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Sir George Bolton of Bank of London discusses British economic depression

BROADCAST: Sep. 23, 1970 | DURATION: 00:29:56


Sir George Bolton discusses how the 1929 American stock market crash affected international banking and investment and how economy and culture relate to each other.


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Man 1 Thirty-four take one.

Man 2 OK, Studs.

Studs Terkel Seated with Sir George Bolton in his offices, the Bank of London South America, of which he is now honorary President. Sir George has been a member of the Court of the Bank of England for a number of years and immediately the thought comes to mind, Sir George--we think of the institutions with which you are connected: stability, solidity, status, stature and, yet, we think of those traumatic days of the early '30s when, as you put it, all hell broke loose. The Depression. Crack-up. What happened?

Sir George Bolton It's very difficult to put it in few words. You've got to remember that as far as the United Kingdom is concerned, the Depression had extended, really, from 1921 onwards. We never really recovered from the slaughter of the young and the natural leaders of society on the Somme and Passchendaele and, so, when I came to the city about the end of the war, it was filled with grandfathers and grandchildren. And those younger men who normally would have taken over the reins and accepted responsibility were either dead or disabled or really incapable of any activity of any kind. There was an atmosphere which was very--one could feel it. One could see that although we had won the war, we really had had a Pyrrhic victory, and we'd lost three or four generations.

Studs Terkel The victor and the loser then. You saw the seeds of the Depression in that war, World War One?

Sir George Bolton Exactly. And then through the, through the '20s we had the return to the gold standard, then we had the general strike followed by a six-months coal strike which had a devastating effect on our economy. And during that period, the country never really showed any sign of getting off the ground. In the meantime, of course, America became inward-looking with this tremendous boom that would develop post-war which ended, of course, with the collapse of the New York Stock Market in October 1929. And from that time onwards, the seeds of the Depression were then beginning to sprout.

Studs Terkel So with the crash in America, the 1929 crash, that obviously affected the rest of the world, too.

Sir George Bolton It put an end to any form of international investment. In fact, it put an end to national investment as well, particularly in the United States. And whereas today we get excited when you see unemployment of three, four and five percent, in certain the United Kingdom we had unemployment to the order of 20 to 25 percent. Hunger marches from the north down to London. And in America, as you know, unemployment reached quite colossal proportions.

Studs Terkel Sixteen million at one time. So we're talking now about the 30s, aren't we?

Sir George Bolton Then you move into the '30s--

Man 1 Can you hold on a second? Keep running.

Man 2 Thirty-five take one.

Studs Terkel We were talking, Sir George, about the Depression in America and in the United Kingdom.

Sir George Bolton Well, with the collapse of the American stock market, with a breakdown completely of the international capital structure and the end of all investment, we had the collapse of the German banking system. Then we had the example of Britain going off the gold standard and bringing about a kind of anarchy in the world exchanges. The French, Germans, the Swiss, the Belgians, and the Dutch formed what we used to call the Gold Bloc, and doing their best to maintain their original parity because they were afraid of any movement in their exchanges. But when America went off gold in 1933, following the collapse of the London economic conference which, by the way, I must tell you was brought about by Mr. Roosevelt, not by anyone else.

Studs Terkel Collapse,

Sir George Bolton Yes. He refused to allow America to enter into any arrangement to stabilize the currencies, and that was the purpose of the conference. And that from that time onwards we had a situation where, as you remember, 14,000 American banks had closed down, the mountain states had no money at all, and we struggled on in Europe as best we could, but with a declining social structure which followed the collapse of the financial mechanism.

Studs Terkel Sir George, on that subject, I know that bankers in America lost, to a great extent, [pretty much their?] respectability in communities and cities throughout in the '30s. Did this phenomenon happen in England, too?

Sir George Bolton I think that there was a great deal of blame attached, as it were, to the orthodox banking community, simply because they not only resisted change, but they regarded anything different from the world they had inherited before 1914 as a blasphemy. But you've got to remember there was no body of young middle-aged men to would, take care of some of the changes which are quite inevitable. And, so, the changes came as a result of circumstances.

Studs Terkel As a result of war, too.

Sir George Bolton And then the war came in consequence.

Studs Terkel This leads to the question of Germany, doesn't it?

Sir George Bolton Well, by 1933 you had 6,000,000 German unemployed. The middle classes, who are all said and done are the body and soul of an industrialized community. In other words, they are the management class. It doesn't matter whether they're Liberals or Conservatives or, for that matter, Communists. I mean, they are the management class, and they were ruined. Their insurance policies were disappeared, and in consequence they became ready meat for the, for unreason. And unreason was illustrated by Adolf Hitler and the group around him. And they promised to restore Germany not only to a state of prosperity, but a state of power. The two things irresistible.

Studs Terkel The question here of the German working man, the long lines of unemployed, his feeling of humiliation, his feeling of bitterness. In addition, he could be somebody greater than great, too.

Sir George Bolton That's right. And don't forget, near starvation.

Studs Terkel We're thinking Chris--in talking with German naturally we think of present and future as well as past. I know you don't consider yourself a man of the present. You have to look ahead all the time, don't you?

Sir George Bolton Well, I do, whether I should or should not is neither here nor there, but that's the kind of life I lead. And I say in 1933 one saw the seeds of the Nazism developing. Modeled originally, of course, on Mussolini's Fascist Italy. And then democracy, which had quite obviously, were failing the people. Literally had no philosophy on which to fall back on. This was the end of liberalism of the kind that people had followed from the early part of the 19th century. And in its place you had a mixture of extreme left-wing ideas and anarchy. And those who resisted the left wing became rather like the Spaniards. Joined Franco. Mussolini was supported by a very large body of opinion in Italy. And Hitler got the support of the working classes. This is what people forget. The Nazi movement was a working-class movement and the middle-class movement, and the middle class provided as it were the mental sinews.

Studs Terkel Well, what happened? Here, this is interesting. The depressed working class being subject to myth, the myth that he'll make it, one way or another, what happened when, what did you observe here?

Sir George Bolton Oh, bewilderment, I would have said. You had practically every political party here. Still engaged in trying to make quite sure that peace was observed by people not manufacturing weapons. That was really the kind of primitive thought that operated the left wing and the right wing. You had a few people continuously harking on the possibility of a second World War. And this, of course, was a most terrifying thought to everybody who had survived the First World War. And by this time, those who had survived were already about 60 years old, if not older. So you see, you had no active element, human element at work in the United Kingdom to really take thought of the future and take drastic action when it had to be taken.

Studs Terkel I'm thinking about you yourself, Sir George, your own feelings at that moment, since you saw it coming, did you not? The war?

Sir George Bolton Well, yes. It wasn't difficult. See, I'd read "Mein Kampf" both in the original German and in the English translation and it seemed to me taking a grassroots activity such as the Nazi party, the National Socialist Party. You see, it was a combination of words that all had their own sort of magic. It's a kind of magic formula. National Socialism. And the Germans were not in the slightest bit worried about the character of the leaders. They were promising them the Promised Land. And then power suddenly seemed to come back into the arms of Germany. And first I say, the Rhineland. Hitler became, was Chancellor. Then, of course, the campaign against Austria, the Anschluss and Sudetenland. And after this, Hitler's ambitions were boundless.

Studs Terkel You saw that then, and--

Man 2 Running. Thirty-six take one.

Studs Terkel Sir George, we were talking about your seeing and the shape of things to come, the seeds of World War II, you saw it way back. You saw it back during the Sudetenland days.

Sir George Bolton Oh, before then. Before then. I think once, and then I quite remember by this time I was in the Bank of England, therefore you had a bird's-eye view of the whole world. Once I could see what was happening in the exchanges, the breakdown of the financial structure, the impossibility of really employing people because there wasn't any capital capacity to, well, develop new industries. Let alone maintain old. That one began to feel the changes that were bound to happen in communities that were already in a rather broken condition. I think it's true to say that Western Europe never really recovered from the first war. And communities which had been established, which were right for centuries, like France, when they found themselves completely overwhelmed and then they had first to rely upon the British to hold the Northern Front, and then on the Americans that finished the war. There was a sense of humiliation in France, and there's always been an undeclared civil war in France between the left wing and between, if you like, the middle classes, and this broke out in the postwar stage and really prevented France from having any policy whatsoever except of day-to-day survival.

Studs Terkel So you really see, then, the Depression, this international depression, as between both wars, ending--beginning with the end of World War I and ending with the beginning of World War II.

Sir George Bolton That's right.

Studs Terkel More than beginning in the '30s, you saw it--

Sir George Bolton It went right the way through. I mean, the Depression in America didn't really end until 1940, when we were all pouring our inherited or what was left of our wealth in Europe into America and really beginning to develop the American war machine.

Studs Terkel We're thinking about war machines and come back to Germany again. There was a problem of unemployment, the question of humiliation, the question of reparation payments in cash rather than goods and services. What was the role--how did you look at, on America at the time, the role it was playing or wasn't playing?

Sir George Bolton Well, I think America was enjoying this tremendous boom and a feeling that America was now really on top of the world and had no need to worry about the outside world. You know, it was rather like looking at Europe and wondering whether there aren't a lot of rather wicked children playing in a nursery.

Studs Terkel But isn't this

Sir George Bolton We were playing in the nursery with very vicious weapons.

Studs Terkel Isn't this interesting, though, it was the crash in 1929 October in the United States that triggered off.

Sir George Bolton That was the catalyst.

Studs Terkel And, yet, there's an inward, an inward looking on the part of America as though it weren't part of what was happening in the rest of the world?

Sir George Bolton That's right.

Studs Terkel Weren't there American investments in Germany, though, too?

Sir George Bolton Oh, the Amer--Germany had in the short period of more or less exchange stability from round about the 1925 onwards, had drawn in an enormous amount of short-term money from the whole of the world, but particularly from the United States. And when the crash came, that was no new money coming in, and then a lot of the lenders then wanting their money back. That prevented any revival. And we stumbled along in this fashion until well until the war broke out.

Studs Terkel You know, Sir George, Sir George Bolton, I'm thinking as you're saying now, I'm looking at your very compelling essay here, "Orthodoxy and Responsibility: Some Predictions for the Remainder of the Century", and you were saying about, I thought of at this moment of responsibility and lack of responsibility. You were speaking of bankers being looked upon somewhat askance because they did not recognize the need for change, and in the last sequence of your essay, you speak of the imperative need for men, financial responsibility to recognize the importance of change. And I'm thinking about the, what happened when it was not recognized by American and by British bankers.

Sir George Bolton Oh, everybody.

Studs Terkel Thinking about yourself, as you and I are talking now, your own personal reflections. You were obviously sensitive to the scene. What were your thoughts, your feelings?

Sir George Bolton Well, I had many thoughts and too many feelings, that's one of the troubles. And I suppose, from about 1935 onwards, I was dominated entirely by my belief that war was inevitable. And secondly, that Germany would win all the early battles and would cover the whole of Europe. This I had very little doubt about. You see, if you're in the financial--the international financial field, you get a general dip test of the character of all the countries, particularly in terms of their capacity to defend themselves and so on. And this we could see quite clearly in the case of France, Italy, Holland, and Belgium. And we felt the impact of this new spirit in Germany. So, most of us, I think, were feeling, certainly those few, of whom I was one, we felt that the spirit of complacency in the United Kingdom was a total disaster. And it ended up by being a total disaster.

Studs Terkel You then, personally then, I suppose your whole day, your domestic life was affected, too, I imagine.

Sir George Bolton Oh, I don't know. I've had a most tremendously gallant and intelligent wife who's always looked after me. She supported me through thick and thin. All the way through the piece. Couldn't have been the happiest life for her.

Studs Terkel You were thinking of these. Were you--you said a moment ago you were among the few. Was it a minority then, a minority of a financial men were aware of these changes and shadows?

Sir George Bolton Yes. I think those young that were beginning to emerge in the '30s, usually by this time you've got a generation over 30 years old who are beginning to represent the feelings of the community that were different from the inherited feelings of those who'd been in office or had responsibilities before 1914, and it was those people plus a certain element in the universities who felt that change was necessary, but couldn't quite, couldn't see quite clearly how the change was going to take place. My trouble was that I knew change was going to take place, but it wouldn't be a reasoned change because it was going to take place in wartime.

Studs Terkel It's a phrase you use, you quote Huxley at the very beginning of your essay: "Irrationality, irrationally held truths may be more harmful than reasoned errors," and, so, we come, don't we, to war and irrationality?

Sir George Bolton Exactly.

Studs Terkel And the Depression. Some American financiers during my investigations were telling me, I asked them, "What happened when the crash occurred in 1929 in the United States?" They said, "We don't know." I said, "How did it to come to pass?" And one said, "We don't know. We waited for an announcement." And I was thinking, it was that the way it was here--were any of the financial men of responsibility, could they explain why a thing happened or how it happened?

Sir George Bolton No, I think everybody, nearly everybody, tried to work it out afterwards. But you'd be surprised the number of people in Europe, and certainly in London, who were quite sure there's going to be a stock exchange crash. But they didn't realize that the American monetary machine was so hidebound that that crash would bring about practically the closure of the, closing down of the American banking system. You see, and 14,000 banks closed. Imagine what that was like, covering God knows how many communities without money.

Studs Terkel Well, my mother was well aware of it.

Sir George Bolton There you are. You see, these--the secondary consequences of that stock market crash were really the worst because it found out that the monetary system organized by the U.S. Treasury with the Federal Reserve System was quite inadequate for the needs of America and you simply ran out of money.

Studs Terkel I'm thinking about the Third World then, not thought about too much, today, of course it is, I imagine on the mind of any thinking person. What happened then there? How were--is that so remote? How are people of the Third World affected by what happened in the United States, United Kingdom and on the continent?

Sir George Bolton Well, if you just take what I call the United States' backyard, Central and South America. You came to a total standstill. Total standstill. But fortunately there was a very large rural community and they were able to live without money, without banks. And the seeds of the present unrest in Latin America, I think, were born in those days. They're probably already there, I know.

Studs Terkel But the burden then was even heavier on them.

Sir George Bolton Oh,

Studs Terkel More than heavy though

Sir George Bolton Well, every commodity price fell to a ridiculously low level. Well below the cost of production. And therefore, no one in the underdeveloped countries, to use this quite ridiculous word, could really pay their way. They couldn't, certainly couldn't pay their debts.

Studs Terkel What do you think, now of course this is what Roosevelt once called "an iffy question," what do you think would happen if--or is it possible for Depression of the magnitude of the '30s to occur again?

Sir George Bolton No. We have different kinds of problems.

Studs Terkel Would you mind expanding

Sir George Bolton Well, basically the Depression was caused by a shortage of money. Through the operation of the gold exchange standard or the gold standard, and nobody was able to move quickly enough to change this. Now, we have no limit to the printing of money, the production of money. And in consequence we have another problem that's called "inflation." And no government's found a way out of this problem.

Studs Terkel Can't runaway inflation. One more thing I think.

Man 2 Thirty-seven take one.

Studs Terkel Sir George, can't inflation, though, lead to a Depression?

Sir George Bolton Not in those terms, but it can lead to something probably very nearly as unpleasant, and that is continuous social unrest. So you once you break a pattern, which has been established over the previous generations and relations between, if you like, railway drivers and porters, on this relationship that's broken, then the whole cultural pattern of the country begins to break down until something new emerges.

Studs Terkel I'm thinking about yourself. I'm sorry!

Sir George Bolton No, I was going to say in Brazil, for example, under Getulio Vargas who was the great left-wing reformer. He started a process of what was eventually ended in [rodent?] inflation, and in the last year of inflation I think the cost of living went up 136 percent, and this brought about an end to the parliamentary system, or if you like, the liberal system of government in Brazil. And it's the women who did it. The women came out on the streets of Sao Paulo. There couldn't be any civil war because they weren't prepared to shoot the women. And the military took over. And Brazil is in a very much happier state of mind today than it's been for the previous 25 years.

Studs Terkel Even though the--

Sir George Bolton Whether it's going to remain happy is neither here nor there.

Studs Terkel I'm thinking about the Depression, spelled capital D, economic depression, yet, how it must affect everyone who's thoughtful. Small d, depression, psychological, I'm sure everyone more or less affected would be sensitive to it. Were you in that sense affected, too?

Sir George Bolton I suppose I must have been, because I do remember the enormous problem of trying to get employment. And if one was able to get a rise, say, of 20 pounds a year. You were really, you really felt rich. Not 20 pounds a week, 20 pounds a year.

Studs Terkel Twenty pounds a year. So when you came to the offices of the bank where you worked during those traumatic days, did you sense something in the air, the feelings of the people?

Sir George Bolton No, I wasn't as sensitive as all that, although I knew that the system was running down. But, you know, there's a perennial optimism in this country, a sort of sense of complacency, which has, I think, been of great value to the United Kingdom through the centuries.

Studs Terkel There's a phrase you used, some vivid memory you have or a recollection of that it's connected with what you just said.

Sir George Bolton Well, I remember on the morning after the Chancellor of the Exchequer, in September '31 had declared that the sterling was no longer attached to the fixed price of gold. And in those days I was responsible for a whole series of operations in the private bank in which I was working. And I felt extremely depressed, very depressed indeed, and a very old stockbroker came in and looked at me and said, "Bolton, what's wrong with you?" And I said, "You heard the Chancellor the night before." I said, "You can't help," I said, "Look what happened to the Reichsmark, the Polish zloty, the Austrian krone." He said, "Take no notice. The impenetrable stupidity of the British people will see you through. Good morning!" And in "The Daily Express" the next day, the headlines, banner headlines, "Huge Fluctuations in the U.S. Dollar." Not in sterling.

Studs Terkel We come back to a certain stolidity of a great many of your colleagues, fortunately not yourself. Thinking about, you yourself didn't major in economics.

Sir George Bolton No, no, no, no. That was an enormous advantage.

Studs Terkel Then you're really saying, if I follow you right, we think of the Depression and the financial world, there's a great deal of random happening, isn't there?

Sir George Bolton Oh, I think the world is made up of random happenings, although there is generally some kind of connecting link. Such as with the troubles we're going through today. But nevertheless, although I regard my--I know I'm regarded as a Jeremiah and very much as a pessimist, I am convinced myself that Russia and the United States are going to make peace. In my opinion they have no option. They'll both be very reluctant about it, particularly the Russians. But they will have to do it.

Studs Terkel Because of mutual deterrent of terror.

Sir George Bolton A mutual deterrent and because they're finding it isn't profitable. The standard of living remains at a depressed level in Russia. It's not rising in the United States. And the load of debt, the load of expenditure is increasing year by year. So they're bound to, they're bound to come to some kind of compromise.

Studs Terkel That leads into another thought. Just made me think of it. During the days of the British Depression and the millions of unemployed. You mentioned the dangers of repression and Fascism and the right. Did you sense, were the possibility, ever possibly of talk of revolution? Socialism? Happening suddenly?

Sir George Bolton Oh, yes, we had the Independent Labor Party on the [client? quiet?] side that were, I suppose they'd be called Trotskyist today. We had a Communist Party that was busy surging around which helped the Conservative Party to win an election over the Zinoviev letter, and we also had Oswald Mosley with his Blackshirts. Oswald Mosley was probably one of the most intelligent men of his era, but he was too clever. You know, cleverness doesn't pay.

Studs Terkel He had some interesting plans remember, the Labor Party, didn't he? They were rejected and then burned bitterly toward the right.

Sir George Bolton But he wanted revolution. But you've got to remember the trade unions are not basically revolutionary parties. Any more than I would have said the Communist Party in Russia is a revolutionary party, in fact I would have said quite firmly the only really conservative government in the world is the one that exists in Moscow today.

Studs Terkel And you didn't sense any overnight revolution.

Sir George Bolton No. No. I think they were--the bulk of the working classes were stunned by the fact that they were comprehensively out of work.

Studs Terkel That phrase, "stunned," that's it. And then there was a numbness that occurred, an apathy, perhaps.

Sir George Bolton That's right, yes.

Studs Terkel Were there--which, perhaps, leads to the last question: Were there to be another Depression, one you doubt could happen, would that apathy, would that stunned quality be pervasive today? What do you think would happen if there were one?

Sir George Bolton I don't think any community now has got such a strong inherited sense of values that it would sit quiet during any form of major Depression. Now, I would--it'd depend on one country, or on the different countries what action they would take. But I'm perfectly certain that apathy wouldn't occur, certainly in any of the British-speaking countries.

Studs Terkel Apathy would not occur.

Sir George Bolton In my opinion.

Studs Terkel Would there be a--again, this is asking you to be a Nostradamus, of course. Would there be, you think something violent in nature?

Sir George Bolton Oh, not necessarily. Not necessarily.

Studs Terkel Any other reflection comes to your mind, thought, memory, anecdote, anything?

Sir George Bolton No, I'm afraid not. I think you've exhausted me.

Studs Terkel I think you [unintelligible]. Thank you very much, Sir George. You're