So, Clarence and the audience are getting their first look at our protagonist:
"That boy?" says Clarence.
OMG you are a dummy, sighs Joseph. It's 1919 in this scene, and George is 12 years old. He and his friends are sledding down a hill on snow shovels, because when George Bailey was your age they didn't have your fancy toboggans and saucers. They did have catchphrases, though ("Hee-haw!" shouts little Sammy Wainwright as he zips past), and they clearly didn't have to walk 10 miles in the snow uphill both ways to slide all the way across the pond and into the unfrozen creek, because Harry Bailey does that on his very first try.
"George saved his brother's life that day," says Joseph as we see George dive in after Harry and arrange a human chain to fish him out. The hero's reward? An infection that left him deaf in one ear.
A few months later, George is on the mend and back at his job at the drugstore. He serves ice cream to Mary and Violet, who are like 8 years old - but you can already tell that Violet is going to be trouble. She calls George "Georgie" and asks him to help her off the stool. He looks disgusted. So does Mary, who waits until George is busying himself under the counter, then whispers, "Is this the ear you can't hear anything out of? ... George Bailey, I'll love you till the day I die."
Then George pops back up and tells her that first chance he gets, he's gonna blow town and be a dashing explorer who travels the world and leaves trails of devastated women in his wake. Good choice, there, Mary.
What with all this romance, I forgot to mention that George's boss, Mr. Gower, is extremely drunk and sobbing in a corner. George noticed this as soon as he walked in (ya gotta have sharp eyes to be a good explorer!), and now he finds out why - there's a crumpled telegram on the cash register informing Gower that his son has died of the newfangled influenza.
You guys, you do not want your prescription filled by a drunk pharmacist. Gower stumbles around, unwittingly makes some pills out of POISON, and calls to George to deliver the pills. George takes the pills and runs off to ask his dad what to do.
Dad is at the Bailey Building and Loan, arguing about something or other with Potter. You all know Potter. You all hate Potter. So does George Bailey - he blows up at the old man and Dad tosses him out before he can ask whether he should deliver poison to a kid with diphtheria. Luckily, he decides on his own that the answer is no.
When George returns to the shop, Gower grabs him and starts throwing him around, demanding to know why he got a call from the family saying they didn't get their pills. He smacks George on his infected ear, which starts bleeding. "Don't you know that boy's very sick?" he shouts. Gower knows how it feels to have a sick child.
Through the blows, George finally gets out that the pills are poison - "I know you didn't mean it, you just feel bad about the telegram" - and thrusts them at Gower. Gower tastes one, and even though it's a black-and-white film, you can see his face go ashen. He falls to his knees - "Don't hit my ear again!" shrieks George - and throws his arms around the kid. They're both crying. (So am I, again. This movie!) "I'll never tell anyone," George vows.
So, within a couple months, at the age of 12, George Bailey saved two lives. Surely even Clarence can handle this case, right?
(on to Part 3)