United States Economy Before, During, and After WWII
World War II was a colossal global conflict that resulted in much loss of human life, as well as economic distress. According to The U.S. Economy in World War II by Harold Vatter, America was initially in a state of confusion, brought about by the principles of isolationism and neutrality- an impossible feat for a country of such foreign importance. After being forced into the war, America experienced a period of economic prosperity due to the high demand for military production. The war completely altered America’s economy by its “establishment of the U.S. mixed economy.”1 Mark Harrison’s publication of The Economics of World War II: Six Great Powers in International Comparison explains that in the United States’ mixed economy, the dominating factor was the war economy, an economy that ran to serve its military. In general, World War II brought about a two-step process in which the United States’ mixed economy was born, resulting in a period of prosperity and postwar inflation.
In the first part of The U.S. Economy in World War II, several aspects of the prewar and during war economy are stressed. Vatter states that the reason for America’s isolationism and neutrality in the mid-twentieth century was the fear of participating in European affairs, and its emphasis on domestic and societal issues rather than political and world affairs. This sense of isolationism and independence was spurred by “both jingoist Americanism and honest conservative nationalism.”2 The period of isolationism and neutrality cost America, as it was less prepared for World War II in terms of supplies, training, and other necessities of war. The United States economy remained depressed while being isolated, with a high unemployment rate, low private domestic investments, and low industrial production. In 1939, the United States began to build up its supply of war goods with the Strategic Materials Act and War Resource Board. In 1940, the war economy began with the establishment of the Lend Lease Act, which encompassed the cash and carry principle to supply Britain with weaponry. There remained a low Gross National Product, gross stock of business plant and equipment, high unemployment, and growing government debt. In an attempt to further control the war economy, the government gave tax breaks to businesses so that they would be more receptive of the federal government controlling their labor and equipment. As World War II began, there was a stagnation of the gross private domestic investment, an increase in personal consumption and an increase in military spending.
Chapters four through six of The U.S. Economy in World War II consisted of detailed analysis of the effect the war had on specific industries and on labor. The automobile and steel industries were mainly preoccupied with consumer sales before the war began. After the steel shortage and the 1941 attack on Pearl Harbor, the automobile industry and consumer-based industries were converted to serve military purposes. The war economy lasted approximately four years, a time period that “brought prosperity, on the whole.”3 The war brought on an increase of labor, energy, and raw materials. The surge of labor was in part due to female participation. During that period, the government was able to take control to stabilize prices and keep them low. Military goods were mass produced for the war effort, with a subsequent quality gap that resulted in the malfunction of some of the products. Luckily, the mass quantity method of production ensured that the Allies and the United States had sufficient war supplies. Several new administration groups and legislation were passed for the war effort, such as the Industrial Mobilization Plan and the Army and Navy Munitions Board. Livestock and agriculture saw a large increase in production. This surplus led to widespread rural unemployment and agricultural workers to seek defense positions. However, while the economy was prospering, small businesses were failing because of low incomes and high failure rates.
Chapters six to eight of The U.S. Economy in World War II cover federal fiscal and monetary policy, as well as the results of the war. World War II brought a surge of total demand and total income, which was typical of a war economy. For a country attempting to recover to normalcy after a major war, this quality would be interpreted as “a dangerous potential inflationary gap.”4 To lessen the war debt, various economic policies were debated, including a regular increase on income tax, and Keynes’s compulsory differed pay, in which income was collected into a savings fund. The consumer consumption remained level, while the Gross National Product increased and civilian capital decreased; more symptoms of inflation. The national debt had accumulated with past administrations, the New Deal and the economic policies of the Depression. Inflation was furthered by increased lending of money by banks of the federal government. The supply of money in the United States grew exponentially. The Treasury and the Federal Reserve System, although armed with cautionary measures to prevent inflation, were unsuccessful in their attempts. The postwar society saw a baby boom, published literary works of African American experiences during the war, the relocation of Japanese Americans after their liberation from the internment camps and postwar veterans being educated. There was increased labor union activity, even though the standard of living had increased and income distribution was more equal.
In the United States economy chapters of The Economics of World War II: Six Great Powers in International Competition, Harrison discusses the incredible growth of the United States economy. The United States economy hit its peak between the start of the war and 1944. The three main points of these sections are resources, finances, and cost. There are several reasons why the economy prospered and why the production was so effective. The high prewar unemployment level and the participation of women in the labor force for the war effort were two of many factors. Mass production and lower prices of weapons were made possible by more advanced technology. Furthering the prosperous economy, the consumer consumption “level in 1944 [was] an all-time high.”5Labor not only became more effective because of the increase of workers, but because workers were working more hours per week. Reallocation of labor occurred, the process in which an unskilled worker was placed into a more skilled, more productive position. Raising taxes, borrowing money, and selling bonds were the three most common methods of making up the war deficit. Unfortunately, these poorly judged actions caused the value of money to plummet and inflation to occur. In the end, Harrison states that the cost in human losses and economic injury America suffered due to the war was simply unnecessary and not pragmatic.
Although written by two different authors, both books share similar viewpoints on economics. The main meaning of both books is that the war contributed to the overall development of the United States' mixed economy. Having been forced to adapt to the foreign-instigated war, America’s union with the Allies was not pre-planned or intentional. Rapidly responding to the demands of the war, the automobile and steel industries had to convert their equipment to begin the mass production of war goods. Additionally, it was necessary “to divert and relocate energy, materials, labor and plant capacity to the needed military production centers.”6 Similarly, the war altered other aspects of the economy, such as labor. Instead of low-paying, low-hourly jobs, workers were trained to obtain higher-paying, more hourly positions. Women joined the labor force and war effort, temporarily taking jobs of men who were off fighting in the war. World War II was a time of revolutionary change in the history of the economy of the United States- it was during this time that the mixed economy was developed.
Harold Vatter, the author of The U.S. Economy in World War II, grew up during the depression. Later, he was unable to find sufficient funding to attend school until he was given money from a relative. Vatter published The U.S. Economy in World War I and The Economy in the 1950’s as well. He was an advocate for the Spanish Civil War and was opposed to fascism; therefore he would have been opposed to Italy and Germany during WWII. Although he was admitted to University of California Berkeley, Vatter was forced to put his education on hold in order to fight in the war. Vatter typed up documents after he was drafted, but was bitter at the fact that he had been taken away from his studies. Therefore, there may be a bias in his literary work. Vatter wrote this book in 1985, around four decades after World War II had ended. It is likely that new information was then appearing, from which he could make a deeper analysis on the economy during the war, as well as postwar changes. During 1985, the economy was slowly recovering, so it is likely Vatter was searching for an explanation as to why the economy had dipped in earlier years. Vatter states his desire to show the “immediate postwar reshaping process in the economy”7 and subsequent inflation and economic woes. People were generally interested in the topic of the postwar economic effects of World War II during this time, hoping to understand their own financial situations. The author attempted to write a book to the public’s demand during a time of economic grief. His conclusion may be biased due to the desire to please the public, resulting in exaggerated information.
The author of The Economics of World War II: Six Great Powers in International Comparison, Mark Harrison, was a British writer from the United Kingdom. Harrison published The Economics of World War I, as well as economic history books about the Soviet Union. Although it is undeniable that Harrison was an avid scholar of economic history, it was unusual that he compiled a literary work on the topic of the United States economy during World War II when he was neither an American, nor a specialist in American history. In addition, the book includes in total, six countries and their economic situations during the war. These countries were the nations he considered “the six great powers: the UK, USA, Germany, Italy, and the USSR.”8 This book was written in 1998, a year of economic prosperity. Harrison chose to write this novel merely to show the historical background of the economy, which was contrasted interestingly with the economic prosperity that they were experiencing at the time. This book was meant to be factual and informative on the given topic. The author intended to share his knowledge in the history of the economy of Britain, and the reasons for the economic success that they were experiencing then. Its end product may be biased due to the desire to please the people and accept their wishes of exaggerated information.
Mira Wilkins, of Florida International University, in her review of The U.S. Economy in World War II, stated that she believed it to be a historical book of usefulness. The first two chapters are on wartime preparation with the themes of “unemployment rate, gross private investment, real personal consumption, and military expenditures.”9 For the most part, the domestic aspects are covered by the book. She says that the two omissions that she caught were the United States international oil policies and changes in America’s financial institutions, which would have improved the accuracy and usefulness of the book. Hugh Rockoff, from the Cambridge University Press, published a review on the same book. The chapters include two themes: social consequences of the war and the “connecting rod between the New Deal’s inauguration of the mixed economy.”10Rockoff doesn’t believe the book to be clear as to the role that the war had, which leaves the readers confused.
For the most part, Richard Overy of the Cambridge University Press believes the “inflation, declining living standards, [and] a stagnant gross domestic product”11to be the important postwar effects of the war. The allies were able to be flexible with their economies, which was a major reason as to why they had won the war. Other important aspects that Harrison mentioned were the ample supplies of weapons, and the ability to utilize mass production. Michael L. Hughes from Wake Forest University approves of Harrison’s depiction of the war’s impact on the supply of money and capital for America. However, he believes the book to be incomplete because there is not a comparison of the pre and post war production levels. Hughes believes that Harrison did not “assess labor allocation and productivity”12 as well as he should. Harrison and his authors are commended by Hughes for providing a mostly accurate book of economic history for America in World War II.
The book The U.S. Economy in World War Two is a thorough analysis of the economic situation during that time period. Not only does it provide insight on the economic situation during World War II, but also includes pre-war, during war, and post-war information. Furthermore, unlike most books, it includes data tables with statistics that serve to strengthen its arguments. The text is clear, the diction and vocabulary is simple, and the tone is informative and unbiased. For the most part, I believe this book to be an excellent source of insight on the economic conditions in the United States during World War II. In the second book, The Economics of World War II, Harrison analyzes the economic conditions in six countries during WWII. The passage on United States economy is informative, and the diction and vocabulary are simple. It was unusual in that it was written in first person, and sometimes seems to be a bit biased. However, overall, both books presented a clear analysis of “United States economy and economic policy in the World War II period.”13 The books were very easy to read and very factual.
The books The U.S. Economy in World War II and The Economics of World War II exemplify how the 1940s was a watershed in history. The authors definitely agree with this statement, because it was during this time period that there was the creation and the implementation of the mixed economy, a new innovative economic system. With the mixed economy, various aspects of the economy were altered. The 1940s saw a “great [upheaval] that spanned the years from 1939 to the first postwar recession of 1947-1948,”14 that forever changed the history of America’s economy. For example, women began to participate in the war effort by working in factories. There was also a migration of agricultural workers to the city to work in factories. These workers saw a dramatic change. Workers gained more working hours and higher paying jobs. The technological advances in equipment allowed for the mass-production of military supplies. The war economy, a minor aspect of the mixed economy, virtually changed the history of the United States economy forever.
World War II caused the United States to suffer major causalities and undergo dramatic economic change; from the implementation of the mixed economy, there was the innovative welcoming of a different labor system, agricultural system, industrial system, and social system. It is vital that society remember its past economical mistakes so that it can learn from those mistakes and move forward as a community towards economic prosperity. If society continues to do so, it will “survive in the face of exceptionally powerful and persistent [economic] attacks upon them.”15
1. Vatter, Harold. The U.S. Economy in World War II. New York: Columbia University Press, 1985. X.
2. Vatter, Harold. 2.
3. Vatter, Harold. 55.
4. Vatter, Harold. 102.
5. Harrison, Mark. The Economics of World War II: Six great powers in international comparison. Cambridge: Cambridge University Press, 1998. 81.
6. Vatter, Harold. 23.
7. Harrison, Mark. 133.
8. Harrison, Mark. XVII
9. Wilkins, Mira. “The American Historical Review.” Colombia University Press, Dec. (1986): 1-2
10. Rockoff, Hugh. “The Journal of Economic History.” Cambridge University Press, Sep. (1986): 876-877
11. Overy, Richard. “Who really won the arms race?” Cambridge University Press, Nov. (1998): 4
12. Hughes, Michael. “The American Historical Review.” Oxford University Press, Apr.(1999): 543-545
13. Vatter, Harold. IX.
14. Vatter, Harold. IX.