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Joseph Kaminski

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December 16, 2017

From Production to Consumption: The Economic Mortality of American Ingenuity


The American economic system has changed significantly since the end of World War II back in 1945, but the ‘product’ of American prosperity has managed to remain the same throughout the decades. Shortly after the American allied victories in the Second World War, the United States became a global economy. They were the only song and dance in town after 1945, as the rest of the former global economies were left in literal ruins – for better or for worse. Thus, America (having only becoming a so-called ‘great power’ after the conclusion of the Spanish-American War less than fifty years prior) became the only real industrial power that was stable enough to witness progress in both domestic infrastructure and global economies. With that being said, the foundations of American success and failure between the periods of 1945-1975 and 1976-2000 possess similarities and differences that summarize the economic history of modern America. This paper focuses on the role that the American government played in its own economy, the role of the United States on a global scale, and the correlation between social change and economic prosperity between the two aforementioned times.

The most important advantage that America had coming out of the Second World War would have to be their ability to stand above others. Relatively far from the center of combat in both theatres, the United States home front was undamaged compared to the European powerhouses that were left in ruins after years of bombings and sieges. One of the biggest economic advantages that bolstered the American economic dominance at the time would have to have been the Marshall Plan which, according to Weaver’s An Economic History of the United States, pumped about five percent of the USA’s GDP into Europe in a rather successful attempt to rebuild “war-ravaged” economies. This would set the stage for a capitalist vs communist home front during the up and coming Cold War, as the Marshall Plan put down anticapitalistic thoughts across most of Western and Central Europe.[1]

Related: America’s Recession Problem: 1945-2016

Another major advantage that the American economy had during the rising decade after the end of the Second World War would have to have been the relatively stable growth of population. While other countries had witnessed the slaughter of countless civilians and were thus behind the relative ‘growth’ they should have been at, the United States pushed for population growth in a way that other members of the conflict couldn’t have been able to withstand. Just as their infrastructure and economic grasp had the ability to jump leagues ahead of a war-damaged world, the American civilian count managed to jump as well. From figures presented from Stephanie Coontz in her paper The Way We Never Were, the society of 1950s America was significantly ‘pro-family’ in a way that limited divorce rates and bolstered the ‘baby boom’ of the century. According to Coontz, birth rates rose from 18.4% to a shocking 25.3% by 1957, and that initial wave of baby-boomerism wasn’t limited to one decade.[2]

The birth rate for third children doubled between 1940 and 1960, and that for fourth children tripled.[3]

Coontz continues her economic analysis of the 1950s by showing how the period from around 1945-1960 was crammed between the problems that had kept down American progress in other periods. As both Coontz and Wright portray, there were social consensus of American ingenuity and progression through traditionalism at the time. There lacked a sense of ‘drive-by’ gang warfare that killed off urban youth in the 20s and 30s, and the drug epidemic was still on the horizon for traditionalists on the sociopolitical campaign of the Nixon administration in the late 70s. The society was almost too good to be true, in a sense. The polio vaccine, introduced to the public in 1954, is the greatest example of medicinal progress during the time.

There was a sense of advancement for everyone, and Coontz does an excellent job at portraying the time period. As the GDP grew by 250% and per capita income increased by almost 35%[4], working-class families found themselves in a whole new world – one that truly didn’t exist during the Great Depression. Labor has more power during this time period than it has ever had in American society, with a building boom and global economic system requiring such action. With such advancements in holding grasps on foreign markets through the Marshall Plan and labor rights and production on the home front at an all-time high, America truly was the world’s production powerhouse – a staple of systematic ideology.

The United States of America hasn’t really gone a decade without economic recession since the events of 1945; and by 1969, it appears as if recession became a literal part of reality. As the sixties demonstrated major social changes, the economic state of America through political changes in the overall scheme of rights portrayed new racial relations in a new limelight.[5] Data from the U.S. Census Bureau shows that despite major population growth overtime, the medium income tanks regardless of race during these  periods, showing that the typical American lived and still lives in a hit or miss style of recession.[6] At the end of the expansion period which came as early as 1945, inflation began to rise exponentially. Deficits and foreign markets beginning to come online after decades of immobility as they played catch up with the American markets injured the aspects of economic ingenuity in terms of both labor and overall production, which would in turn create a rather mild recession. Stagflation came knocking on the doorsteps of the market, and the nation watched as high unemployment and inflation smashed the power of labor that existed during 1945-1975. This, coupled with the high government spending during and after the Vietnam War along with other international affairs at the time, led to said stagflation and the effects of the Nixon Shock that would follow.

There lies the reason as to why the 1970s are referred to as the “Pivotal Decade” in Judith Stein’s Capitalism on the Run. The decade brought major difficulties to the society that was propelled by so-called greatness following the Second World War. If we are to label the period of around 1945 to 1975 as a period of great production and the period of around 1976 to 2000 as a period of great consumption, there has to be a middle-ground between the two. In Stein’s Capitalism on the Run, this middle-ground is referred to as years of “assimilation and adaption”[7] that pressured two sides of the same coin to converge in a sense that led America down a rather dangerous path.

Nixon

Richard Nixon (1973), right.

The Nixon administration, at the height of its power, was considered an ‘eye of the storm’ in many senses. Nixon, although he seemed to have cared less about the economic stipulations on his own doorstep, played cards internationally in a way that led to great consensus around the Republican Party of the time. Although the Nixon administration would be plagued with scandal upon scandal, the eventual trigger for economic recession would have to be the problems America had during the aforementioned oil crisis.

One major difference between the socioeconomic foundations in 1945-1975 vs 1976-2000 would be the key economic theories that existed and were propagated. Keynesian economics, propped up by John Maynard Keynes of Britain, played a crucial role in the world from 1945-1975. Keynes played an important role in the Bretton Woods conference in 1944, which would in turn set up a gold standard that backed the American dollar through both commercial and financial regulations. In a sense, the American dollar was backed by and converted through a supply of gold.[9] This international monetary system would exist until 1971, when the controversial ‘Nixon Shock’ shot down the Bretton Woods agreement to combat prevalent stagflation.[10]

By the time we enter the more recent era of 1976-2000, that sense of Keynesianism had begun to lose its meaning in economic thought. It was a more ‘trickledown’ theory that dominated the American economic system from 1976-2000. Divisions between corporatist Republicans and Democrats deepened to the point where the labor of American society had no other party to turn to. Critics of the traditional methods of economic success began to sweat at the concept of failure as 1975 turned to 1976.[11]

The periods of 1945-1975 and 1976-2000 were both dominated and effected by their own economic theories of vitality, and it would be these economic differences that would summarize the production and consumption values of American society and global interactions between both eras. By 1976, foreign markets in Europe and Asia began to ‘wake up’, in a sense, as competition towards the increasing consumer base on the United States home front. A process of deindustrialization took place within the production and labor based market system that America had gotten used to, with high paid union labor making it more difficult to compete and connect with said foreign markets. The Great Compression, the period from around 1945-1975, fell into the Great Inequality, the period from around 1976-today. American and foreign markets began competing not for labor but for resources and other investment opportunities within developing third world countries in a ‘race to the bottom’ style of business.

One could easily pinpoint the oil markets and the investment firms that grew impressive strongholds on Wall Street during the so-called “Pivotal Era”[12] of American society as the middle ground between such a traditionalist style of production and the more problematic consumption society that fed into foreign markets. By the time Republicans were in favor with the country again, with 40th President Ronald Reagan, American society pushed for fiscal policies that rivaled the political platforms of the past with a trickle-down sense of economic theory that fed tax benefits to the wealthy and pushed for the great inequality of the late 20th and early 21st centuries.[13]

The population and family-based benefits that 1950s America used to its advantage during the Baby Boom faded as other countries caught up from their wartime troubles and legislation that allowed divorce to become more mainstream took relevance in the next decade. The gold-based standard that allowed the American dollar to perceive dominance over foreign markets vanished in order to repair stagflation and other economic stagnations in progress during the pivotal decade of the 1970s. The economic theory that helped bring the Western World out of the Great Depression faced harsh critiques from Reagan and the new conservative movement, allowing for new virtues to set up a movement in favor for the wealthy in a 20th-21st century revival of gilded age socioeconomics. Alongside these figures, one would also have to view the progression of technology – with more percentages through radios and televisions through automobiles – as a quick way for foreign markets to enter the world in intellectual and entertainment based markets to compete against the production factors of ‘good old American ingenuity.’

All in all, both periods (1945-1975 and 1976-2000) have been plagued by economic problems and witnessed hope through economic success. As mentioned previously, it appears as if recessions have occurred on and off throughout the 20th and 21st centuries, and that we (today) are overdue for one. Census data has shown that we as a society have relatively accepted 12% unemployment as the normal standard, which goes against the whole ‘era of compression’ that was pushed for in the past.[14] The American society of 1945-1975 found itself as a global ‘superhero’, in a way, as the only song and dance in town following the destruction of previous world markets during the Second World War.

While other countries played catch-up with the Americans, legislative maneuvers such as the Marshall Plan allowed America to go from a debtor nation to a creditor nation. Both periods have witnessed legislative acts that pushed for economic vitality, and both periods have witnessed political connections through such acts. The main difference between the two eras would have to be the change from production to consumption, and how American markets found themselves competing with foreign ones in a race to the bottom for such profits. It seems as if America has no interest in investing towards production and labor, but in investments alone.

[1] Weaver, An Economic History of the United States, 169-172.

[2] Stephanie Coontz, “Leave It to Beaver and Ozzie and Harriet: American Families in the 1950s” in The Way We Never Were: American Families and the Nostalgia Trap, 23.

[3] Ibid, 23.

[4] Stephanie Coontz, “Leave It to Beaver and Ozzie and Harriet: American Families in the 1950s” in The Way We Never Were: American Families and the Nostalgia Trap, 24-25.

[5] Gavin Wright, “The Economic Consequences of Voting Rights" in Sharing the Prize: The Economics of the Civil Rights Revolution in the American South, 190-91.

[6] U.S. Census Bureau, Current Population Survey, 1960-68 to 2017 Annual Social and Economic Supplements.

[7] Judith Stein, “Capitalism on the Run” in The Pivotal Decade: How the United States Traded Factories for Finance in the Seventies, 101-102.

[9] Weaver, An Economic History of the United States, 170-172.

[10] Ibid, 193-197.

[11] Judith Stein, “Capitalism on the Run” in The Pivotal Decade: How the United States Traded Factories for Finance in the Seventies, 122-125.

[12] Ibid, 23.

[13] Weaver, An Economic History of the United States, 197-198.

[14] U.S. Census Bureau, Current Population Survey, 1960-68 to 2017 Annual Social and Economic Supplements.

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