I just can’t understand how the Golden Age in USA emerged after the World War 2. Although they “won” the war, they spent billions of dollars on their military and on the Marshall plan to assist and to restore the economic infrastructure of many countries in Europe.
EDIT: There are some comments mentioning that the USA didn’t get bombed during the WW2. I know that, but USA has never gotten bombed. Why did it happen right after the WW2 and not later?
In: Economics
It was kind of a perfect economic storm.
– Europe was severely damaged by the war and had a massive amount of rebuilding to do.
– They couldn’t produce many of those good locally because the factory infrastructure _also_ needed to be repaired.
– The US was untouched by the war. There was a ton of manufacturing infrastructure that needed purpose once the war machine no longer needed it.
– Other major powers – like the USSR and China – were not openly trading.
– There was so much demand that workers could demand higher wages.
All that together made it the perfect time for US manufacturing. As each of those above conditions changed, the boon faded.
Because all the other countries spent billions of dollars on the war and got flattened. The US infrastructure was basically untouched because of those two huge oceans between them and the other combatants.
For one, the fact that this was a “golden age” is something of a myth. Rates of poverty and all sorts of economic metrics point to this being a much worse time than later periods, including today.
Regardless, the post-war economic growth emerged from several factors:
* The most important is that the US was the sole industrialized country that wasn’t bombed.
* military investment in US industry was very quickly put to civilian use. Car factories were repurposed to make tanks and planes and then very quickly retooled to make cars, again, for example
* Much of the war spending was financed by what was essentially forced savings. There was a huge savings glut that was spent down in the years after the war
* federal spending, particularly on infrastructure, was even higher as a fraction of GDP than it was during the new deal, which was massively higher than anything that came before.
As an aside, the Marshall plan was about 0.5% of US GDP.
US dominated manufacturing with manufacturing capacity decimated by war in Europe and Japan. They needed to rebuild and we supplied the goods to do so. There was also lots of pent up demand for consumer goods, homes, cars in the US after Great Depression and WWII, all those soldiers coming back from war to start families, buy homes in the suburbs and cars.
The GI Bill and unions played a large part in the economic expansion of the US. Education has (I think?) the highest long-term ROI of any kind of government spending. More returning soldiers went to college than would have without the GI Bill, and many others joined unions. This greatly expanded wealth for the middle class (remember that?) as well as the tax base for the US, which made large infrastructure projects possible. Large infrastructure projects meant high demand for labor, which drove up wages, which helped the middle class grow…
The US made bank selling supplies during the war and then more bank selling more supplies to war torn countries that were trying to repair and recover.
Since we never got bombed (aside from Pearl Harbor) we didn’t need to repair anything, so all of the extra cash-flow went right into improving everything we already had and the US became an economic powerhouse.
Finally there was the cold war. A time of tension that spurred on unity and growth without actually needing to fight costly battles.
>EDIT: There are some comments mentioning that the USA didn’t get bombed during the WW2. I know that, but USA has never gotten bombed. Why did it happen right after the WW2 and not later?
It’s not simply that the USA didn’t get bombed, it’s that Europe did. WWII decimated most if not all of the pre-WWII world powers which were in Europe (and Japan). It made the USA one of the only places that could still produce at scale since the infrastructure was unharmed by war.
It also created a huge power vacuum which immediately got filled by both the US and the USSR which directly led to the cold war.
When you’re one of the last men standing, you tend to do very well economically while everyone else is just trying to survive and recover.
The US survived the war virtually untouched because there was an ocean in the way.
So unlike Europe which had much of its industries destroyed the US made all these investments into building up manufacturing throughout the war that survived intact.
The GI Bill help train up an entire generation of returning soldiers for skilled jobs as well.
So after the war much of the Allies were in debt to the US for supplying arms, and the US was the #1 exporter of goods.
It’s no coincidence the Golden Age of the 50s and 60s ended when countries like Germany and Japan had rebuilt their industries.
There was also other factors like the US foreign policy during the Cold War starting to backfire. Supporting Israel during the Yom Kippur War for example resulted in OPEC creating an oil crisis.
The late 70s and 80s also saw wide spread deregulation and the offshoring of US labor
WW2 resulted in a massive growth in the US economy at a time when most of the competition was struggling to cope so after WW2 they could mass produce ships, cars and lots of other items, but there were few customers outside of America that could afford to buy stuff and most of what was produced people started to get concerned about huge amounts of pollution.
I mean everyone goes on the big things at the national level, but one incredibly powerful thing that happened after the war, was that just about everyone had something called disposable income. Before the war this was something only the rich and well off had. Now even people at the poverty line had a little bit.
Disposable income is a huge deal.
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