Economy Flashcards
(20 cards)
1
Q
Impact of WW2 on the economy
A
- growth in home ownership + consumerism = personal consumption was fuelled by hire-purchase agreements + consumer debt
- the war had replaced the high unemployment rates of the 1930s with the full employment needed for maximum war production
- the economic potential of the economy was fully exploited = new methods of industrial organisation + massive federal spending helped grow the economy
2
Q
What happened to the economy after 1945?
A
- slight dip in the economy as America shifted from war to peace
- however, the outbreak of the Korean War in 1950 + massive spending on armaments as the Cold War developed kick started economic growth again
3
Q
What industries did WW2 boost?
A
- stimulated big industries like steel, oil + engineering
- high tech industries such as aircraft builders e.g. Boeing in Seattle-Tacoma benefited from advancements in scientific research + development during the war + from high federal spending after
- there was also a boom in the chemical industry, especially plastics
- the invention of small solid-state transistors accelerated the development of computers + in 1951 the Stanford industrial park opened in the Silicon Valley
4
Q
What’s different about the post WW2 boom compared to other booms?
A
- it might have been expected the US would be hit by a financial crash + period of depression but that never happened
- financial panics leading to depressions were cyclical in American history = regularly occurred at roughly 20 year intervals—> 1873, 1893, 1907 + 1929
- however there was no such crash after 1945 until the early 1970s
5
Q
Trade after 1945
A
- conditions were very favourable for American exports
- world trade was reshaped at the 1944 Bretton woods conference in a way that fitted American principles = US currency effectively became the world currency for trade
- Marshall plan = American aid to Western European countries from 1947 helped rebuild their economies but also highly beneficial for American producers + exporters
6
Q
Figures for economic growth after 1945
A
- by 1960 GDP was three times higher than it had been in 1949 + after 1960 it rose even more steeply
- Number of cars produced annually quadrupled between 1946 and 1955
- 1956 = majority people employed in white collar jobs rather than blue collar, factory jobs
7
Q
How long did the post war boom last?
A
- lasted 30 years until the end of 1960
- however the boom was not even or continuous = punctuated by occasional downturns + periods of slack growth
8
Q
What happened in 1960?
A
- economic downturn begun in April 1960 + persisted until February 1961
- unemployment was up + farm income was falling
- Kennedy promised following his inauguration action + state intervention to boost the economy (like Roosevelt’s new deal + Truman’s fair deal)
9
Q
Kennedy’s intervention in early 1960s
A
- Area Development Act = policies to stimulate the construction industry (especially housing), raising the minimum wage, giving federal aid to ‘distressed’ areas
- 1962 Public Works Act = allocating $900 million for jobs creation in areas of high unemployment
- Manpower Development + Training Act provided federal funding for training the unemployed in new skills
- stimulated the international economy through the ‘Kennedy round’ = cutting tariffs + working with Japan + European economic community to liberalise trade
10
Q
Limitations of Kennedy’s intervention in the early 1960s
A
- not all of Kennedy’s policies were effective = many were watered down on their way through congress
- the surge of economic growth + prosperity in the 1960s was due to the natural strengths of American industry - but the injection of federal spending did stimulate recovery at a crucial time
11
Q
Space race
A
- 1961 = first US space mission by Alan shepherd showed Americas determination to win the ‘space race’ agains the USSR
- 1962 communication satellite act or ‘Telstar act’ = set up a corporation to develop satellite technology for space exploration
- massive spending on NASA enabled US to win the ‘space race’ by landing a man on the moon in 1969
- most importantly it stimulated the growth of high tech industries
12
Q
Kennedy’s economic policy in 1963
A
- 1963 Kennedy was persuaded by liberal economists to propose big tax reductions to stimulate the economy, even though growth was already strong
- Kennedy called for tax cuts of $10 billion over the next three years but like his other policies he had trouble getting approval from congress
- it was only passed 9 months later
- even so the annual rate of economic growth was running above 5% by the end of 1963
13
Q
Johnson’s economic policy
A
- Johnson was a big spender + one of the great persuaders, able to get his policies through congress
- committed huge federal funding for his social provisions of the ‘war on poverty’ + plans for a ‘great society’
- under Johnson national debt increased by 13%
- his economic policies had a social focus (like Franklin Roosevelt) trying to improve the lives of the 25% of Americans living in poverty
14
Q
Criticism of Johnson’s economic policy
A
- his ‘big government’ had too much emphasis on regulation, + spending that saddled the govt with msssibe future debts
- however at the time the economy seemed able to take the strain because despite all the social programmes + cost of Vietnam war the underlying economy remained vibrant
- consumer spending was high + manufacturers such as car giant Ford were booming
- millions of middle class Americans had the personal disposable income to spend
15
Q
Who was president during the 1970s depression
A
Nixon
16
Q
Economic conditions of the early 1970s
A
- high inflation
- recession
- rising unemployment
- energy crisis
17
Q
Causes of the 1970s depression
A
- US economy starting to feel the strain of the massive military spending required by the Vietnam war + the wider Cold War
- America struggling with availability of oil due to OPEC crisis in 1973 when OPEC refused to sell oil + caused prices of oil to quadruple + led to high rates of inflation
- growing balance of payments deficit as US exports couldn’t counteract growing price of imports (e.g. oil)
- Nixon pulls out of the bretton woods system
18
Q
Nixon’s response to the crisis
A
- made decisions that were a massive shock for the US + the world economy
- Nixon greatly expanded federal intervention in the economy = imposed a freeze on wages + prices, raised tariffs on all imports
- took the US off the gold standard + devalued the dollar by allowing floating exchange rates = undermined the position of the dollar as a worlds reserve currency established at the bretton woods conference
- this caused serious tensions with American European allies + with OPEC
19
Q
Success of Nixon’s policies
A
- in the short term Nixon was successful in reassuring Wall Street + reducing US deficit
- but the devaluation of the dollar + end of the bretton woods system led to high inflation in all western economies including the US
- it also provoked OPEC into a sharp rise in price of oil in 1973 = major crisis in energy supplies
- therefore, nixons actions dealt adequately with the immediate difficulties but in the longer term they produced a deeper economic crisis + badly undermined American prestige around the world
20
Q
State of the economy in 1974
A
- inflation at 12%
- stagflation = toxic combination of high inflation but low growth
- American industrial production slumped by 15%
- unemployment rose by 9%
