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American History Essay Notes
The American Economy during World War II
Written by Christopher J. Tassava, from the Economic History
Association
http://eh.net/encyclopedia/the-american-economy-during-world-war-ii/
Overview
Wars effects were varied and far-reaching:
o Decisively ended the Great Depression
o Government emerged from the war as a potent economic actor,
with the ability to
partially control the economy through spending and
consumption
o Economy was essentially revitalized by the war, and fueled
growth of many sectors
o
Strengthened the organized labor movemento
Quality of life increases
o War damaged the economy of other superpowers, giving the US
unprecedented
economic and political dominance after the war
Background The Great Depression
A global economic slowdown, which helped shape many political
movements around the world
as well (i.e. rise of Hitler and the Nazi party with the promise
of economic power)
U.S. President Roosevelt promised to enact a New Deal to
reconstruct American capitalism
It waxed and waned between 1933 and 1940, mitigating some
effects of the Depression but
not ending the crisis
In Germanys invasion of Poland in 1939, US was still deeply
mired in the depression:
o Showed by GDP, which dropped for 4 years in a row after
1929
o Showed by unemployment; between 29 and 39 the US employment
rate averaged 13.3
percent; in the summer of 1940, 5.3 million americans were still
unemployed; 11.5
million had been in 1932
Background Preparedness and Conversion
As war spread throughout Europe starting from 1939, the federal
government readied the
nation for war, by enlarging the military, strengthening certain
allies, and converting Americas
industrial base to produce armaments and other war materials
rather than civilian goods
Conversion was resisted by some company executives, and was a
goal pursued more by public
officials and labor leaders
Auto companies fully converted to war production in 1942, and
only began substantially
contributing to aircraft production in 1943 > initially the
car-companies rejected producing
aircraft, but the Reuther Plan called the publics attention to
US lagging preparedness for war
http://eh.net/encyclopedia/the-american-economy-during-world-war-ii/http://eh.net/encyclopedia/the-american-economy-during-world-war-ii/http://eh.net/encyclopedia/the-american-economy-during-world-war-ii/
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Over the course of the war US produced increasing amounts of
ships, overseen by the US
Maritime Comission; 71 ships only produced between 30-36, 106
between 38-40, and almost
that amount in 1941 alone
US also exported aircraft, military vehicles, munitions to
Britain and Soviet Union via the lend-
lease program
US also exported food to Britain
War Administration
From 1939, American leaders recognized that war economy could
not be unfettered, left in a
laissez-faire manner; manufacturers could not be trusted to stop
producing consumer goods,
etc.
Federal government created an array of mobilization agencies
that purchase goods for the Army
or Navy
GDP increased dramatically, as did federal and military
spending
Table 1: Federal Spending and Military Spending during World War
II
(dollar values in billions of constant 1940 dollars)
Nominal GDP Federal Spending Defense Spending
Yeartotal $ % increase total $ % increase % of GDP total $ %
increase % of GDP % of federal spending
1940 101.4 9.47 9.34% 1.66 1.64% 17.53%
1941 120.67 19.00% 13.00 37.28% 10.77% 6.13 269.28% 5.08%
47.15%
1942139.06 15.24% 30.18 132.15% 21.70% 22.05 259.71% 15.86%
73.06%
1943 136.44 -1.88% 63.57 110.64% 46.59% 43.98 99.46% 32.23%
69.18%
1944 174.84 28.14% 72.62 14.24% 41.54% 62.95 43.13% 36.00%
86.68%
1945 173.52 -0.75% 72.11 -0.70% 41.56% 64.53 2.51% 37.19%
89.49%
Taxation
Taxation increased dramatically; government extended the income
tax to virtually all Americans
# of americans who payed federal taxes rose from 4 million in
1939 to 43 million in 1945
Rates also increased; americans who earned as little as $500 per
year paid income tax at a 23
percent rate, while those who earned more than 1 million paid a
94 percent rate
Standard of Living
With wages rising about 65 percent over the course of the war,
this limited success in cutting
the rate of inflation meant that many American civilians enjoyed
a stable or even improving
quality of life during the war (Kennedy, 641)
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Accomplished through General Maximum Price Regulation from the
Office of Price
Administration, which curtailed inflation by maintaining prices
at their March 1942 levels
National War Labor Board imposed a wage-increase limit of about
15 percent
Labor Unions and Employment
Labor unions and their members benefited a lotNWLBs maintenance
of membership rule allowed unions to count all new employees as
union
members
Therefore, unions grew dramatically; the organized labor
movement expanded from 10.5 million
members in 1941 to 14.75 million in 1945
By 1945 35.5 percent of non-agricultural workers were
unionized
The wartime economic boom also allowed unemployment to dip to
1.2 percent in 1944,a record
low in American economic history
Those that were unemployment in the depression found jobs
Percent of blacks who had jobs was 8%, while black percentage of
total population was 10%
Two million women also served in war industries, half in
aerospace alone
Table 3: Civilian Employment and Unemployment during World War
II
(Numbers in thousands)
1940 1941 1942 1943 1944 1945
All Non-institutional Civilians 99,840 99,900 98,640 94,640
93,220 94,090
Civilian Labor Force
Total 55,640 55,910 56,410 55,540 54,630 53,860
% of Population 55.7% 56% 57.2% 58.7% 58.6% 57.2%
Employed
Total 47,520 50,350 53,750 54,470 53,960 52,820
% of Population 47.6% 50.4% 54.5% 57.6% 57.9% 56.1%
% of Labor Force 85.4% 90.1% 95.3% 98.1% 98.8% 98.1%
Unemployed
Total 8,120 5,560 2,660 1,070 670 1,040
% of Population 8.1% 5.6% 2.7% 1.1% 0.7% 1.1%
% of Labor Force 14.6% 9.9% 4.7% 1.9% 1.2% 1.9%
Science and Technological Innovation
