The War.[1] A decade before the beginning of World

The Second World War transformed the United States
economy, creating the base of the system we use today. Americans
were able to create a remarkably effective and sustainable economy from
1940-1945, through the mobilization for World War II, which expanded rapidly
resulting in The United States becoming a prominent economic world power. Before
World War II, the economy in America was ever fluctuating in the 18th
and early 19th century as a result of factors such as: migration to
the Midwest in the early 18th century pursuing land and cotton, The
Industrial Revolution, and the American Civil War.1 A decade before the
beginning of World War II in Europe, Americans faced the bitter hardships of
The Great Depression, beginning with the stock market crash of 1929. The Great
Depression deprived people of civilian goods for ten years prior to the four-year
American involvement in the war, creating an abundance of desire for goods at
the end of the conflict.2 The stock market crash and
the worst economic crisis in the industrialized world, affected every American
and cost Republicans the presidential election in 1932. Democrat Franklin
Roosevelt beat Herbert Hoover and became the thirty-second president of the
United States and served from the years of 1933-1945, serving a total of three
terms as president. He made optimistic promises of fixing the depression by
introducing ‘The New Deal’, taking effect in 1929. The federal government was
more actively involved in the economic and social condition, accustoming
American citizens to a powerful national government that implemented influence
and restrictions. The New Deal facilitated the American mobilization of World
War II due to its intrusive approach for alleviating the burdens carried
throughout the depression. 3
In 1933, Roosevelt deployed many relief operations within a period of four
months in an attempt to curtail the economic emergency in America. These acts
were built on the cooperation between the American government, business
leaders, and workers.4 One of the most
influential acts of the New Deal on the public climate was The National
Recovery Administration, creating codes that limited production, wages, and
working conditions. Since the success of the National Recovery Administration
depended on support from both businesses and the public, it attained its all-embracing
slogan: “We Do Our Part.” The economic direction and mandatory participation
established during this time forced the cultural attitude to be more patriotic
and affirmative.5
Consequently, during World War II, government was exceptionally successful in
enforcing regulations and modifying the economy to support the war effort. The
vast number of alterations and reforms within the economy mixed with
socioeconomic changes produced an economic boom after the war that reinvented
American life. The civilian mindset during The Great Depression combined with
the implementation of the New Deal allowed for the conversion of America’s
industrial base from producing civilian goods to war armaments, ultimately resurrecting
the economy to incomparable prosperity and improving the overall quality of
life through to the 1960’s.

The
United States converted their economic system and industrial base to adjust to
wartime conditions. In preparation to successfully fight in World War II, it
was most important to convert America’s industrial base from producing civilian
goods to producing war material. The New Deal and mobilization for World War I
served as a template for the Second World War; however, it took its own unique
shape as the economy continued to expand. The American conversion into a
wartime economy was less centralized than those of Britain or Germany where all
their production systems were overseen by military officials, contrary to the
vast American economy which was not controlled by either the Army or Navy or
supreme body.6
Only two weeks after the bombing of Pearl Harbor and early within the
mobilization period, the War Powers Act of 1941 was passed which granted the president
unprecedented authority over the process of mobilization. Specially, Roosevelt
was given total authority over the
organization of the the executive branch, independent government agencies, and
government related corporations in any way he saw most beneficial for America
in the war. The War Powers Act of 1941 most importantly declared that the
president was to remain in possession of these rights for as long as six months
after the wars end.7  The Great
Depression created a large pool of unemployed Americans. In the summer of 1940,
about 5,300,000 American citizens were unemployed, providing an opportunity to utilize
unused labor. 8
Many minorities were welcomed into the work force such as women and African
Americans, expanding the number of workers available. To encourage mobilization
the government promised businesses profit and considerable tax write-offs, and
suspended anti-trust prosecutions. Employment rose rapidly, diminishing the
devastating unemployment statistics brought on by the Great Depression. What
was a turbulent and desperate economy evolved into a bustling and prosperous
machine. By late 1942, about thirty-three percent of the U.S. economy was committed
to war production. This intense growth caused a large increase in federal
defense spending. In 1940, defense spending was only four percent of the gross
national product, however in 1945 it rose to forty-six percent.9 The federal budget jumped
from nine billion all the way to ninety-eight billion.10 Merchant shipbuilding,
overseen by the U.S. Maritime Commission, mobilized early, ensuring wartime
demands were met in time to compete in the war. The automobile companies, such
as General Motors, finally complied and converted to creating planes in 1942.
The economy was growing and preparation for conflict within the economy
continued at full speed.

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In
order to most efficiently and systematically prepare the economy for
significant changes, administrations and agencies were put into effect.
American manufacturers were not trusted to stop making civilian goods in order to
gain more profit, and so mobilization agencies became necessary. Manufacturers
feared their coinage would be negatively affected if they stopped producing
consumer goods and began producing for the war. By purchasing such large
numbers of goods for the Army and Navy, these agencies were able to closely
direct and influence the operation of private companies and even whole industries.
As early as 1939, President Franklin Roosevelt created preparedness agencies to
oversee economic growth. Some of the most influential agencies were The Office
for Emergency Management and its sub-organization: The National Defense
Advisory, The Office of Production Management, and The Supply Priorities
Allocation Board. These were effective because they dealt with the conflict
between the two competing parties: reform-minded civil servants and
private-sector executives. The War Production Board, directed by Donald Nelson,
was created in January, 1942 by Roosevelt to help mend the dispute between
civilian and military needs.11 Nelson understood the
complex problem of controlling the war economy and believed that it could be
resolved by balancing attention between civilian and military goods, especially
for industrial workers. Nelson also realized and resolved a few key economic
issues, most notably being The Feasibility Dispute. This important dispute was
a conflict between civilian administrators and their military counterparts over
the argument that the American economy should be fully devoted to contributing
to war needs in the year of 1943. Nelson’s influential argument, that complete
devotion would harm America’s long-term ability to continue to produce for the
war after 1943, helped maintain it’s economic stability that would allow the
country to flourish once the pressure of the war was lifted. By implementing
the Controlled Materials Plan through the War Production Board, which allotted
metals to industrial workers, he very efficiently curtailed the conflict over
supplies. Another extremely effective administration was the Office of War
Mobilizations, created by Roosevelt in 1943 and directed by Former U.S. Supreme
Court Judge, James Byrnes.12 This would become the
dominant mobilization body in Washington. The Office of War Mobilizations
settled disputes between contenders and the War Production Board, and help
other smaller, federal organizations under its power which handled labor, food,
shipbuilding, and price control. The Office of Price Administration imposed
strict price controls and constantly battled the growing issue of inflation. Fueled
by greater spending power and a scarcity of public goods, prices continued to
rise; and in 1942, prices climbed about two percent each month.13 However, due to The
Office of Price Administration’s rationings of goods and cooperation from the
American people, prices rose only eight percent in 1944 and 1945, the last two
years of the Second World War.14 Through all of these
administrations that checked issues that threatened American prosperity and
reconstructed the structure of the economy, America would become the economic
powerhouse of the world.

In
response to the transformation of the industrial base, significant economic and
societal developments occurred during the war, which benefited both the government
as well as home front. The frustrated American labor force was met with an
abundancy of fair paying occupations and rushed into position. Although civilian
war agencies retained manufactures from producing goods, the American economy
grew at an unprecedented rate over the course of World War II. The United
States’ industrial output doubled, creating about 17,000,000 new jobs.15 The expansion of employment
paralleled the growth of industrial production.16 The number of organized
labor employees rocketed from around 9,000,000 to 14,800,000.17 The overall unemployment
rate greatly dropped from 14.6 percent in 1940, to 1.9 percent in 1945. Bankrupt
manufacturers reopened to produce war materials, gain profit and further boost
the economy, as well as serve as a part of the war effort. New industries to
produce armaments appeared, which in a little time would lead America to become
the world’s greatest weapons manufacturer, producing more war material by 1945
than all its Axis enemies combined. The Gross National Product grew from $88.6
billion in 1939 to $135 billion in 1944.18 Producing such an
extensive amount of war produce was partly made possible due to a ‘no-strike’
pledge taken by workers after the attack on Pearl Harbor allowed for little to
no working time being lost. The war years rendered the only significant shift
toward greater equality in the distribution of income in the 20th
century. Within these four years, the lowest earning workers saw a sixty-eight
percent increase in their income, while the highest earning workers saw their
total disposable income drop six percent.19 Corporate after tax
profits rose seventy percent, and industrial workers wages and purchasing power
increased by fifty percent.20 Incomes were able to rise
during the war because of the federal governments ability to contain inflation
and support higher wages.21 A major socioeconomic
trend during the war was migration. The populations of states on the Pacific
coast grew by one third between 1940 and 1945, ultimately altering their
demographics and economies.22 Scientific and
technological innovations were a key part of the wartime economy, rapidly introducing
new industries, such as the nuclear science field, aerospace, and shipbuilding.23 Pushing innovation lead to
extraordinarily important inventions such as air conditioning. The invention of
air conditioning allowed Americans to live in warmer, more desirable cities such
as: Miami, Houston, Phoenix, and Atlanta comfortably. These popular southern cities
were nicknamed the “Sun Belt”.24 These southern cities industrial
capacity increased by forty percent and per capita income tripled.25 The pace at which
innovative technology advanced created an expectation of continued
modernization after the end of the war. The growth of the work force correlated
with the growth of the industrial complex, which consequently lead economic
growth.

  To financially support The United States’
large federal defense budget and their allies throughout World War II, the
implementation of taxation, War Bonds, and the Lend-Lease Act was vital to the growing
economy. In 1940 The Department of the Treasury enforced the first general
income tax and successfully began generating money to pay for the war. The
number of American citizens required to pay the tax soared from about 4,000,000
in 1939 to 43,000,000 in 1945.26 The general income tax
provided about $136.8 billion of the wars total cost of close to $304 billion.27 To cover the remaining
cost, The Department of the Treasury created War Bonds. These bonds were debt
securities citizens would be able to purchase from the government. Purchasing a
War Bond, which were very versatile in price, was viewed as a sort of personal
sacrifice and act of patriotism. From the governments perspective, War Bonds,
proving to be a valuable source of revenue, were a way of raising money to pay
for the costs of the war, as well as curtail the persistent threat of inflation.
War Bond sales ended in 1946, and at the end of the war, Americans had bought
over $185 billion worth of securities.28 The Lend-Lease Act of
1940 was a less direct method of collecting funds. The Lend-Lease Act
constituted that the U.S. Military would provide aid for foreign nations in the
duration of World War II. Large amounts of armaments were purchased from
American manufacturers and essentially given to a nation in need of weapons or
war material. Although the government was not being paid for the armaments
themselves, the income of the manufacturers who produced the weapons would be
greater, therefore the manufacturers income tax, collected by the government,
would be greater. The United States successfully amassed a large portion of the
total cost of the American involvement in the war as well as supported the economy.

World
War II came to an end in 1945, guided by President Harry S. Truman, and
followed by an economic boom; this unexpected flood of economic stability and
prosperity improved American quality of life and the standard of living. Before
the end of the war, President Franklin D. Roosevelt died and his vice president,
Truman who served from 1945-1952, was granted his position when he was chosen
to be Roosevelt’s running mate by the 1944 Democratic National Convention.
After he ended the war, Truman needed to reorient the nation’s economy towards
producing consumer goods and create a plan for the government’s role in the economy
for the future after his reelection.29 He also pushed for a
quick military demobilization, thus allowing the American troops alongside
their families to all return to civilian life simultaneously, stimulating a new
wave of consumers. During Truman’s first term, Republicans dominated both the
House and Senate, and so as a result, Truman’s presidency was plagued with
losses and failures and had no major effect on the economy. The War Production
Board Chairmen, Nelson, scaled back war production, with some opposition by the
military, in early 1945.30 Federal spending dropped
dramatically, however due to the prosperous state of the economy at the end of
the war, it did not result in an economic depression. The G.I. Bill, also known
as the Serviceman’s Readjustment Act of 1944, presented financial aid to
veterans for housing and education.31 Within the G.I. Bill,
servicemen received: educational assistance, guaranteed mortgages, and small
business loans. Educational training for the servicemen increased their incomes
and thus their income tax payment. The Veterans Administration gained $16.5
billion in loans for houses, farm lands and businesses which stimulated more
economic growth.32
In 1947, more than 4,000,000 young men and women were benefiting from the bill.33 All the servicemen and
small families in American wanted cheap, single family homes. Bill Levitt was
the first man to figure out how to build a home using Ford’s techniques of mass
production.34
These houses wer cheap, attractive, and quick to build. In the early postwar
period, there was very little affordable housing, and many veterans ended up
homeless. Truman appointed Wilson W. Wyatt to be in charge of expediting the
building of houses quickly and effectively.35 Wyatt turned the housing
shortage into a housing boom that was stimulated from easily affordable
mortgages. Car manufacturer General Motors had waited through the Depression
and the war to make an impactful comeback to a prepared and affluent society.
General Motors’ Corporate Architect, Alfred P. Sloan, believed that society
could be broken into groups sorted by status as well as economic situation. He
used his belief to craft a line of four cars that would resurrect General
Motors. He created the Chevy, for the blue collar working man, the Pontiac for
young, successful individuals, The Buick for a doctor, and the Cadillac for
sophisticated executives.36 In 1946, reconversion
issues have settled, and Americans were living at a higher material standard
with a greater sense of status. The need to produce war material during the
Cold War created a military-industrial complex.37 In the 1950’s, mass
production techniques in industries and the mechanicalization of agriculture steadily
progressed and quickly farming became operated by big business. Small farmers
were forced to leave their agricultural job, get educated and find another occupation
to support themselves and their family, which lead to more and more Americans
joining the middle class. The Baby Boom took place from 1946 to 1964. In the
last year of the Second World War, 1945, there were about 2,700,000 babies
born. Only one year later after the war had ended, in 1946, about 3,400,000
babies were born. From this information, it shows that twenty percent more
babies were born in 1946 than 1945. A whopping 4,000,000 babies were born every
year from 1954 to 1964. The Baby Boom resulted in a plethora of new consumers throughout
the 1950’s and early 1960’s. In 1953, Republican Dwight D. Eisenhower was elected
President of the United States. Eisenhower expertly preserved the boost of
economic prosperity after the end of World War II by focusing on balancing the
federal budget before cutting taxes. During his two
terms of the presidency, the unemployment rate was generally low, the poverty
rate declined, and inflation usually was 2 percent or less.38 He
worked to improve the American quality of life by expanding Social Security,
raising minimum wage, and creating The Department of Health, Education, and
Welfare. Dwight Eisenhower also established the Interstate Highway Program in
1956.39 The 41,000-mile
road system sparked the economy and made driving long distances faster and
safer. This highway system formed more opportunities for the placement of suddenly
fashionable suburbs which would attract young families, stimulating the economy.
However, it would draw families and residents out of the larger cities. The post-war
decades were positively influenced by the patriotic trend, reformed structure
of the economy, and introduction to new industries. At a macroeconomic scale
the war ended the Great Depression and created conditions for collaboration
between the federal government, private enterprises, and organized labor. Mobilization
for the war altered the economy so that it would be most productive, quick, and
flexible, while also alleviating the American labor force from a relentless economic
depression. World War II forced the United States Government to take more control
of its own economy, guide the American people to be able to increase their own quality
of life, and turn America into a worldwide economic component.

 

 

 

 

 

 

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