© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. World War II

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. How did America prepare for war? How was the wartime economy managed? What were the impacts of policies? How did America convert back to peacetime activity? What did we learn from managing the economy? What did we think we learned from managing the economy?

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Since the US had many idle resources, it was in a good position to mobilize for war At first, the US supplied the Allies with war products Later, the US supplied itself and the Allies with war products What were the economic effects?

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

From mid-1940 to mid-1945, the US produced:  86,338 tanks  297,000 airplanes  17,400,000 rifles, carbines, and sidearms  315,000 pieces of field artillery and mortars  4,200,000 tons of artillery shells  41,400,000,000 rounds of small arms ammunition  64,500 landing vessels  6,500 other navy ships  5,400 cargo ships and transports

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Key Points:  Since the US was far inside its PPC, it could quickly increase production  Civilian purchases during WWII were generally lower than during the Depression  Within 3 years, the US was producing more war munitions than Germany and Japan combined

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The US had several distinct economic advantages:  Except for Pearl Harbor, the war was fought on foreign soil  The US already had an absolute and comparative advantage in producing many goods  The US simply had more resources than many other countries

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. How did the US pay for the war? 1)TaxesTaxes 2)Borrowing 3)Printing new money

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

After US resources became fully employed supply became more inelastic, and the money supply increased, inflation became a problem Wage and price controls were the prescribed solution

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Effects of price controls: 1)Shortages 2)Quality deterioration 3)Black markets 4)Non-price rationing 5)Distorted behavior to try to obtain goods and services

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Considerations:  Are the data even accurate? (wage and price controls would have distorted GNP data)  20 to 50% of production was going overseas for military use  Family, social, emotional stresses  See Higgs (1992) “Wartime Prosperity: A Reassessment of the U.S. Economy in the 1940s”

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. After power and popularity gains during the 1930s, unions saw popularity and support diminish as the war ended The Taft-Hartley Act of 1947 greatly restricted union activity

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Women entered the labor force at rates never seen before They also performed jobs they never had before They didn’t leave the labor force after the war at the rate many predicted

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

The African American population moved from rural areas to urban areas Also moved from the South to the North and Midwest Would eventually help the Civil Rights Movement

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Strong demand reduced the need for and reliance on price supports

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Why didn’t the Depression resume after the war? Plausible reasons: 1)Increase in money supply and financial assets 2)Employment Act of )Increase in demand for consumer goods and exports (to rebuilding countries) 4)GI Bill 5)Optimisim 6)Others?