The Second World War, post-war affluence and growth, 1941-69

what did WWII do to America that was different from WWI?

The Second World War boosted the US economy and, unlike in the years immediately after the First World War; the economy continued to prosper after the war.

what fuelled the boom? - consumer goods

A huge demand for the consumer goods people had done without during the war made the move from wartime industries to civilian ones easier: Production increased (from $213 billion-worth of goods in 1945 to $284 billion-worth in 1950), which helped keep unemployment low.

what fuelled the boom? - business

The business boom encouraged employers to expand their workforces and to raise wages, thus encouraging even more spending.

what fuelled the boom? - government involvement

The government came down hard on strikes for higher wages as prices rose. When coal miners went on strike, President Truman took control of the mines. The rail workers went on strike to support the miners. Truman took over the railways. When rail workers walked out (marooning 90,000 passengers and stopping 25,000 goods trucks, many loaded with perishable food), he asked Congress to draft strikers into the army. The strikers backed down and there were very few strikes after this.

what fuelled the boom? - baby boom

A post-war baby boom' meant a growing demand for child-centred goods and foodstuffs (in 1947, nappy sales were $32 million; in 1957, they were $50 million). Toy manufacturers made $1.6 billion in 1959. By 1961, their profits had risen to $2 billion. In 1940, there were 2,559,000 live births in the USA. In 1950, there were 3,632,000; in 1955, it was 4,104,000. It stayed at the four million mark until 1965 (3,760,000), when the fertility rate began to decline. More babies meant more toddlers and more teenagers to come. They would create a need for more schools and colleges, and would become consumers themselves.

what fuelled the boom? - farmers

Even some farmers managed to do well, thanks to continued farm subsidies and the demand for farm produce at home (as consumers spent more on food) and abroad (especially in war-torn Europe).

what fuelled the boom? - government spending

Government spending rose steadily throughout the period under Truman's 'Fair Deal' policies. Immediately after the war, the government provided support for all those leaving military service. This included a leaving payment, unemployment pay for a year, loans to buy a home or business, and medical and health care. It also provided education or training through the GI bill (over 12 million did this. The government also increased the amount of social security benefits and expanded them to cover more people. The 1949 National Housing Act introduced slum clearance and the building of 810,000 low-income housing units to replace the slums. This provided work for the building industry and better conditions for some urban poor.

what was the most obvious cloud over the post war economy?

inflation. Prices were rising, sometimes faster than wages.

Office of Price Administration (OPA)

The government's Office of Price Administration (OPA) had controlled prices during the war. When it shut down in 1946, farmers and businesses wanted to exploit the demand for goods and food. Prices jumped 25 percent in two weeks. however, after the initial jump, prices settled to a steadier rise.

1946 Employment act

Truman passed the 1946 employment act, so called because it set a goal of full employment, which set up a Council of Economic Advisers, CEA, to advise the president on managing the economy. It also said the president had to give a strategy report to a Joint Economic Committee of the House of Representatives and the Senate after each federal budget.

what was the government careful to do?

to keep taxes low and the fact that buying on credit was rising meant that inflation didn't damp down spending in the 1950s. The Fed put controls on the money supply to keep inflation low.

what was the baby boom fuelled by?

men returning from the war, fewer women working and the buoyant economy.

The economic boom of the 1950s and 1960s

made people confident about 'the American Way' as opposed to the communist ideas of their Cold War opponents.

Consumerism

was positively patriotic However, it was not all steady economic growth. Sometimes both inflation and unemployment increased sharply for a year or so.

what is also important to remember?

that, while the economic climate was good, there were always people who were not a part of the rising affluence.

what was one reason for growth of the suburbs?

was that people moved to leave inner cities they saw as increasingly dangerous and slum-ridden. Even so, consumer confidence was vital to the growE of the economy. It also hid the economy's underlying problems.

what were the suburbs a visible sign of?

economic change in the USA. Factories, colleges and universities moved outside the cities, where there was more land.

1956 Highways Act

The government funded the building of roads and homes (e. g, the 1956 Highways Act allowed for 41,000 miles of interstate highways).

what did the boom economy mean?

builders were willing to invest in building suburbs and running the necessary facilities, such as electricity, water and sewage, to them.

what did the Levitt company specialised in?

mass-produced, prefabricated houses. They were quick and cheap to build and led to an explosion of 'Levittowns' in the North East, where the firm was based.

where had one such development occurred?

on Long Island, had 17k homes for 82k residents, the cheapest of which, washing machine included, was just under $7k. Cheaper homes, added to the fact that people could afford to buy a home - if they moved to the suburbs.

who did Levitt refuse to sell to?

black Americans, as did some other developers. This led to the building of back suburbs; yet another example of Northern segregation.

what was there a shift in in terms of goods?

where those goods came from.

whats was the USA losing by the end of the 1950s?

its place as the country of technological innovation and its hold on world markets. This would have a growing impact on the economy. For example, Americans designed the first transistor radio bur didn’t improve and miniaturise it. The Japanese did. US businesses had to buy Japanese parts to assemble in the USA. By 1958, there were 45 million transistor radios in the USA.

what was the shift in the industry?

from the North and East of the county towards the South and on industry, now called the Sunbelt. Much of the shift was due to wartime investment for the war production industry. including aircraft manufacture and military bases.

why was there a move from the North and East of the country to the South?

because land, goods and services were cheaper in the South and West

what happened after the war?

the military bases stayed and the new factories began producing peacetime goods. The development of good air-conditioning made the area more attractive and more people retired there. This sizeable population shift towards areas where there was work and better weather contributed to the emptying of the inner cities and to the problems that developed in them.

what did the government shift in the 1950s?

its economic strategy. Previous economic thinking, from the New Deal onwards, was that high government spending, even if it created a budget deficit, would keep the economy stable and prices down. After the war, this didn't work.

what did the government want to keep?

interest rates low, so increased the money supply, thinking this would hold inflation down. In 1952, there was $169.7 billion in circulation (not counting savings, shares, etc.). By 1960, it was $215.8 billion.

what did the USA lose during the 1960s?

its place as the world's most important exporter.

what was the vietnam war draining?

government finances, as were social welfare payments.

what was the government still increasing during the 60s?

the money supply (with the consent of the Fed), but inflation was still rising. Increasing the money supply helped the government meet increased welfare costs and other bills and, in the short term, helped the economy. But the amount of gold held by the government kept falling, so the balance between gold reserves and paper money was increasingly out of balance. This was a significant problem.

The 1944 international Bretton Woods agreement

had made the dollar the currency to be backed by a gold resen (other currencies were then valued against the dollar). The government saw that the falling gold reserve was a problem.

1966

the government slowed (but did not stop) increasing the money supply. There was an almost immediate downturn in the economy and inflation kept rising.

what did the government want to do to prices in 1966?

The government wanted to control prices rather than letting business have its head, so it increased the money supply more, slowing inflation but creating problems for the future in terms of the gap with the US gold reserves.