Sample Answer for US economy 1945-89

Essay Plan

INTRODUCTION:

• Post-WWII Economic Growth
• Fear of Recession
• Continuation of Economic Prosperity

BODY PARAGRAPHS:

1. Post-WWII Industrial Expansion
2. Public Investment and Government Initiatives
3. Domestic Resources and Technological Advancements
4. Baby Boom and Population Growth
5. Military-Industrial Complex and Economic Impact
6. Rise of Multinational Corporations (MNCs)
7. Globalisation and Cultural Influence
8. Economic Downturn in the Late 1960s
9. Responses to Economic Challenges (Nixon, Ford, Carter, Reagan)
10. International Competition and Decline in Economic Dominance

CONCLUSION:

• Economic Boom and Recession Cycle
• Post-1989 Developments
• Long-term Economic Fluctuations

Sample Essay

The US economy went through a series of developments from 1945 to 1989. After WWII, there was a fear of a recession, but the economy continued to grow through the 1940s, 1950s, and 1960s. Unemployment and inflation were low due to the booming post-war industry and multinational corporations (MNCs). The standard of living increased, as did home ownership and education; all of this contributed to the 'American Dream'. The economy prospered until the high defence spending due to Vietnam began having adverse effects in the late 1960s.

During WWII, American industries expanded to meet the increased demand for iron, coal, steel, and oil. This led to higher employment and the entrance of women into the workforce. As a result, the average family's income increased. Consumer goods were not a priority during the war, so by the end, people had significant savings. These were spent afterwards, increasing employment due to rising demand. From 1940 to 1945, income tax increased from $7 billion to$51 billion. Many companies merged, becoming corporations, and as the US mainland was undamaged, the country was spared repair costs. The economy was in full swing.

Public investment improved the economy and society. The Military-Industrial Complex and the Cold War resulted in a massive military budget and space programme, creating employment and profits. President Truman established the Council of Economic Advisors to monitor economic progress and provide advice. The Employment Act and the GI Bill of Rights improved employment and productivity and provided opportunities for veterans. President Eisenhower implemented the Highway Act, and overall spending was increased on highways, education, and social welfare, contributing to the booming economy.

The US was fortunate to have domestic coal, oil, and gas supplies, which provided cheap energy. Advances in technology and science due to the space and arms race increased per capita income. Electronic, food, plastic, and pharmaceutical companies expanded. Scientists and engineers grew by 600% from 1945 to 1961. President Johnson's Great Society Programme and President Truman's post-war Marshall Plan increased public investment, reduced poverty, and made trade connections in Europe. These policies contributed significantly to the US economy, making it the most economically prosperous country in the world.

The baby boom was both a cause and a consequence of the economic boom, as healthcare and quality of life improved. Due to increasing birth rates, decreasing death rates, and immigration, the population increased by 50 million from 1940 to 1966. As a result, new markets emerged. The teen demographic, or the 'Pepsi Generation,' were catered to, leading to a culture of materialism within this optimistic new generation. The American Dream drove the economy, and manufacturers had a solid market to sell to.

Because of the Cold War, the military and corporations producing military equipment developed close relations. The military relied on industry to supply weapons, and the defence industry relied on the government for funding. As a result, strong lobby groups were created to sustain these relations. Corporations like Boeing and McDonnell Douglas benefited from the high profits. Lobby groups wanted to fuel the Red Scare so more money would be spent on defence. President Eisenhower thought the military-industrial complex would dominate policy and undermine the integral values of freedom and democracy. Despite this, the industry created many jobs and contributed vastly to the growth of the US economy.

Multinational companies (MNCs) resulted from smaller companies' mergers, leading to the formation of corporations, an oligopoly-led economy, and corporate capitalism. At the time, 75% of the industry was controlled by a mere 100 companies. MNCs began operating outside of the US to increase profits, and the US became a substantial overseas investor. The service industry grew as the domestic economy became more service-based. Cheaper taxes and labour were available abroad, and as MNCs expanded, the dollar became the world's primary currency. The European Economic Community (EEC) formed a big market for the US, resulting in a booming economy.

Widespread trade and commerce by large MNCs such as McDonald's, Coca-Cola, and Levi's made their corporations synonymous with American culture. This was referred to as globalisation. American music and films became famous worldwide, and English became the world's most studied second language. These trade and cultural developments meant the world's economies were more integrated. However, this sometimes led to an anti-American sentiment as globalisation erased native cultures. Free trade conditions were established, such as the World Bank and the International Monetary Fund; these helped boost the US economy even further.

This economic prosperity did not last forever. A downturn began around 1965 as a result of the unpopular Vietnam War. The war was hugely expensive, leading to high inflation. The 1973 oil crisis, sparked by the revolution in Iran, drove up prices, leading to further government spending and deficits. President Johnson continued the Great Society Programme and the Vietnam War. He attempted to reduce taxation while maintaining high government spending, leading to a budget deficit. More money was borrowed, and inflation continued to rise. The oil crisis and the Vietnam War triggered a recession in the US economy.

As a result of the domestic economic downturn, unemployment rose, mainly affecting minorities. President Nixon froze wages and prices in 1971 and devalued the dollar, making US exports less expensive and imports more so. He also tariffed Japanese cars to improve the balance of payments problem. President Ford cut government spending, increasing unemployment. President Carter then increased spending, causing inflation and political reactions. Finally, President Reagan introduced the Programme for Economic Recovery, cutting taxes by 25%, increasing take-home pay, and lowering government spending. This tactic was called Reaganomics; he also further increased the defence budget to deter the Soviet Union in the arms race. As a result, the recession improved slightly.

International competition from Germany and Japan rivalled the US economy. West Germany recovered due to the Marshall Plan and spent less on consumer goods, keeping wages lower. It exported 30% of its goods, compared to Japan's 11% and the US's 7%. Japan and Germany excelled in car manufacture, communications, and machinery. Throughout the second half of the 1900s, the EEC expanded and replaced the US as the world's largest trading bloc. By the end of the 1980s, the US economy had fallen from its grace in the 1950s.

In conclusion, the US economy from 1945 to 1989 followed the natural cycle of boom and recession. Bill Bryson illustrates its prosperity: "I can't imagine there has ever been a more gratifying time or place to be alive than 1950s America." After the fall of the USSR in 1991, the US decreased defence spending but increased it again after the 9/11 attacks, which led to the neglect of other parts of the economy. The GDP in the 1990s was very high, likely due to increased internet and technology access. Ultimately, the US economy saw highs and lows over the latter half of the 20th century.