spent the decades since sanding it back down, and the sanded version looks a good deal like what La Follette actually said on April 4. Dissent punished, then adopted, then vulgarized, then corrected: the full cycle, run inside a single generation.

The resolution went to the White House on the afternoon of Good Friday, and the United States was at war. The President who had asked for it now sailed, in his own design if not yet in fact, for the peace that would justify it — and the next part of this lecture crosses with him, to Paris, where the design met the world.

[ PAUSE FOR QUESTIONS ]

Part Three: Paris

On the fourth of December, 1918, the George Washington — a seized German liner, renamed, repainted, and pressed into the service of the power that seized her, which is the whole era in one hull — steamed out of New York carrying a sitting President of the United States to Europe. No president had ever done this. The precedent was so raw that critics questioned whether he ceased to be president upon leaving American waters, and the mockery in the Senate had an edge of genuine constitutional bewilderment. The decision to go in person was Wilson’s alone, taken against the advice of his closest counselors, and it followed from his reading of the stakes: the peace was the purpose the war message had promised, the design was his, and he did not trust it to subordinates.

Whatever one concludes about that reasoning, the historian’s point is that the mission was damaged before the ship cleared the harbor, by two decisions made in Washington in the preceding six weeks. In late October, with the war ending, Wilson issued a public appeal asking voters to return Democratic majorities as a mark of confidence in his leadership — converting the midterm election into a referendum on himself. Two weeks later the voters returned Republican majorities in both houses. The rebuke was modest in numbers and enormous in machinery: it delivered the Senate Foreign Relations Committee to Henry Cabot Lodge, and it meant Wilson would negotiate abroad for six months while his opposition organized the chamber that owned one-third-plus-one of every treaty’s fate. The second decision compounded the first. The peace commission Wilson took to Paris contained no senator of either party and no Republican of national standing — the one nominal Republican aboard, Henry White, was a retired diplomat without a following. Root, Taft, Hughes: three available Republicans of the first rank, all of them, remarkably, supporters of a league in some form, all left at home. The Constitution makes treaty-making a shared power; the President structured the negotiation as though it were an executive possession, and the Senate would spend 1919 reminding him of the arrangement. Institutions do not forgive being treated as absent, and this lecture’s fourth part is the bill arriving.

None of this was visible from Paris in December. What was visible from Paris was the largest crowd in the history of France. Two million people lined the route from the Bois de Boulogne on the fourteenth of December; the papers called him Wilson le juste; his portrait hung in workmen’s flats from Lisbon to Warsaw next to the saints. In Rome the crowds were reported as exceeding any reception given to any man in the city’s modern history. It is worth pausing on what the crowds believed, because the gap between it and the coming arithmetic is the part’s true subject: they believed the American president had come to redeem the catastrophe — to make the four empty years mean something, and to arrange the world so that it could never happen again. No statesman has carried expectations of that size into a negotiation. They were not his to fulfill, and a fair accounting says that no conceivable conference could have fulfilled them; the choices lay among disappointments.

The conference that convened in January was nominally a congress of twenty-seven victorious nations; in practice it compressed, within weeks, into four men in a room — and then, effectively, three. Clemenceau, presiding: seventy-seven years old, premier of a country that had lost a tenth of its young men, a man who had watched Germany invade France twice in his adult lifetime and intended to arrange matters so that he need not watch a third time; in February an anarchist shot him in the chest, and he attended the conference thereafter with the bullet still in him, an inconvenience he treated as roughly equal to the weather. Lloyd George, fresh from a khaki election in which his coalition’s candidates had promised the British electorate a Germany squeezed, in the phrase of one of his ministers, until the pips squeaked. Orlando of Italy, who would eventually walk out over the Adriatic port of Fiume and return to find the other three had proceeded without noticeable difficulty. And Wilson, holding the Fourteen Points — which occupied, at Paris, a peculiar legal position that the lecture must make clear, because it is the hinge of everything after: Germany had not surrendered unconditionally. The armistice had been concluded on the agreed basis of the Fourteen Points, with two named Allied reservations. The Points were, in a real if contestable sense, the contract of surrender — so every departure from them at the conference table handed the future a document that Germans of every party, from the communists to the officer corps, could call a fraud with a straight face. Against the Points stood the secret treaties among the Allies, carving up the Ottoman lands and the colonies and the Adriatic — instruments whose texts the Bolsheviks had gleefully published out of the Tsar’s archives a year earlier, an embarrassment this series will revisit in the lecture on the revolution. Wilson’s fourteenth point, the association of nations, was in his own hierarchy the point that redeemed compromise on the other thirteen: build the League, and the League would in time correct whatever injustices the treaty carried. That reasoning, sincerely held, became the solvent in which the Points dissolved one by one.

So the compromises came, each purchased to keep the Covenant stitched into the treaty’s first pages, where Wilson had insisted it live so that no signatory could take the peace without the League. Shantung: the German concessions in China transferred to Japan over the anguish of the Chinese delegation, which refused to sign the treaty at all — and in Peking, that May, students filled the streets in a movement Chinese historians still date their modern politics from. The Rhineland: Clemenceau wanted it detached from Germany outright; the compromise gave France a fifteen-year occupation plus a treaty of guarantee, signed by Wilson and Lloyd George, pledging America and Britain to defend France against future German attack — hold that guarantee in mind, because it was priced into every French concession, and it will die quietly in the Senate’s committee rooms without ever reaching a vote, leaving France holding neither the Rhine nor the promise, a fact that governs French conduct through the whole decade 2.7 will examine. Reparations: the conference could not agree on a sum, so it deferred the figure to a future commission and wrote instead the article — 231, as the Germans would learn to number it — establishing German responsibility for the war’s damage as the legal ground of whatever bill would come; the politics of that article belong here, the carousel of money it set turning belongs to Lecture 2.7, and the two lectures will meet at the Dawes Plan. And one compromise that this series is specially positioned to feel: Japan proposed for the Covenant a clause affirming racial equality among member nations. A majority of the commission voted for it. Wilson, in the chair, ruled that so grave a matter required unanimity, and the clause died — the Australians adamant, the Americans relieved, the Japanese delegation absorbing a lesson about the announced principles of the Anglo-American world that Tokyo did not forget. Five years later, when Congress wrote the exclusion clause whose effect on Kenji’s household you have already measured, it was putting Wilsonian race prejudice into statutory practice.

In the first days of April, Wilson went down with influenza — the same visitation you have met twice in this series already, still burning through the world that spring — with fever, violent coughing, and, by the testimony of those around him, a changed man afterward: quicker to suspicion, more rigid, given to odd fixations that his own aides recorded with alarm. What the illness was, medically, and what it took from him, is genuinely contested — influenza with neurological sequelae, a small stroke, or the visible acceleration of the arteriosclerosis that would fell him six months later; the sources permit no verdict and this lecture will not manufacture one. The negotiating record shows that several of the largest concessions came in the weeks at and after the sickbed. Whether a well Wilson holds those lines is one of the era’s honest unknowns, and I leave it as one.

The treaty was signed on the twenty-eighth of June, 1919, in the Hall of Mirrors at Versailles — the room chosen because the German Empire had been proclaimed in it in 1871, France closing a circle with deliberate ceremony — five years to the day after the shots at Sarajevo. The German delegates, summoned to sign a text they had been handed rather than negotiated, did so and left. Nobody present loved the document. It was, as critics said almost immediately, too severe to reconcile Germany and too gentle to destroy her — a punishment calibrated to be resented and survived. The disappointment found its bible in December, when a young British Treasury official who had resigned from the conference in despair published The Economic Consequences of the Peace: John Maynard Keynes, furnishing disillusion with numbers, prophecy, and a set of savage portraits — the President as a Presbyterian bamboozled by quicker men — that fixed the popular image of Paris for fifty years. The book’s economics will get their hearing, and their cross-examination, in Lecture 2.7; its immediate work was atmospheric, and on both shores of the Atlantic it armed every reader who wished to believe the peace was both a failure and a fraud.

Wilson sailed home in July with the treaty, the Covenant embedded in it, and the guarantee to France in his portfolio, to lay them before the Senate his October appeal had helped deliver to his opponents. He believed the country was with him, and he may even have been right — which made no difference at all to the arithmetic of the chamber, and the chamber is where this lecture now goes.

[ PAUSE FOR QUESTIONS ]

Part Four: The Senate and the League

The Treaty of Versailles, with the Covenant woven into it, failed in the Senate for a reason that can be stated in one sentence: Article X pledged every member to preserve the territorial integrity of all the others, and a majority of senators concluded that this committed the United States to future wars on the decision of a council in Geneva, without the consent of the body the Constitution charges with declaring them. Lodge’s fourteen reservations reduced, in substance, to one — the United States assumes no obligation under Article X unless Congress so provides — and Wilson held that a guarantee so fenced was no guarantee at all. Both claims were true, which is why the fight was genuine rather than a misunderstanding. The votes of November 1919 and March 1920 killed the treaty in both forms: with reservations it fell because Wilson instructed his loyalists to join the irreconcilables against it — among them La Follette and Norris, opposing the peace’s machinery on the same ground they had opposed the war’s beginning — and without reservations it never came close. Wilson’s stroke in October 1919, suffered on a speaking tour undertaken to carry the fight over the Senate’s head, left the White House unable to negotiate and unwilling to yield; the final tally in March fell seven votes short, with a majority for ratification made meaningless by the two-thirds rule.

One correction to a century of shorthand: the Senate did not reject the League out of disillusion with the war. In 1919 the disillusion had not yet arrived — the bitter memoirs, the revisionist histories, the merchants-of-death hearings all lie years ahead — and most senators, probably most of the country, favored membership in some form. The treaty died of constitutional argument, senatorial prerogative, personal enmity between two proud men, and a sick president’s refusal to accept a fenced version of his design: politics in its ordinary operation. The disillusion came afterward, compounded across the decade, and eventually adopted the dead treaty as evidence for a conclusion the Senate never voted on.

Would American membership have changed what followed? Possibly a great deal: a League with the world’s largest economy inside it faces the crises of the 1930s with weight the actual League never possessed, and the reserved membership the Senate would have accepted — the United States in Geneva with its war power fenced — was on the table and might have sufficed. Honesty requires the counterweight. The United Nations has now operated for eighty years with the United States a charter member, a permanent Council seat, and no fence on participation beyond the veto, and its record against great-power war rests less on the machinery than on other things — the memory of the last catastrophe, the balance of terror, the interests of the strong. The experience should caution us against assuming that an international body is the solution to the problem of war, and therefore against loading the whole tragedy of the next twenty years onto seven Senate votes in March of 1920. The League’s failure was one of the paths to 1939; it was not the only one, and the American absence might not be the isolationist debacle that the postwar imagination came to believe.

Part Five: The Diplomacy of Normalcy

The war ended, for the United States, by joint resolution of Congress in July 1921, followed by a separate treaty with Germany that consisted, in essence, of the Versailles settlement’s benefits with its obligations struck out. It is easy to smirk at that instrument, and the twenties’ critics did. The decade that followed deserves a fairer accounting, because the Republican administrations conducted an active foreign policy — conferences, treaties, financial diplomacy on a large scale — organized around a single consistent principle: engagement that created no obligation to fight. That principle stood well in the 1920s, before German and Japanese militarism arose to challenge it.

The showpiece came first. In November 1921 Secretary of State Hughes opened the Washington Conference before the assembled delegations of the naval powers, and instead of the expected welcome address he read out a detailed disarmament schedule: the United States would scrap thirty capital ships, built and building, and he named — tonnage by tonnage — the British and Japanese ships that should join them. A British observer wrote that Hughes had sunk more ships in thirty-five minutes than all the admirals of the world in a cycle of centuries. The treaties that emerged fixed capital-ship strength in the famous 5:5:3 ratio among Britain, America, and Japan, ended the Anglo-Japanese alliance in favor of a four-power agreement to consult, and pledged nine powers to the Open Door in China. It was the first arms-limitation agreement among great powers in modern history, it was real — the ships went to the breakers — and the Senate ratified the package with ease, which measures precisely the distance from Article X: the Washington treaties asked America to consult, and never to fight. The limits were also real. The ratios covered battleships and left cruisers and submarines to an unrestrained competition; nothing enforced any of it beyond each signatory’s continuing convenience; and in Japan the 5:5:3 arithmetic curdled, over time, into a national grievance that the naval faction would spend the next decade nursing.

The war debts occupied more diplomatic energy than any other subject of the decade, and the two shores never argued about the same thing. Ten billion dollars had gone to the Allies, most of it after April 1917; to the borrowers this was America’s contribution to a common cause in which they had contributed the dead, and cancellation was simple justice — the more so once the money’s return was chained, in practice, to reparations from a Germany that could pay only what it could borrow. To Congress and to three administrations the debts were contracts, and the debtor governments signed funding agreements through the twenties at interest rates quietly written down again and again — a de facto partial forgiveness that American politics could tolerate only if nobody called it that. Coolidge’s summation — they hired the money, didn’t they? — is secondhand and probably invented, which has never prevented it from being the most accurate sentence in the file: it is what the policy believed, whoever said it. The mechanism that kept the whole circuit turning — American loans to Germany, German reparations to the Allies, Allied debt payments to Washington, each leg denying any connection to the others — was arranged in 1924 by a commission under a Chicago banker named Dawes, because the United States government would not officially link debts to reparations and therefore conducted the linkage through nominally private citizens. Note the institutional form, because it is the decade’s signature: the state doing its foreign policy in a business suit, achieving coordination while disclaiming commitment. The carousel itself — who lent what to whom, and what happened when the music stopped — belongs to Lecture 2.7.

The decade’s last diplomatic monument was the Pact of Paris of 1928, in which the United States, France, and eventually more than sixty nations renounced war as an instrument of national policy. Its origins were tangled — Briand had proposed a bilateral version as a quiet security tie to America; Kellogg, unable to refuse peace and unwilling to grant alliance, universalized it into harmlessness — and its text bound no one to do anything, reserved self-defense to each signatory’s own judgment, and provided no machinery whatever. The jokes wrote themselves, and Senator Glass voted for it while announcing it was not worth a postage stamp. Two things should nonetheless be said for it. The outlawry movement behind it was a genuine mass phenomenon — millions of signatures, churches and women’s organizations and law-school theorists, the same public that had filled Wilson’s crowds looking for a form of his promise the Senate could not object to — and the pact was the form: a League obligation with the obligation removed. And the idea outlived the mockery: seventeen years later, at Nuremberg, the tribunal cited the pact as a legal foundation for the charge of waging aggressive war, which is more posterity than most postage stamps receive. Henry, you will recall from the first lecture, followed the pact’s signing on his radio with the satisfaction of a man watching his oldest convictions ratified by the world.

The change in the public mood across these years is the largest fact this lecture leaves you with, and its most important feature is that it was slow. In the spring of 1917 the country talked itself into a crusade — the Liberty Loan rallies, the war as the great cause that would redeem a commercial civilization, a pitch of patriotic enthusiasm that the next lecture will show was in considerable part manufactured, and was believed all the same. What came after was not revulsion; it was exhaustion. The Armistice found Americans wanting the boys home and the emergency ended, and the year 1919 delivered instead a soaring cost of living, a wave of great strikes, a Red Scare, and a demobilization run like a fire drill — so that the first thing the country repudiated was not the war but the wartime state, the boards and controls and exhortations, which it dismantled with a speed the next lecture will measure. The turn against the war itself came later and by degrees. The early twenties brought disengagement more than disgust: normalcy was less a verdict on the crusade than a wish to stop being troubled by Europe, and the Senate’s rejection of the League, remember, was already complete before any of the deeper disillusion had formed. Only toward the middle of the decade did the intellectual verdict arrive — the flood of war novels and memoirs around 1926 to 1929, the historians reopening the question of who had wanted the war and why, the slow spread of a conviction that the whole thing had been a swindle of bankers and propagandists. Across the twelve years the mood traveled perhaps two-thirds of its journey; the hardening into settled doctrine — the investigations, the neutrality statutes, the fixed resolve never again to be drawn in — belongs to the 1930s, past the border of this series, and its full flowering waits for a later generation to narrate.

Two inheritances, then, pass out of this lecture into others. The wartime state that the country built in nineteen months and tore down in a fury — how it was made, what the progressives hoped it proved, and why the public rejected it so completely — is the subject of the lecture that follows. And the mood whose gradual souring I have just traced becomes, as it matures, the weather of American arts and letters in the twenties: the irony that replaced the crusading confidence, the writers who could no longer use the large words the war had spent, the whole disenchanted temper that the lecture on arts and ideas will inhabit at its leisure. The country that steamed home from the war a creditor and a world power spent the decade deciding it wanted to be neither, and the record of that deciding — in its institutions here, in its imagination later — is the through-line of the lectures still to come.

[ PAUSE FOR QUESTIONS ]

Appendix: The Two Blockades and the American Response, 1914–1919

A chronology. One phrase per entry; the spoken lecture carries only a handful of these dates, and the rest live here.

1914

• Aug 4 — Wilson proclaims American neutrality as Britain enters the war.

• Aug 6 — Washington asks all belligerents to observe the Declaration of London, the unratified 1909 code of maritime war.

• Aug 20 — Britain accepts the Declaration only “with modifications,” immediately expanding the contraband lists.

• Oct 29 — A new Order in Council extends the doctrine of continuous voyage, reaching cargoes bound for Germany through neutral ports.

• Nov 3 — Britain declares the entire North Sea a military area and mines it.

• Dec 26 — First major American protest note to London on the treatment of neutral commerce.

1915

• Feb 4 — Germany declares the waters around the British Isles a war zone; submarines will sink enemy merchantmen, effective February 18.

• Feb 10 — The United States answers that Germany will be held to “strict accountability” for American lives and ships.

• Feb 20 — An American compromise proposal (food into Germany in exchange for restricted submarine and mine warfare) is refused by both sides.

• Mar 11 — The “reprisal” Order in Council: Britain will intercept all commerce into or out of Germany, however routed.

• Mar 28 — A U-boat sinks the Falaba; the first American citizen dies by submarine.

• Mar 30 — Washington refuses to concede the legality of the March blockade and reserves all American rights and claims.

• May 7 — The Lusitania is torpedoed; 1,198 dead, 128 of them Americans.

• May 13 — First Lusitania note demands disavowal and an end to unrestricted methods.

• Jun 8 — Bryan resigns rather than sign the second Lusitania note, judging it a war message in diplomatic dress.

• Jul 21 — Third Lusitania note declares any repetition “deliberately unfriendly.”

• Aug 19 — The Arabic is sunk with two American dead.

• Aug 20 — Britain declares cotton absolute contraband, quietly arranging purchases to hold up the price and pacify the South.

• Sep 1 — The Arabic pledge: Germany promises no liners will be sunk without warning and provision for safety.

• Oct 21 — The comprehensive American note to London pronounces the blockade “ineffective, illegal, and indefensible”; Britain concedes nothing.

1916

• Feb–Mar — The Gore-McLemore resolutions, warning Americans off belligerent ships, are tabled at Wilson’s insistence: Congress declines to trim the doctrine of neutral rights.

• Mar 24 — The Channel steamer Sussex is torpedoed; Americans are among the injured.

• Apr 18 — The Sussex ultimatum: abandon current submarine methods or the United States severs relations.

• May 4 — The Sussex pledge: merchant vessels will be visited and searched before sinking — conditional, Germany notes, on Britain’s blockade being addressed.

• May 24 — American protest against British seizure and search of neutral mails.

• Jul 18 — Britain blacklists some eighty American firms; Wilson, angrier at London than at any point in the war, calls it “the last straw.”

• Sep 8 — Congress grants the President retaliatory powers against nations discriminating against American commerce; the powers are never used.

• Nov 27 — The Federal Reserve warns member banks against further unsecured Allied credits — the one American protest with coercive teeth.

• Dec 18 — Wilson asks all belligerents to state their peace terms; the Allies are privately furious at the implied moral equivalence.

1917

• Jan 9 — At Pless, Germany decides for unrestricted submarine warfare, accepting the probability of American entry against the calculation that Britain starves first.

• Jan 22 — “Peace without victory”: Wilson’s last design for a mediated settlement.

• Jan 31 — Germany announces unrestricted submarine warfare in the war zones, effective the next day.

• Feb 3 — The United States severs diplomatic relations with Germany.

• Mar 1 — The Zimmermann telegram is published in the American press.

• Mar 4 — A Senate filibuster kills the armed-ship bill; Wilson denounces the “little group of willful men” and arms the merchantmen by executive authority.

• Mar 16–18 — Three American merchant ships go down in three days.

• Apr 2–6 — The war message; the Senate votes 82–6, the House 373–50.

• Oct 6 — The Trading with the Enemy Act: the United States, now belligerent, builds its own export-control and blockade machinery, joining and tightening the system it had called illegal.

1918–1919

• Nov 11, 1918 — The Armistice silences the U-boats; the Allied blockade of Germany continues.

• Mar 1919 — The Brussels agreement permits food into Germany against payment in gold, after four hungry months of leverage.

• Jul 12, 1919 — The blockade is lifted, two weeks after Germany signs at Versailles.

Every American claim against Britain docketed in those notes was quietly shelved after April 1917.

End of Lecture 2.2

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professors must reconceive of themselves as interlocutors, serving as performative models of how to calibrate uncertainty and revise frames in real time. The classroom experience should focus on helping students to understand how to constitute a goal rather than generate a text in response to a prompt provided by the professor.

This is something closer to the Oxbridge tutorial system, the clinical ward round, or the seminars of many small liberal arts colleges in the United States. These pedagogies were once defended on grounds of tradition or prestige. The post-AI argument is structural: they are the delivery mechanisms for exactly the cognitive capacities that the architecture of AI cannot replicate, because those capacities are developed only by being exercised, not described. Interestingly, this means that the coming of AI is going to mean there will be demand for more professors, rather than fewer.

None of this implies that faculty should pretend AI does not exist, or that the tutorial and seminar should be conducted in proud ignorance of a tool students will be spending the rest of their professional lives using. The opposite is true. Faculty should integrate LLMs directly and deliberately into their instruction as tools that need to be used correctly in order to not be harmful.

This articulates what I was trying to do intuitively at UATX. Otherwise, though, I think that Gilman is too optimistic that universities will evolve in this direction.

Austin Scholar writes,

from roughly age 10 onward, anything that gets coded as a route to status and respect inside your kid’s actual social world becomes massively motivating, and anything that doesn’t gets tuned out. This is why “because it’s good for you” doesn’t land for a 13-year-old. The kid doesn’t need a better lecture about long-term outcomes. She needs a route to look impressive in front of the people whose opinions she actually cares about.

…In a friend group where being well-read is high status, your kid will read; in one where caring about school is cringe, she really, really won’t.

Howard Husock and Tao Tan write,

Of the 57,339 foundations that give to higher education, just 165 supply half the dollars. The receiving end mirrors the concentration: Of 5,270 institutions in the data set, 54 capture half the money, led by Harvard, Stanford and Johns Hopkins Universities. The 526 community colleges in the data set received $1.3 billion combined, less than any one of those three.

…the biggest foundations intend to last forever: They are legally permitted perpetual existence, they are funded by their own endowments, their trustees appoint their own successors and they answer to neither an electorate nor the market. Entire disciplines now take their cues, indefinitely, from the preferences of a few self-perpetuating, self-funded institutions.

Gad Levanon writes,

Private colleges & universities covers every private degree-granting institution. Together: 4.4 million jobs.
Both are now shrinking. The combined total peaked in January 2025 and has fallen 95,000 since — public down 55,000, private down 40,000. Meanwhile K‑12 employment (dashed line) keeps drifting up, and overall hiring has firmed. This is specific to higher ed.
The timing tells you why. The turn came precisely with the federal research funding cuts of early 2025, followed by hiring freezes across dozens of universities and a 17% drop in new international enrollment — students who disproportionately pay full tuition.

The DSA presumably will reverse this when it comes to power.

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substacks referenced above: @

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Job Recession in Higher Education

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Austin Scholar #222: The three things that actually make a kid love learning

Hey, y’all…

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are the hundreds of billions of dollars being invested by the U.S., its allies and rivals in new tanks, planes and warships going to become the equivalent of buying horses and arrows on the eve of machine guns and howitzers?

…what used to be the safe rear hundreds of miles away from the front line is now contested…The proliferation of cheap sensors has also made any massed maneuver, such as an armored thrust akin to the U.S. assault on Iraq in 2003, much more difficult because any concentration of troops can be spotted quickly and attacked well before reaching the battlefield.

…Even a country without a conventional air force can now achieve localized air superiority thanks to drones.

One feature is the rapid pace of innovation.

what used to be cutting-edge weapons and technologies becomes outdated within months.

…the [drone] weapon becomes, in a way, a subscription service rather than an object, constantly updated and redesigned to fit changing battlefield conditions.

Similarly, in a podcast with Yascha Mounk, Arvind Narayanan says,

I think the Ukraine war has shown very clearly that the advantage now lies less in built-up capacity, and more in the speed of innovation that adversaries are able to produce during warfare on the ground. The cycles of drone and counter-drone tactics, from what I’ve seen, seem to be evolving at a pace of something like six weeks, to the point where if you’re six weeks behind the state of the art in the latest jamming technology or whatever it is, you can get overpowered by the other side’s new innovations.

…I think the answer to a lot of this kind of asymmetric potential, when it comes to terrorism, for instance, using small devices—or historically with dynamite, when that was a new technology—a lot of the time the answer has been more surveillance. With dynamite, from what I understand, for several decades anybody could just assassinate people in power; there was nothing you could do about it. The way that got mitigated was by having much more comprehensive surveillance.

I bet that we are going to have to fight the Iranian regime again. And in order to win, I think we will need at least two capabilities.

One capability is exquisite mapping. Using a combination of aerial photography and AI, we will need highly accurate estimates of likely locations of Iran’s key military personnel and sites for munitions manufacturing, munitions storage, and missile launchers.

The second capability is miniature special forces. In the war against the Taliban, our special forces infiltrated into Afghanistan and called in air strikes. For Iran, we will need many more special forces. But instead of humans, they should use very small communication devices that we can deploy, presumably by drone gliders discharged from aircraft, near suspected military installations. These devices should have sensors and AI to detect underground activity, such as missiles or drones being positioned for launch. The devices should have the means to communicate to aircraft to direct attacks against these sites.

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America 1914–1930

Lecture 2.1

The Great Disruption: America Measured, 1914 and 1929

Part One: Paris, Spring 1919

It is an afternoon in early April, 1919, and Captain Charles ——, twenty-five years old, of Boston, Massachusetts, is walking across the Place de la Concorde with four hours of liberty and no instructions about how to spend them.

The square is full of cannon. Captured German guns stand ranged in long rows across the paving stones, their barrels painted with the names of the battles where they were taken, and small boys climb on them while their mothers watch from a distance. At the north end of the square, the American flag hangs over the Hôtel de Crillon, where the United States has installed part of its peace delegation. A few hundred yards away, in a rented mansion, the President of the United States is in bed with a fever — influenza, or something very like it — and the newspapers are printing careful bulletins. At the corner of the square nearest the river stands a statue of a seated woman representing the city of Strasbourg. For forty-seven years, from the day Alsace was surrendered to Germany in 1871, that statue wore black crepe. The crepe is gone now, and the statue is heaped with flowers gone brown at the edges, five months’ worth, laid there since November and never entirely cleared away.

Charles has been in France for twenty months. He trained at Plattsburg in the summer of 1916, in the volunteer officers’ camps that young men of his class and college attended the way an earlier generation had attended dancing school; he was commissioned in 1917; he commanded a battery of field artillery through the Meuse-Argonne, the largest battle in American history, forty-seven days in which the American army suffered some twenty-six thousand dead. He is now waiting — as roughly a million other American soldiers in France are waiting — for a berth on a ship home. The army processes them through embarkation camps at a rate the newspapers call miraculous and the men themselves call slow.

He walks, and Paris presents itself to him.

Every third woman he passes, or so it seems to him, is dressed in mourning black. This is close to arithmetic. France has lost about 1.4 million soldiers dead — from a population of forty million, roughly one death for every ten men of military age. The country counts some six hundred thousand war widows and nearly a million children legally designated orphans of the nation. Mourning in France is a formal practice with a wardrobe and a calendar, and the calendar, for hundreds of thousands of households, will simply never run out. Among the women, and threaded through every café and Métro entrance, are the men the French call les mutilés — the maimed. Men with one arm, men with one leg and a crutch, men with faces rebuilt by a new surgery that is heroic and imperfect. Paris has begun to look away from them politely, which is its own kind of information.

The hotels tell a different part of the story. The lobbies of the Majestic and the Crillon, and of a dozen lesser establishments, are crowded with delegations — and what is remarkable is where the delegations come from. There are Poles, representing a country that did not exist six months ago. There are Czechs and Slovaks, representing another. There are South Slavs assembling a kingdom out of pieces of a vanished empire, Armenians petitioning on behalf of a slaughtered nation, Arabs in robes attending the Emir Faisal, who moves through the conference trailed by a slight, blue-eyed British colonel named Lawrence. In the kitchen of one Paris hotel works a young man from French Indochina who has rented a dark suit and drafted a petition, in careful French, asking that President Wilson’s principles about the self-determination of peoples be applied to his own; he will get no answer, and the world will hear from him later under the name Ho Chi Minh. The lobbies of Paris in the spring of 1919 are a bourse of nationalities, and the currency being traded is the wreckage of empires.

Four of them. It is worth pausing on that number, because nothing in Charles’s American upbringing prepared him for it. The Romanov dynasty had ruled Russia for three hundred and four years; the Tsar abdicated in March 1917, and in July 1918 he and his family were shot in a cellar. The Habsburgs had ruled from Vienna for more than six centuries, and their empire dissolved in the first week of November 1918 into quarreling successor states. The Hohenzollerns had ruled in Berlin and Brandenburg for five hundred years; the Kaiser crossed into Holland on the tenth of November and took up residence in a country house, where he would spend the rest of his life chopping wood. The Ottoman dynasty, older than the European discovery of America, sits defeated in Constantinople under Allied guns, awaiting a sentence that will take a few more years to pronounce. When Charles was a Harvard freshman, those four houses governed, among them, perhaps a quarter of the human race. All four are gone, and the men in the hotel lobbies are dividing the estate.

And then there is the thing Charles notices every time he pays for anything: he is rich here. A captain’s pay, unremarkable in Boston, commands Paris. The franc buys less every month; the dollar buys more. The doughboys on leave fill the restaurants and the shops with a purchasing power that startles their hosts and slightly embarrasses the more observant of the Americans. Charles is observant. He understands, in a general way, what stands behind the arithmetic of the exchange rate: that Britain and France have spent down the accumulated savings of a century; that they have sold off their foreign investments and borrowed, from his own country, sums that would have been considered fantastic five years ago; that the gold of the world has been flowing westward across the Atlantic and settling in vaults in lower Manhattan. In 1914 the United States owed the rest of the world, net, nearly four billion dollars — the largest debtor nation on earth, as it had been throughout Charles’s lifetime and his father’s. In 1919 the rest of the world owes the United States roughly ten billion dollars in government war debts alone, with billions more in private lending stacked on top. Five years. One national balance sheet inverted, and with it the financial architecture of the world. London had been the world’s banker since before Waterloo. The job has crossed the ocean, and — this is the part that will matter for the next ten years, and for a later lecture in this series — the new banker has not yet decided whether it wants the position, or understands what the position requires.

Charles thinks about none of this in these terms. What he thinks about, crossing the great square with its rows of captured guns, is harder to state, and he himself will never state it well. He is whole. He wants that word to be exact: he was gassed lightly once, and shell fragments twice passed near enough to matter, and he came through forty-seven days of the Argonne without a wound. His name appears on no casualty list. And something is gone all the same. He can locate its absence most precisely by thinking of his father. Henry ——, attorney, of Boston, is a man built on the conviction that the world improves; that reasonable men, given time and sound institutions, will settle their differences short of catastrophe; that the great arbitration treaties, the Hague conferences, the whole patient machinery of civilization, constituted a ratchet that turned one way. Henry heard William James lecture in 1906 and argued about it at his club for a decade. Henry believes in progress the way he believes in the Boston & Maine timetable. Charles has spent forty-seven days watching the most advanced civilization in human history direct its entire accumulated ingenuity — its chemistry, its metallurgy, its logistics, its capacity for organization, everything the nineteenth century built — to the task of converting young men into the contents of the military cemetery now being consolidated at Romagne, where the graves will eventually number more than fourteen thousand, the largest American burial ground in Europe. He does not doubt that the war needed winning. He has simply lost the ability to believe that the ratchet turns one way. He is going home to a father who still believes it, and some part of Charles already knows that this, and never anything either of them says aloud, will be the distance between them at the dinner table for the rest of Henry’s life.

In the last week of April his number comes up. He entrains for Brest, boards a converted liner with several thousand other men, and sails west. Fourteen months earlier he had crossed the other way and been seasick with fear the whole passage, watching for periscopes. This crossing is calm. He stands at the rail a great deal. When the ship comes up New York harbor the men crowd the port side and cheer the statue, and Charles cheers with them, and means it, and is surprised by how much he means it — and underneath the cheering he is doing what he will do for years, which is measuring the distance between the country he left and the man coming back to it.

[ Lecturer’s voice ]

Hold Charles there, at the rail, for a moment — because the question he is carrying up the harbor is the question this entire second series of lectures will try to answer. What country is he coming home to? What did the convulsion he has just witnessed do to it — and what will the United States, alone among the great powers enriched rather than ruined, do with the position the catastrophe has handed it?

The scale of the convulsion first, stated plainly, because everything in the next nine lectures happens in its shadow. The war killed on the order of ten million soldiers — France 1.4 million, Germany two million, Russia perhaps 1.8 million, Austria-Hungary over a million, Britain and its empire nearly a million, and the roll continues through Italy, Turkey, Serbia, Romania. Civilian deaths from blockade, massacre, famine, and the diseases that follow armies added millions more. And beginning in 1918, moving along the shipping lanes and the troop trains the war had built, came the influenza pandemic, which in two years killed something on the order of fifty million people worldwide — more than the war itself, by most reckonings — including six hundred and seventy-five thousand Americans, one of whom this lecture series will ask you to mourn personally. Four dynasties that had governed for a combined two thousand years ceased to exist. A revolutionary government of a kind never before seen took power in Russia and announced that its ambitions were global; an entire lecture later in this series concerns what Americans made of that. And the emotional inheritance — the mourning bands, the empty chairs, the specific ways in which the survivors of that generation, in Europe and more quietly in America, stopped trusting the future — is as much a fact of the postwar world as any treaty, and harder to amend.

The United States entered the catastrophe late, and the catastrophe made it supreme. American deaths — one hundred sixteen thousand, roughly half of them from disease — were a tragedy at home and a rounding error in the European ledger. American industry, untouched by a single shell, had spent the war selling to the belligerents. American finance ended the war holding the paper of every Allied government. In 1914 the United States was a big, rich, provincial debtor on the edge of a European world system. In 1919 it was the last financial power standing, the largest economy on earth by a widening margin, and the creditor of civilization.

The peace conference sitting a few miles from Charles’s walk — what America tried to build there, and how completely the attempt collapsed — is the subject of the next lecture, and I am going to make you wait for it. This lecture has a different task. Charles’s question at the rail is our assignment: to describe the country he is sailing toward, and what fifteen years did to it.

Here is how we will do it. We are going to measure the United States twice — once in the summer of 1914, in the last weeks of the old world, and once in the summer of 1929, at the height of the new one — and we are going to let the two measurements stand against each other. How many Americans, and where they lived, city and country. Who was arriving from abroad, and in what numbers, and then in what numbers they stopped. Who was moving within the country, and in which direction — including the great northward movement of Black Americans that will change every city it touches. How long Americans lived. Which houses had electric light, and a telephone, and running water; whose road was paved; who owned an automobile, a washing machine, a radio — this last an object that in our first measurement does not exist as a consumer good at all, and in our second sits in more than a third of American parlors. Aviation, which in 1914 is a stunt and in 1929 is an industry.

And we will take these measurements the way this series has always taken them — through households you already know. Frank, Ezra’s son, farming in Kansas on land his father broke. Isaiah, twenty years off the Mississippi Delta, raising a family on the South Side of Chicago. Rosa, on the Lower East Side, and her daughter Concetta — who, we will discover, has been telling her employers for some years now that her name is Connie. Kenji, in California, whose next fifteen years will be a study in how much can be taken from a man by entirely legal means. Henry, in Boston, older now, and Charles, whom you have just met. We will meet them all properly in the next part of this lecture, in the summer of 1914, when the world they are living in still looks permanent.

One warning before we begin, and it is the lecture’s only sermon. The numbers you are about to hear run steeply upward, and it would be easy to hear them as a simple story of ascent. Keep Charles at the rail in your mind’s eye while you listen. Every statistic in this lecture was lived by people who also lived through the things the statistics leave out — a war, a plague, a Red Scare, a farm depression — and one of the households you are about to revisit has an empty chair in it. The prosperity is real. So is everything it grew up alongside.

[ PAUSE FOR QUESTIONS ]

Part Two: The First Measurement — Summer 1914

[ Lecturer’s voice ]

The United States in the summer of 1914 holds just under one hundred million people. It is the largest economy on earth and has been for roughly two decades, a fact that Americans know in the abstract and Europeans prefer to treat as a statistical curiosity, like the tonnage of the wheat crop. The census of 1910 counted fifty-four percent of Americans living in rural territory, and although the cities are gaining fast, the country a majority of Americans inhabit is still one of farms, crossroads villages, and county-seat towns. It is worth fixing that in mind at the outset, because the single most consequential line that will move between our two measurements is this one: at the first measurement, rural America is the majority; at the second, it is a shrinking minority, and it knows it, and a good deal of the politics of the intervening years is the sound of it finding out.

On the twenty-eighth of June, an archduke is shot in a Bosnian town few Americans can pronounce. The American newspapers give the story respectful space on the foreign page and move on. Through that whole incomparable summer — and the weather of 1914 was, by every account, magnificent on both sides of the Atlantic — almost no one in the United States understands that the old world has about five weeks to live. We have the advantage of them. Let us use it to walk through their country while it is still intact, household by household, taking measurements as we go.

Boston: The Top of the Curve

Begin where the future has already arrived. Henry is sixty-one this summer, still at the firm, still walking to it. The house on Marlborough Street was piped for gas before he bought it and wired for electricity in 1902, and the two systems coexist in the walls the way the old century and the new coexist in Henry: the fixtures in the front rooms take bulbs, the ones in the back hall still take a match. The house has a telephone — it has had one for twenty years — a furnace in the cellar, a bathroom on each of two floors with hot water rising to meet it, and, as of last spring, over Henry’s dwindling resistance, an automobile in a rented garage two streets away. Charles, twenty years old, home from Harvard for the summer, drives it. Henry rides in it, sits very straight, and refers to it as Charles’s machine.

I put Henry first for a reason of method. Nearly everything in Henry’s house will be in nearly everyone’s house by the middle of the century, and Americans will come to regard the whole inventory — light at a switch, heat from a register, water from a tap, a voice from a wire — as the ordinary furniture of life. In 1914 the full inventory belongs to perhaps one American household in ten, concentrated in the cities and within the cities concentrated at the top. Roughly one home in five has electric service of any kind. Perhaps a quarter have full plumbing — running water, a flush toilet, a fixed bath. The statistics of this lecture are, most of them, measurements of a single process: the contents of Henry’s house moving down the income scale and out across the map. In 1914 the process has barely begun. By 1929 it will be the largest economic fact in America.

Charles, for the record of our second measurement, is about to enter his junior year. He rows, he reads history without urgency, and he holds the standard convictions of his age and station, which is to say his father’s convictions, worn more casually. In August, when the European news turns unbelievable, he will follow it the way one follows a distant fire — with excitement, and with no premonition whatever that it is spreading toward him.

The Lower East Side: The Crowded Doorstep

Four blocks of Manhattan tenement hold more people this summer than several counties of Kansas. Rosa is thirty-nine. She has been in America sixteen years, married fifteen, widowed four — her husband was one of the men the industrial economy used up quietly, a construction fall, no compensation, a collection taken at the parish. She finishes garments, keeps three boarders, and rules two American children with a rosary and a wooden spoon.

Her flat measures three rooms in a building put up before the reform law of 1901, which means the toilet is in the hall and serves the floor, the bath is a galvanized tub filled by the kettle, and the light is gas, paid for at a quarter-fed meter that has a way of dying at supper. No telephone — the telephone lives at the druggist’s on the corner, who takes messages for the block at a nickel each and thereby knows everything about everyone. And yet Rosa’s street is, by the standards of the villages that filled it, drenched in modernity: the elevated railroad two blocks west, the nickelodeon around the corner where Concetta, eleven years old, spends every nickel she can extract from her brother, electric light blazing in the shop windows below the dark flats above. The city has the future in its streets and the past in its bedrooms.

Salvatore is twenty-one, and I want you to meet him properly. He is the family’s American project made flesh: born three months after Rosa landed, finished the eighth grade — a distinction in the building — and works as a cutter uptown, the aristocracy of the garment trades. He is quick, vain about his clothes, sends his mother’s remittance to Calabria every month under mild protest, and is teaching Concetta, over Rosa’s objections, the steps of dances Rosa considers evidence of American moral collapse. He has his eye on a girl from Mulberry Street and a foreman’s job, in that order or possibly the reverse. Keep him in mind. This series will ask you to keep a number of things in mind, and Salvatore is the first and most important of them.

Rosa’s street also gives us the summer’s most astonishing national statistic. In the fiscal year that ended this June, one million two hundred eighteen thousand immigrants entered the United States — the second-highest total ever recorded, within sight of the record. Ellis Island is processing humanity on an industrial scale, five thousand souls on a busy day. Nothing in the visible world of the summer of 1914 suggests the flow will ever stop; it has run, with dips for hard times, for thirty years, and it is the sea Rosa’s whole neighborhood swims in — the boarders, the remittances, the ticket agents, the men who work a season and sail home. Hold the number: 1.2 million. It is about to fall off a cliff, and after the war, when it tries to climb back, a door will close that no one on Rosa’s street believes could ever close. That story gets its own lecture. For today it is enough that at the first measurement the door stands wide open, and no living American remembers it otherwise.

Kansas: The Golden Age, While It Lasts

Frank is thirty-six, and the farm is his now in everything except the deed — Ezra, seventy-four, has moved to a cottage in town, from which he issues opinions. Frank works four hundred and eighty acres: his father’s original quarter-sections and the adjoining land bought in the fat years, some of it with borrowed money.

Measure the farmhouse. No electricity — and none coming; the utility companies have calculated the cost of stringing wire to scattered farmsteads and declined, a refusal that will stand for another twenty years and become one of the sharpest lines dividing rural from urban life. No plumbing; the windmill pumps to a kitchen cistern, which is counted a luxury, and the privy stands where privies stand. Kerosene lamps, a coal-and-cob range that makes the kitchen murderous in August, and washday performed by Frank’s wife with a boiler, a washboard, and the better part of a day.

And yet — here is the counterintuitive measurement, and it is one of my favorites in the whole lecture — the farmhouse has a telephone, and Henry’s cook in Boston does not. Kansas farm country is better supplied with telephones than most eastern cities, through an institution no economics textbook predicted: the farmer-owned mutual, a few dozen families stringing wire along the fence posts, a switchboard in a neighbor’s parlor, dues of a dollar or two a year. The party line carries weather, prices, gossip, and emergencies, and everyone listens to everyone, which is understood. Where the market said no, the farmers built it themselves — remember that pattern; it is the same instinct that built the cooperatives and the Alliance a generation ago, and it will surface again in the farm politics of the twenties.

There is also, since March, a Model T in the barn, bought for four hundred and ninety dollars out of the proceeds of the 1913 wheat. Ford’s assembly line at Highland Park — running barely a year, paying its famous five dollars a day since January — has driven the price of the car down while the price of wheat holds firm, an arithmetic Frank checked twice before signing. The car has already collapsed distance in a way the statistics can barely register: town is twenty minutes instead of two hours, and Frank’s wife, who used to see other women at church and threshing, sees them when she likes. What the car rides on is another matter. Of the two and a half million miles of rural road in the United States, the overwhelming majority are graded dirt — gumbo in the rains, washboard in drought — and a paved farm-to-market road is a thing Frank has heard of, in the way he has heard of the opera. The automobile has arrived in rural America twenty years ahead of the road, and the gap between them is about to become a permanent item of national politics.

Set the scene economically, because the timing is exquisite and cruel. These years — historians will call them the golden age of American agriculture, and farm economists will enshrine 1909 to 1914 as the “parity” years, the benchmark of fairness for half a century of farm legislation — are the best that Frank’s way of life will ever see. Crop prices and land values have climbed together for a decade; the mortgage is manageable; the Populist fury of Ezra’s prime has mellowed into something close to contentment. Frank, in the summer of 1914, is a man on a rising floor. Within weeks, the war will begin bidding for his wheat, and the floor will rise faster still — to heights that will teach a whole region to believe the rise is permanent, and to borrow accordingly.

Chicago: The Advance Guard

Isaiah is fifty this year, and it is nineteen years since he walked away from a Delta commissary debt that arithmetic could never retire. He came north early, ahead of the great wave — in 1914 the South Side’s Black community numbers perhaps fifty-five thousand, a city within a city, with its own churches, its own bank, its own newspaper — and he has spent a dozen years in the packinghouses, presently on the killing floor at Armour, steady work at seventeen and a half cents an hour. His son works beside him. His wife takes in washing from Hyde Park. The flat, in the narrow strip of blocks where Black Chicago is permitted to rent, has electric light in the front room, a toilet shared with one family rather than a floor, and costs several dollars a month more than an identical flat rents for six blocks east — the premium charged for confinement, assessed on every Black household in the city with perfect regularity, and worth a measurement of its own.

The national numbers behind Isaiah at the first measurement: ninety percent of Black America still lives in the South, most of it in the rural South, under the arrangements the first series described. Life expectancy for Black Americans stands somewhere near forty years against roughly fifty-four for whites — the gap has narrowed a little since 1900, and remains an abyss. The northward movement is a rivulet: a few thousand a year into Chicago, the price of a ticket on the Illinois Central being, for most families, the price of everything they have. Isaiah reads the Defender — printed a mile from his flat, already sliding south in the porters’ grips — and the Defender has begun saying plainly that the North, whatever its cruelties, does not lynch by the calendar. At the first measurement, the paper’s argument runs ahead of the people’s movement. The war is about to close Europe, starve the packinghouses and mills of immigrant labor, and turn the rivulet into the largest internal migration in the country’s history. Isaiah, who came early and knows the ground, is about to become what every migration requires and rarely honors: the man at the depot who knows where a room can be had.

The Santa Clara Valley: Measurement by Subtraction

Kenji is forty-one, and his measurement must be taken differently, because the most important quantities in his life are the ones being subtracted. He farms twenty acres of berries and vegetables near San Jose — farms them with a skill his neighbors freely acknowledge in the same breath with which they petition against his presence. The land is leased. It was always going to be leased: California’s Alien Land Law, passed in Sacramento just one year ago over the formal protest of the government of Japan, forbids the purchase of agricultural land by “aliens ineligible to citizenship” — a phrase of exquisite legal draftsmanship that names no nationality and aims at exactly one. The same law caps his leases at three years, so Kenji improves soil on a horizon of thirty-six months, and does it anyway, because the alternative is to stop, and stopping is a language he has never learned.

The household measures modestly and carefully: a frame cottage, kerosene light, water from a well, a Ford truck older than Frank’s car and maintained better, no telephone. The measurements that matter are these. Savings at a Japanese-American bank in San Francisco, accumulating toward a purchase the law forbids him to make. A wife, Haru, who came as a photograph in 1907 and turned out to be, by Kenji’s own account, considerably more formidable than advertised. And three children born on American soil — which means three United States citizens, a status the Constitution confers on them at birth and every court agrees no statute can remove. The eldest is ten. Land cannot be held by Kenji; land can be held in trust for an American citizen who is presently in the fourth grade. The family’s entire strategy for the next fifteen years is already visible in that sentence, and so is the next move of the California legislature, which can read the sentence too. At the first measurement, the contest between them is roughly even. It will stop being even, and the story of how — the courts, the statutes of 1920 and 1923, and the federal act of 1924 that finishes the matter — belongs to a later lecture in this series, where I promise you it will be handled at length.

The Summer’s Inventory

Stand back now and take the national photograph whole, as of this incomparable summer.

Ninety-nine million people; a rural majority, for the last time in the country’s history. One motor vehicle for every sixty of them — about 1.7 million registrations, though Highland Park is stamping out the future at a rate that obsoletes each year’s count by the next. A telephone in perhaps one home in four, distributed in the strange leopard-spots we saw from Kansas. Electric light in one home in five; full plumbing in about one in four; the washing machine, the refrigerator, and the vacuum cleaner present in the statistics only as expensive curiosities at the top of the urban market. Life expectancy at birth in the middle fifties for white Americans, around forty for Black Americans. Immigration at 1.2 million a year through a wide-open door.

And two absences to record, because our second measurement will need them. In the summer of 1914 there is no such thing as broadcasting — the word exists only as farm jargon for a way of sowing seed. The wireless is a maritime and military tool; the idea that a human voice might be thrown into a hundred thousand parlors at once belongs to the future, and nobody is waiting for it, because nobody has imagined it. And aviation: in January of this year a pilot named Tony Jannus began flying paying passengers across Tampa Bay, one at a time, five dollars a head, twenty-three minutes over the water — the first scheduled airline in the history of the world. It lasted four months and carried twelve hundred passengers, and the newspapers covered it as a delightful stunt, which is what it was. That is the entire American airline industry at the first measurement: one flying boat, out of business by spring.

That is the country in the last weeks of the old world — measured, inventoried, and innocent of what the foreign page is about to become. In the first days of August the European exchanges close, then the New York Stock Exchange itself, which will stay shut for four months; the wheat pits go wild; the transatlantic liners arrive crammed with Americans fleeing the continent and depart carrying the first of the war orders. The fifteen years between our two photographs have begun.

[ PAUSE FOR QUESTIONS ]

Part Three: The Fifteen Years Between the Photographs

[ Lecturer’s voice ]

A lecture built on two snapshots owes you at least a sketch of the years in which the second image developed out of the first. The full history of those years occupies the rest of this series. Briefly, here is what happens between 1914 and 1929.

Immigration cut by four-fifths and recomposed by statute: the war closes the Atlantic in a single season, the postwar surge panics Congress, and the quota acts of 1921 and 1924 end the open door that had defined the country for a century — permanently. The Black population in motion on a scale never before seen: the labor agents go south when the European supply fails, half a million people move north during the war decade, nearly a million more in the twenties, and Black America begins its transformation into an urban people. Farm prosperity broken in 1920, when the wartime price guarantees lapse and European agriculture revives, and never mended — industry takes the same blow and recovers in eighteen months; agriculture stays down for the rest of the decade. Then, from 1922, an industrial boom without precedent: manufacturing output nearly doubles, productivity rises faster than in any decade on record, and the growth flows into the automobile and the household machine, the objects our second photograph will inventory. Federal capacity expanded enormously by nineteen months of war — four million men in uniform, railroads run from Washington, prices administered, dissent policed — and then dismantled with a speed that resembled evacuation, though never completely. And a mortality catastrophe — the Spanish influenza — administered in a single year and then folded into a silence that still puzzles historians: six hundred seventy-five thousand American dead, concentrated against all precedent among the young and strong, a knife-cut visible in every table the demographers keep. Life expectancy at birth fell by more than a decade in 1918 alone, then snapped back and resumed its climb. Nearly every American family could name someone. You are about to find that this series of lectures can too.

Beneath the convulsions, continuously, the quieter series ground forward: power lines extending street by street, roads paved mile by mile, installment contracts signed kitchen table by kitchen table.

In the summer of 1929 the second photograph is ready. Let us go back to the households and develop it.

[ PAUSE FOR QUESTIONS ]

Part Four: The Second Measurement — Summer 1929

[ Lecturer’s voice ]

Fifteen summers later. The United States now holds just under one hundred twenty-two million people — twenty-three million more than at the first measurement, the increase alone larger than the whole population of most countries in Europe. The census of 1920 recorded, for the first time in the nation’s history, an urban majority, and the movement has continued all decade: the city is now where America lives, and the countryside knows it. Let us return to the households in the same order and take the second photograph.

Boston: The Curve Catches Up

Henry is seventy-six. He goes to the office three mornings a week, mostly to be consulted and slightly in the way, and his house on Marlborough Street measures almost exactly as it measured in 1914 — which is the finding. The front hall was converted from gas years ago; an electric refrigerator hums where the icebox stood; otherwise the inventory stands. What changed is everyone else. In 1914, Henry’s house was a preview available to one household in ten. In 1929, most of urban America has caught up to it, and the catching-up — the wiring of sixty percent of the nation’s homes, the plumbing, the appliances riding in on the wires — is the largest single economic event of the intervening years. The top of the curve barely moved. The curve moved.

One object in the house is new, and it is Henry’s favorite: a radio in a walnut cabinet, on which he follows the Symphony broadcasts, the election returns, and — with an enthusiasm his son finds touching and slightly alarming — the market reports. Henry at seventy-six remains what he was at sixty-one: a man convinced the world improves. The twenties have been generous to that conviction. Peace, prosperity, the Kellogg pact renouncing war signed by every civilized nation just last summer — Henry reads the news of 1929 as a vindication arriving on schedule.

Charles is thirty-five, married, two children, a partner at a downtown firm where he manages trusts and estates. He is, by every exterior measure, his father continued. The interior measure is the one this series will keep taking. Charles handles other people’s money with a caution that has begun to cost the firm business, because clients in 1929 do not want caution; they want the new era, and Charles does not believe in the new era. He cannot fully say why. He believes — he has said this to his wife, once, late, after a dinner at which a guest explained that common stocks had permanently changed their nature — that he has already once watched a world convince itself that the mechanism had been perfected. His father hears the same dinner talk and hears progress. Charles hears 1913. Neither of them says any of this at the table. The radio plays; the two men listen to the same broadcast and hear different centuries.

The Lower East Side: The Empty Chair

Rosa is fifty-four. The flat is the same three rooms, and the second photograph must begin with who is missing from it.

Salvatore enlisted in the spring of 1918 — over his mother’s objection, wearing, witnesses report, an expression of unbearable satisfaction. He was sent to Camp Devens, outside Boston, to train with the artillery. In the third week of September the influenza reached the camp, and it moved through those barracks with a violence that the army’s own physicians, men who had seen every disease the recruiting stations could deliver, described in their reports with something close to disbelief — sixty-three deaths on the worst single day at Devens alone. Salvatore went into the base hospital on the first of October, among the strongest men in his company, and died on the fourth. He was twenty-five. He had never left Massachusetts; the girl from Mulberry Street kept his letters; the foreman’s job went to another man. The telegram reached Rosa on a Friday. The neighborhood, which buried eleven of its own that month while the city ran short of coffins and gravediggers, understood exactly what to do, and did it, and then — this is the part the historians still circle — almost never spoke of it again. There is a photograph of Salvatore in uniform on the wall above Rosa’s bed, with a palm frond behind the frame, renewed every year.

Around the empty chair, the household has been remade, and its new center is Concetta — who is twenty-six now, and who has been informing employers, landlords, and young men for some six years that her name is Connie. Connie works a comptometer — a key-driven adding machine, the fastest calculating device in any office of the day, operated almost everywhere by young women trained in schools the manufacturer runs — in the office of an insurance company on Fourth Avenue: fifty-one weeks a year, twenty-two dollars a week, her own money in her own envelope, a fact whose novelty is worth a full stop. In 1914 her mother’s world offered a girl the needle trades, the shop counter, or domestic service, all understood as an interval before marriage. The war pulled women into the offices; the twenties kept them there; the office girl — hair bobbed, skirt at the knee, lunch at the automat — is by 1929 so standard a figure that it takes an act of historical imagination to recall how new she is. Connie has a payment book for the radio, a savings account her mother regards as the family’s, an opinion of Al Smith bordering on veneration, and, on Saturday nights, engagements about which Rosa has elected, strategically, to stop asking. The rosary comes out all the same. The two of them conduct, across the kitchen table, in two languages, the negotiation between two Americas that this series will visit again in the lectures on Prohibition and on the arts — Rosa yielding ground grain by grain, and holding one line absolutely: Sunday dinner, attendance compulsory, at which the chair is never filled and never moved.

Measure the building, briefly. The landlord wired it in 1924; a bare bulb hangs in each room where the gas mantles hissed, and Rosa has never stopped regarding the meterless light as faintly miraculous. The toilet remains in the hall. The block itself is quieter than in 1914 — the door through which the neighborhood renewed itself for forty years closed in 1924, and the young families now leave for Brooklyn and the Bronx along the new subway lines, so that the street is aging in place. Connie wants to move them to the Grand Concourse, where the buildings have elevators and private baths. Rosa’s answer is that the parish is here. The parish, and the photograph with the palm frond; she does not say the second part, and Connie has stopped arguing, because she understands it.

Kansas: The Second Photograph Nobody Framed

Frank is fifty-one, and his measurement must be read against the light of that “rising floor” of 1914, because the floor gave way in the summer of 1920 and has stayed low for nine years.

The numbers first, from the inside. Wheat that brought better than two dollars a bushel under the wartime guarantee brought a dollar and a fraction through most of the twenties, and some years less; the land that neighbors bought at three hundred wartime dollars an acre trades — when it trades — at half that. The money Frank borrowed in 1919, when every voice in the county including the government’s said the world’s hunger was permanent, was borrowed the way farm money was always borrowed: on a five-year note, principal due at maturity, renewed at the bank in town as a matter of course, as such notes had been renewed for forty years. It was renewed in 1924. The bank in town failed in 1926 — one of nearly six thousand banks, overwhelmingly small and rural, that failed in the United States between 1921 and 1929, in what the prosperous decade managed to treat as a series of local misfortunes. Frank’s note was sold with the bank’s other paper to a bank two counties east, owned by men who have never seen his land and know him only as a folder. The note falls due in March of 1930. The old bank would have renewed it; the old bank knew that Frank’s word was collateral. What the new bank will do, no one can tell him, and the question of where a man raises eleven thousand dollars against land worth half what it was appraised at is one Frank works on at night, at the kitchen table, after the radio goes off. He has no answer yet.

Of the six farms touching his, two have been foreclosed and one abandoned; the school district has consolidated; the church shares a minister with two towns. And Ezra is gone — he died in his sleep in the cottage in town in the winter of 1924, eighty-four years old, having outlived his wife, his political movement, and his own predictions, and was buried in a February funeral that the whole county attended because he had been there before the county was. His last recorded opinion, delivered to Frank regarding the note, was that a man who borrows against good times has agreed to hand the bad times a weapon.

Yet the photograph is stranger than plain decline, and here is where the measurement earns its place in this lecture. The farmhouse now contains a radio — battery-powered, since the power lines have never come and still show no sign of coming; nine farms in ten in America remain without electric service in 1929, the sharpest single line in the national inventory. Beside the barn stand a truck and a tractor, bought used; the tractor and its kind have released millions of acres from growing feed for horses, which is one of the several reasons the wheat price will not rise, so that Frank’s own machinery is a small working model of his predicament. The road past the section line was graveled in 1927 with state and federal money and will be paved, the county says, within five years. His eldest boy finished the consolidated high school — the first in the family — and left for Wichita, where he works for an aircraft company and sends home cheerful letters that Frank reads twice and does not answer for a week. The farm population of the United States has been falling all decade, in absolute numbers, for the first time in the nation’s history. The second photograph of rural America shows a smaller, older, more mechanized, better-connected, and poorer countryside, listening on the radio to the prosperity of the cities — and Lecture 2.6 will show what that combination did to its politics.

Chicago: The City Within the City, Enlarged

Isaiah is sixty-five. He left the killing floor in 1923 — his knees, and an opinion of the packers that hardened permanently in events we will reach in a moment — and he now owns, outright, a three-flat on a street south of Forty-Seventh: purchased in 1920, paid off in nine years by rents, his wife’s laundry money, and a frugality his tenants regard as biblical. He is precisely what the migration made possible and precisely what it cost. The building was bought at the confinement premium we measured in 1914, now grown teeth: the South Side’s Black population passed two hundred thirty thousand this decade — quadruple the 1914 figure — while the boundaries of the district in which that population is permitted to live have barely moved, held in place since 1919 by a legal instrument called the restrictive covenant, whose career through the courts belongs to a later lecture. Quadruple the people, the same square miles: Isaiah’s rents are high because his tenants have nowhere else to be, and he knows the arithmetic from both sides, having paid it for twenty years before collecting it.

The intervening years touched this household directly, and the second photograph records it plainly. In the last week of July 1919, the week Chicago burned along its racial seam — thirty-eight dead, more than five hundred injured, the worst of a national summer of such violence — Isaiah stood armed in the doorway of the building he had owned for not yet a month, through three nights, and no one on his block was harmed. His son carried a union card through the packinghouse organizing drive that followed the war and was blacklisted when the strike broke in 1922; he works now at the Pullman shops and carries a different card, in a porters’ brotherhood organized four years ago by a man named Randolph, of whom this series will have much to say. The full labor story is Lecture 2.6’s; the Red Summer belongs to 2.4’s account of a country looking for enemies. Here they are entries in a household ledger.

Measure the rest of the ledger. Electric light in every room, a telephone, a Victrola, and a radio around which the block’s children assemble; a bathroom private to each flat, which Isaiah’s wife counts the true dividend of ownership. Three grandchildren, Chicago-born, who have never seen Mississippi and cannot be made to believe the half of it. Life expectancy for Black Americans has climbed to around forty-eight years — rising, and still eleven or twelve behind the white figure. The Defender that Isaiah reads on his own front steps now sells more copies in the South than in Chicago; the depot where he once stood as the man who knew where a room could be had now receives the arrivals of a migration that no longer needs him, having built churches, banks, newspapers, a political organization that elected a Black congressman from this district last November — the first from any northern state in the nation’s history — and a music, audible three blocks north on any warm night, that Lecture 2.9 will walk inside.

The Santa Clara Valley: What the Law Accomplished

Kenji is fifty-six, and the second photograph must be read the way the first was: by subtraction, except that the subtractions are now complete.

Every path he was navigating in 1914 has been closed by name. The 1920 initiative — passed by the voters of California three to one — abolished the leasing of farmland to aliens ineligible for citizenship and reached even the guardianship arrangements by which such a man might hold land for his citizen children; the legislature tightened it again in 1923. In 1922 the Supreme Court of the United States decided the case of Takao Ozawa — a Berkeley-educated clerk who had argued, in a brief he wrote himself, that twenty-eight years of American life, an American church, an English-speaking household, and children in American schools had made him white within the meaning of the naturalization statute — and the Court answered, unanimously and with expressions of personal respect, that he was not, and that the door to citizenship was closed to him and to Kenji forever. And in 1924 the immigration act added a clause excluding from entry all persons ineligible for citizenship — a provision aimed at Japan alone, gratuitous even by the reckoning of the State Department, which fought it; the government of Japan called the day of its enactment a day of national humiliation. The picture-bride passages had already ended. After 1924, the community Kenji belongs to can grow in exactly one way: by birth.

And so the household in the second photograph has rearranged itself around its youngest members, precisely as the strategy visible in 1914 foretold. The eldest son is twenty-five, a citizen, a graduate of the state college at San Jose — and the holder of record title to thirty acres of orchard and berry ground, purchased in 1927 with the savings of two decades. His father works the land daily and owns, in law, no part of it. Haru keeps the books; a daughter teaches school; the youngest boy is the finest shortstop in a Japanese-American baseball league whose box scores the local paper prints without comment, directly beneath its editorials endorsing exclusion. The measurement of this household is the shape of the family itself: a fortress built of birth certificates. It is the only material the law left them, and they have built with it. What the arrangement cannot survive — though no one in the summer of 1929 has any means of knowing this — is a government that decides to disregard the certificates themselves; and that story lies beyond the borders of this series, in a valley thirteen years away.

The Second Inventory

Now the national photograph, summer 1929, set beside the first.

One hundred twenty-two million people; an urban majority. Twenty-six and a half million motor vehicles — one for every four and a half Americans, against one for every sixty at the first measurement; the automobile industry, in 1914 a large novelty, now stands first in the nation in value of product, and first also in what it consumes of steel, glass, rubber, and installment credit. Two-thirds of homes wired for electricity — nearly nine in ten in the cities, one in ten on the farms. Full plumbing in roughly half. A telephone in four homes in ten. The radio, which at the first measurement did not exist as a thing a family could own, now sits in ten million homes, and the two networks that program it constitute the first machinery in human history by which one voice speaks to an entire continent in the same instant — the lectures on Prohibition and on the arts will both have reason to return to that machine. The refrigerator and the washing machine are climbing the same curve the automobile climbed fifteen years earlier. Life expectancy at birth: about fifty-nine years for white Americans, about forty-eight for Black Americans — each figure some five years above the first measurement, the gap narrowed and enormous. Immigration: under three hundred thousand a year, composed by statute. And in aviation, where the first inventory recorded one flying boat over Tampa Bay, out of business by spring: the airlines of the United States this year will carry roughly one hundred seventy thousand paying passengers over scheduled routes, the mail flies nightly on a lighted airway from coast to coast, and the young man who flew the Atlantic alone two summers ago is the most famous human being alive. Frank’s son in Wichita builds airplanes for a living. The stunt became an industry inside the span between two photographs.

That is the second measurement. Set the two side by side and the finding of this lecture states itself: in fifteen years — five of them consumed by the greatest catastrophe in the history of civilization — the United States became the first society in which the ordinary household began to command energy, machinery, information, and mobility that at the first measurement belonged to one home in ten. The transformation was violently uneven. It skipped the farmhouse’s wiring while taking the farmer’s price; it admitted Isaiah to the wired city while drawing a line around his address; it delivered Kenji’s family the automobile and the radio while stripping them, item by item, of the law’s ordinary protections; it gave Rosa electric light and took Salvatore. The averages rose, and every household in this lecture would tell you the averages are real, and every household would tell you they are insufficient.

Closing: The Photograph in Summer Light

End where the lecture began, with Charles — who stood at a ship’s rail ten years ago asking what country he was coming home to, and who now has his answer, and does not trust it.

It is a Sunday evening in late June, 1929, on the porch of a rented summer house on the North Shore. Henry, up from town for the weekend, has the radio through the window — the Symphony, then the news, then a market commentator with a voice like warm oil. The children are on the lawn. The commentator is explaining that the economy of the United States has entered upon a plateau of permanent prosperity, that the old cycle of boom and collapse has been mastered by science, organization, and the Federal Reserve, and that those who doubt it are the same breed of men who doubted the automobile. Henry, seventy-six, nods along in genuine contentment: he has lived to see the world he always said was coming. Charles watches his children on the grass and holds his peace, as he has held it for ten years, and the two of them sit in the same summer light that fell on the Place de la Concorde, on the wheat that summer of the guarantee, on the roofs of Camp Devens — the light of every photograph taken just before.

There we leave them, and the country: measured twice, richer beyond any prior imagining, unevenly and in some places bitterly, with its door closed, its farms sinking, its cities blazing with light, and its radio assuring it, in the summer of 1929, that the mechanism has at last been perfected.

What the mechanism did next is a later lecture. The next one takes us back — to 1914, to the foreign page, and to how the war that made all of this got an unwilling America into it after all.

End of Lecture 2.1 — Questions Welcome

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it's a hard thing selling to the giant enterprises. Like there's basically there's both like headwinds and tailwinds into approaching them. So I think there's a like right now obviously the technology is moving extremely fast. Humans are moving reasonably fast right there is a huge amount of social pressure and people want to keep their jobs and there's a lot of that and then enterprises move slowly and so you're dealing with all three speeds at the same time.

Cannon’s idea was to use AI to do customer research. That is, if a business is offering a product or service, it wants to know what customers are happy about and unhappy about. Surveys are crude and annoying. The most effective way to do research is to actually interview customers, but that is very labor intensive. AI solves the labor intensity problem.

But selling anything to big enterprises is hard. You are asked to meet with a dozen people in the organization, spending hours and hours trying to explain and persuade. Half the people you meet with are skeptics who are going to argue that your service won’t work. The other half are going to argue internally that the service is a good idea, but the enterprise should build it itself instead of buying it from you.

Internal politics always favors building rather than buying from you, because building enables some middle managers to expand their empires, while buying threatens someone with losing an empire. And even if the enterprise decides to buy rather than build, it will still think that buying from a small startup is too risky. I remember at Freddie Mac when we wanted to build a system to use credit scores automatically in our loan underwriting process, there was a small startup that already was doing that. After endless meetings with the small startup, Freddie Mac gave the contract to a big IT consulting firm instead, even though that firm had to figure out from scratch how to do the work.

Later in the interview, Cannon says,

we started we were it was entirely educational, right? Every call was like what is this thing, right? And I was educating what’s possible.

There were there were calls I joined where they did not know what LLMs were, right?

…the beginning was tough because it we were in category creation mode, right? Where we have to will this thing into existence.

It was like this for me in 1994, when I started my web site, which was for home buyers, and I wanted big companies to be sponsors. There were no banner ads or popups on the Web in those days—and our site never adopted them. My idea of sponsorship was that, in the context of content, we would provide links to contact forms for service providers.

In 1994, I was so early that only universities, some government agencies, and tech companies knew that the Internet existed. The Web was all but inaccessible to ordinary households, and I even had another Internet entrepreneur advise me to not bother with the Web for that reason.

I was trying to sell to non-tech firms that had zero experience with the Web. The first sales call I made was to a large mortgage lender. They wrote up a contract that began something like, “whereas there is a service, called the Internet, owned by Arnold Kling…” That wording was very flattering, but I could not let it stand.

For the first year and a half, I was dealing with prospective customers that did not yet know what the Web was. And yet it occurred to me, using exponential growth estimates, that within a year or two, they would all have web sites of their own. That was a strange realization.

I eventually acquired a business partner who noticed that a lot of the value we were providing to customers was educating them about the Web. He had the insight that, as he put it, “We should charge tuition!” Once he started doing that, we became profitable.

Cannon goes on,

I think in the last 12 to 18 months the market tipped where it went from this like you know a default skepticism and default kind of need of education to oh this is the the killer application for insights and research with AI period.

I experienced a similar switch, from ignorance about the Internet being the biggest obstacle to sales in 1995 to companies being so desperate to catch up on the Web in 1997 that my partner could charge almost whatever he wanted for “tuition.”

Between 1994 and 2000, the capabilities of the Web grew enormously. Almost none of the user interfaces that we take for granted today were even possible in 1994. I suspect that there are business opportunities today in building interfaces that expose the potential of AI to more people. If AI “agents,” for example, are just an esoteric tool for advanced software engineers, that is as adverse for diffusion of AI as the lack of a TCP-IP stack and the limits of 14.4 modems were for the Web in 1994.

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Joe Lonsdale

Ep 159: Aaron Cannon Is Building the Leading AI Customer Research Platform; It's About to Upend a $140B Industry

Aaron Cannon is applying AI to solve one of the oldest and most important challenges in business: understanding exactly what customers want and need. Traditional consumer surveys often provide low-quality data, while one-on-one interviews are cost-prohibitive and not scalable. But AI unlocks profound new possibilities. How is Aaron using AI to conduct d…

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23 days ago · 3 likes · Joe Lonsdale