US economy

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  • The US Economy
    • John Keynes-economist
      • Theory explained how  to encourage a national economy out of recession or depression by using government financial muscle to borrow money and spend it on large scale projects to stimulate industry and create jobs
      • Philosophy employed by Roosevelt in his 'New Deal'
      • Truman was more sceptical of Keynesian economies but wanted to continue with the liberal social programmes that had been so popular before the war
      • Truman had an economy set for decline and a country and population that had been remade by the war-this was against him in his pursuit of a domestic programme that could be compared with that of FDR
    • The US and the global economy
      • By the end of WW2 the USA was the single dominant force in the global economy
      • For the USA to retain its global dominance it needed to return to peaceful trading relations with Europe and the Pacific
        • One of the factors that influenced Truman's post-war thinking on foreign affairs
      • Growing economies in Europe and Asia would allow Britain, France and China to pay back their substantial war loans from the USA -$31 billion, $3.2 billion and $1.6 billion respectively
      • The Bretton-Woods System
        • On July 1st 1944, representatives of the 44 Allied nations met in Bretton Woods, New Hampshire to design a system of monetary management for the post war world
        • Discussions led to the establishment of the International Monetary Fund (IMF) and the World Bank as well as obliging countries to adopt a monetary policy that tied their currencies to the US dollar
        • The system also promised that the IMF would step in to help countries in financial trouble
      • Measures taken towards the end of the war in preparation for a return to global trade gave the US a key advantage
        • Introduction of the Bretton-Woods system (including the IMF and World Bank both headquartered in New York)  promised the new world economic order would be based around the US conception of capitalism and trade.
        • Truman just needed to keep things ticking over for the first few post-war years and the pick-up in the world economy should have inevitably followed
    • US economy under Truman
      • Truman's ambitions for presidency mainly domestic
        • Ironic he has mainly become associated with international problems
      • Main domestic ambition to continue with the liberal legislative programme of the 'New Deal' and to smooth the transition of the economy from wartime to peacetime
        • Policy called the 'Fair Deal'
          • Designed to address the problems of poverty that had carried over from the Great Depression, such as the inequalities in education and healthcare, as well as the problems of unemployment
        • With 12 million former soldiers about to rejoin the job market, cushioning the inevitable problems they would face was imperative
        • Truman decided to demobilise 9 million of the soldiers in 1945 but keep an army of 3 million given the dangerous state of the global situation
          • This gradual reintroduction into the civilian workforce prompted some short term unemployment but nothing on the scale of the Great Depression-indeed the Truman presidency never saw unemployment rates run higher than 5%
        • In 1945 the army was further reduced in size to 1.5 million men
          • This gradual reintroduction into the civilian workforce prompted some short term unemployment but nothing on the scale of the Great Depression-indeed the Truman presidency never saw unemployment rates run higher than 5%
      • Businesses also faced a period of transition from the demands of wartime production to those of peacetime
        • Confidence from having gained victory and the influx of men returning home led to a consumer boom which produced an inflation rate of 25% in 1945-46
          • Contributed to the Democrats defeat in the 1946 mid-term congressional elections
        • Truman proposed a Price Control Bill but it was watered down by Congress, convinced the President was too weak to push it through
        • Truman then suggested the creation of a Council of Economic Advisors (CEA) to advise the government which did get approval along with an Employment act which committed the country to 'maximum employment'
      • The post-war economy was also helped by demand for housing and FDR's 1944 GI Bill
        • The GI Bill provided government help in getting a 90% mortgage, guaranteed 52 week unemployment benefit and loans for collage education
          • In the subsequent decade the government invested $20 billion through the GI Bill, stimulating several key sectors of the economy and providing a golden age for social mobility
        • The 'baby boom' of 1945-50 created a huge new market for goods and services as well as stimulating housing
        • Housing boom led to the development of suburban housing sites such as Levittown in Long Island, New York where workers could have far larger houses for less money than in the city and still get to work due to the booming car sales which rose from 2.1 million in 1945 to 7.9 million by 1955
    • By the time Truman was re-elected in 1948 the economy was improving and demand was growing
      • Helped by the maturing of $185 billion of war bonds purchased by US citizens since 1941, injecting money into the economy which could fuel the consumer boom
      • By 1952 total output had increased by almost 90% on 1939 levels, that industrial output had approximately doubled, agricultural output had increased by a third and business investment rose from an annual rate of $14 billion to almost $38 billion.
      • Employment had risen despite the demobilisation of thee army growing from 46 million to an average of about 61 million during the same period
      • The per capita income of Americans had risen about 40%




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