USA & the Wider World 1945-1989

• Leaving Cert History

• US ecomony 1945-1990

It’s the Ecomony, Stupid

•Bill Clinton’s Presidential campaign slogan in 1992

The Post-War Boom• After WW2 the USA was the

greatest military and economic power on the planet – one of two superpowers.

• By 1950 the US had –- 7% of the world population- Produced 50% of the world’s manufactured goods- Created 40% of the world’s income

• By mid-1960s the USA was a very wealthy society

• Many citizens owned their own homes

• High consumers of goods – cars, household appliances etc

• Were well educated

Affluence

• Influence of WW2

• Public Investment

• Other Factors

Reasons for the Boom

• During WW2 American industries expanded to meet the demands of the war

• This led to increased demand for Iron, Steel, Coal and Oil

• This in turn created employment – brought millions of women into workforce

• Family earnings increased• During war people had few goods to

spend their income on• By 1945 Americans had $140billion in

private savings

Influence of WW2

• These savings were spent on consumer goods

• This led to incresed consumer production – more employment etc.

• With more people working the government collected more tax –

1940 - $7 billion1945 - $51 billion

After the War

• During War – made large profits from government contracts

• Led to the establishment of large corporations – through mergers

• By 1945 – 75% of all manufacturing industry was controlled by 100 corporations

• Because of their size and wealth these companies were able to stay ahead of their competitors

American Companies

• Government spent mainly on defence and the military

• Between 1945-1970 – 60% of all government spending went on military spending

• Korean War• Vietnam War• Cold War

• The ‘military industrial complex’• Created boom in the economy – large profits

and increased employment

Public Investment

• Council of Economic Advisors- ‘the business of American Governments was business’

• The GI Bill of Rights helped war veterans to buy their own homes, start businesses, go to education

• By 1956 over 8 million veterans had gone to further education

• The construction industry benefitted from contracts to build the new schools and colleges

Education

• 1956 Highway Act

• 41,000 miles of interstate highways were built

• Total cost $30 billion – 90% provided by federal government

• With Canada they built the Great Lakes - St. Lawrence seaway – canals connecting the great lakes to the Atlantic

• Massive boost for the construction industry• Benefitted the transportation of goods

Infrastructure

Great Lakes Seaway

The Gross Domestic Product• 1950 - $355 billion• 1960 - $488 billion

• Investment at a rate of $40 billion per year

• GNP grew by –– 1964 – 7%– 1965 – 8%– 1966 – 9%

• However – 40 million Americans still lived in relative poverty

Other Factors

America had large deposits of OilCheap energy

Made advances in Science and Technology

Increased productivity – worker output increased by 35% (1940-1970)

Other Factors

•The Baby Boom –

•In 1946 nearly 4 million babies were born

•The birth rate steadily increased until the end of the 1950s – by 1958 a third of the US population were under 15 years of age.•Growing Demand for goods and services – clothes, food, toys etc•A rampant consumer society fuelled the economic boom

Baby Boom

• Created a demand for housing, schools, leisure facilities.

• Middle class Americans moved to the ‘Burbs’ (suburbs)

• By 1960 – 25% of Americans lived in the suburbs

• This led to a demand for more cars (and new Highways) – – 1945 – 26 million cars – 1955 – 130 million cars

US Economy 1968-1989• JFK – elected in 1960 – tax reform,

social welfare reform civil rights – borrowed money

• LBJ – announced ‘The Great Society’ – a war on poverty.

• $800 million made available to improve health and education and tackle urban poverty

• Vietnam War – Cost $120 billion ($700 billion in today’s money)

Deficit Spending• Keep ‘The Great Society’ going and to

fund the Vietnam War – LBJ borrowed money.

• Federal deficit grew rapidly – national debt soared.

• By the late 1960s the economy was slowing down.

• Inflation and unemployment increasing

1973 Crisis• US Economy was running into trouble

• Trigger for worldwide economic recession

• War between Israel and Egypt 1973 – the Yom Kippur War

• USA agreed a $2.2 billion arms deal to Israel

• OPEC responded by cutting oil supplies and increasing the price of oil

• USA imported 30% of OPEC’s oil

Effects of the Crisis in USA•Rising inflation•Rising unemployment •Drop in real income for workers

•Workers didn’t have the education or skills for the new hi-tech economy – unemployable

• High inflation + low growth + high unemployment = stagflation

•US government unable to solve the crisis

Ford replaces Nixon• In 1974 Gerald Ford faced a rising

trade deficit

• Caused the value of the dollar to drop

• ‘Whip Inflation Now’ – cuts in spending and increased taxes – no solution

• In 1975 – gave income tax rebates and cut business taxes

Jimmy Carter•President 1977

•Increased interest rates to discourage borrowing and reduce inflation

•Increased oil costs from a second oil crisis in 1979 pushed inflation to 13%

Reaganomics•1981 US economy in deep recession

•Unemployment 10%

•33% of US manufacturing not working

•Interest rates = 20%

•Reagan introduced massive cuts in public spending and cut personal and business taxes

Tax Cuts•As the economy recovered Reagan introduced massive tax cuts for the wealthy

•Massive increase in military spending ($1.2 trillion)

•Government borrowing soared –1980 $930 billion –1989 $2.6 trillion

•More debt that all previous US presidents

Millionaires•100,000 new millionaires each year

•Poor Americans saw their income drop

•Massive gap between rich and poor

•Many new jobs were low paid service industries

Ongoing Crisis•USA replaced by EEC as world largest trading block

•US share of world trade –1948 25% –1985 15.4%

•Caused by – –growing competition from abroad (Europe and Japan) –A decline in domestic production –Rising unemployment

• Presentation prepared by:

• Dominic Haugh• St. Particks Comprehensive School• Shannon• Co. Clare

• Presentation can be used for educational purposes only – all rights remain with author