After World War II, most countries of the world were left to grapple with the trail of destruction the war left behind. This destruction was replicated in different sectors of the economy, such as the agricultural, industrial, infrastructure, telecommunications, health, education, and trade sectors among others, resulting in economic problems for various countries. Japan and Europe’s economies bore the greatest brunt of what has been described as humanity’s greatest war.
But as some countries suffered, others like the United States seemed to have come out of the war stronger than before and as such, its economy continued to experience growth. Even though the country had spent a lot of money on the war, the effect on the United States was minimal. Over the successive decades after the war, different social, political, and economic issues cropped up.
This paper will focus on the economic aspects that are mainly associated with the successive decades between 1950 and 1990, and based on the outstanding issues in these periods as well as the current events, generate a forecast of the same in the predictable future. It will also show how the major events in these decades affected the culture of the United States people, government policies as well as the general economy, and prove why they had a bigger impact on the people as opposed to other happenings in the same periods. It is important to note at this point that any economy is characterized by several basic underlying qualities which include production, consumption, exchange, and distribution, which are in turn affected by factors of production including capital, land, entrepreneurship, and labor.
Consumerism in the 1950s
This period closely followed the end of the Second World War, whose events led to the increase in consumption associated with it. Since most of the countries engaged in the war had been affected greatly in terms of infrastructure, it meant that they were unable to produce enough products for the people in their countries and as such had to rely on the United States for the supply of such products. The issue of consumerism stood out most in this period because of the positive effects it had on the lives of the people of the United States, especially regarding their income, spending habits, and living standards.
The rise in consumerism during this period was necessitated by the increase in demand by war-affected countries for commodities produced by the United States. Since the US infrastructure was not greatly affected by the war, the country was able to produce a variety of products to sell to different countries and more so to Europe which later became the main consumer of US manufactured products.
As a direct result of the revenues generated from these sales, the US economy experienced a major boom, and with such benefits trickling down to the country’s people, they had more money at their disposal and thus spent it on various goods and services. Goods such as clothes, televisions, and vehicles from the automobile industry experienced major consumption, while other people took to tourism as a way of spending the extra money they made (Young & Young, 2004, pp. 260). Norton, et. al (2009, 780), describes the situation during this time as having been one of consumption culture, with people spending money on goods that were used to express their styles and status in the society. As the United States sought to help other countries get back on their feet economically, it also reaped economic benefits. The US accomplished its intended goal as it gave people from other countries access to consumer products and also helped in re-building their economies.
1960s-The Era of Economic Expansion
Although consumerism in the 1950s proved beneficial to the United States economy, it also came with its share of problems. Towards the end of the 1950s, the US economy started experiencing a downturn with 1958 being the year that experienced the most troubles. Production fell, especially in the industrial sector due to declining sales, for example in the automobile industry, corporations experienced reduced profits, the level of consumer debts went up and the levels of unemployment rose by a great margin. As a result of this, the government experienced major deficits in its budget due to declining revenues.
President J. F. Kennedy’s government which came into power in 1961, mainly focused on the expansion of the US economy with fiscal policy being the main tool used to bring about economic recovery and expansion. This is because he mostly focused on Keynesian propelled economics.
According to Junker & Gassert (2004, pp. 359), the Fiscal policy was meant to counter the effects of unemployment. To do this the government adopted tax cuts and increased federal funding. With the tax cuts, the government hoped to increase demand, enhance the level of economic growth and as such reduce unemployment but this did not happen. President Lyndon, after taking over in 1963 introduced major government domestic spending programs, to reduce poverty levels among the country’s people (Rosser & Rosser, 2004, pp. 124-125). For example, military spending was increased as well as spending on other sectors such as education, infrastructure, and research.
In as much as this translated into increased consumer spending, these benefits were only short-lived as they increased general wage levels and prices. This led to inflation as was witnessed from 1967 through to the 1970s. The United States people only benefited as far as increased income and reduced levels of unemployment were concerned, but they now had to contend with the negative effects of high levels of inflation.
Stagflation in the 1970s and 1980s
These two decades are associated with high inflation rates in the United States, which surprised even the policymakers. The early 1970s saw oil and food prices shoot up leading to high rates of inflation of between 5% and 10% (Rabin & Stevens, 2002, pp. 513). This era was characterized by a lack of political goodwill to reduce the high levels of inflation because by applying anti-inflationary measures, the level of unemployment would go up.
This was especially so during President Nixon’s term in office between 1972 and 1974. When Carter took office between 1973 and 1977, he introduced fiscal policy measures meant to curb inflation, such as voluntary price and wage controls as well as government programs to increase employment, but they failed to yield the intended results because even towards the end of the 1970s decade, inflation and unemployment were still high. These events greatly weighed down on the people of America and more so the unemployed.
The effects of this decade’s economic crisis were felt even in the 1980s especially in terms of budget deficits, which continued to increase. President Regan’s term in office between 1981 and 1989 was also characterized by swelling government deficits even after he implemented tax-cutting policies and increased government spending as a way of stimulating economic growth (Northrup, 2003, pp. 239). During this period, those who greatly suffered were mainly businessmen as many businesses had to either shut down or went bankrupt.
Economic Recovery in the 1990s
With the United States having experienced one economic downfall after another, people were skeptical about the progress it would make in the 1990s, but this proved to be the decade that would see the country experience economic recovery and continued economic growth. Under the governance of President Clinton, starting in 1993, the regulation of economic activities in the country remained under the watchful eye of the Federal Reserve System.
Trade opportunities for the country were great as Eastern European Communism and the Soviet Union had fallen apart. Technological developments and innovations in the information technology sector helped by taking advantage of the available trade opportunities as the country supplied related products to different countries. This led to an increase in corporate earnings which resulted in rapid economic growth.
This trend coupled together with increased levels of employment, low inflation rates, and a rise in business profits strengthened the stock market and in effect the country’s financial system. Most people were employed in the services sector and the information technology sector, with a few in the industrial and farming sectors. The government budget deficit also reduced significantly due to increased tax collections, and in 1998, the government achieved a budget surplus for the first time in decades (William, McHugh & McHugh, 2005, pp. 393).
The majority of the American people benefited from this economic recovery as different sectors of the economy opened up new opportunities for them. The policies that were put in place during this time worked and their effect was seen in the improvement of the US economy and also in peoples’ living standards. Members of the Clinton administration were applauded for this recovery as they had achieved their goal which was to return the economy to positive growth and from the results attained, it is evident that they managed to surpass their goals.
The period between 1950 and 1990 was characterized by mixed economic activities, some of which were beneficial and some which were not. Successive governments came up with different economic policies to counter economic downturns and while some worked, others proved detrimental to the country’s economy. But in the 1990s, the country finally found its footing and the economy started experiencing economic growth.
Based on the above information, I conclude that with the right policies, it is possible to achieve continued economic growth. Even though the policies during the 1990s decade worked, it is important for institutions charged with the regulation of economic activities to engage in a constant survey of the economy and put in place policies that are in line with the prevailing economic conditions, to avoid problems such as those caused by the 2008 economic crisis. Different proposals have been floated to this effect, such as the Financial Regulatory reforms by the US Treasury Department, and if correctly observed, they will help prevent the occurrence of future economic crisis and in cases where they cannot be completely prevented; the proposals will minimize the negative effect on the economy.
Junker, D. & Gassert, P. (2004). The United States and Germany in the Era of the Cold War, 1945-1968. New York: Cambridge University Press.
Northrup, C. C. (2003). The American Economy: A Historical Encyclopedia. Volume 2. California: ABC-CLIO, Inc.
Norton, M. B. Sheriff, C. Blight, D. W. Katzman, D. M. Chudacoff, H. & Logevall, F. (2009). A People and a Nation: A History of the United States Since 1865. 8th Edition. Massachusetts: Wadsworth Cengage Learning.
Rabi, J. & Stevens, G. L. (2002). Handbook of Monetary and Fiscal Policy. New York: Marcel Dekker, Inc.
Rosser, B. J. & Rosser, M, V. (2004). Comparative Economics in a Transforming World Economy. 2nd Edition. Massachusetts: Massachusetts Institute of Technology.
William, N. G. McHugh, J. M. & McHugh, S. M. (2005). Understanding Business. Ohio: McGraw Hill Publishers, Inc.
Young, W. H. & Young, N. K. (2004). The 1950s: American Popular Culture through History. Connecticut: Greenwood Publishing Group, Inc.