Post-World War II economic expansion

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In the United States and several other countries, the boom was manifested in suburban development and urban sprawl, aided by automobile ownership.

Many Western governments funded great infrastructural project during this period. This is the redevelopment of Norrmalm and the construction of the Stockholm Metro in Sweden.

The post-war economic expansion, also known as the long boom, was an international period of economic prosperity in the mid 20th century which followed the end of World War II in 1945, and lasted until the early 1970s, ending with the collapse of the Bretton Woods system in 1971, the 1973 oil crisis, and the 1973–1974 stock market crash, which led to the 1970s recession. Narrowly defined, the period spanned 1950/1951 to 1973, though there are some debates on dating the period, and booms in individual countries differed, some starting as early as 1945, and with the East Asian booms lasting into the 1980s or 1990s.

During this time there was high world-wide economic growth; Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment. Contrary to early predictions, this high growth also included many countries that had been devastated by the war, such as West Germany (Wirtschaftswunder), France (Trente Glorieuses), Japan (Japanese post-war economic miracle) and Italy (Italian economic miracle).

[edit] Terminology

In academic literature, the period is most frequently and narrowly referred to "the Post-World War II economic boom", though this term can refer to much shorter booms in particular markets. It is also known as the Long Boom, though this term is generic and can refer to other periods.

[edit] Dating the period

Political Economist Roger Middleton states that economic historians generally agree on 1950 as the start date for the golden age^[1] – while Lord Skidelsky states 1951 is the most recognized start date.^[2] Both Skidelsky and Middleton have 1973 as the generally recognized end date, though sometimes the golden age is considered to have ended as early as 1970.

The real oil price was low during the post-war decades, with this ending in the 1973 oil crisis.

The boomed ended with a number of events in the early 1970s:

• the collapse of the Bretton Woods system in 1971,
• the 1973 oil crisis,
• the 1973–1974 stock market crash,
• the ensuing 1970s recession, and
• the ensuing displacement of Keynesian economics by monetarist economics.

While this is the global period, specific countries experienced booms for different periods; in Taiwan, the Taiwan Miracle lasted into the late 1990s, for instance, while in French the period is referred to as Trente Glorieuses (30 glorious [years]) and is considered to extend for the 30-year period from 1945 to 1975.

[edit] Global economic climate

In the United States, unemployment fluctuated during the 1950s, but dropped steadily during the 1960s.

Income in the United States by percentile, normalized to 2007 costs. All social classes grew wealthier during the 1950s and 1960s, but the lowest percentiles have only seen marginal improvement since then.

OECD members enjoyed growth averaging over 4% each year in the 1950s and very near 5% a year in the 1960s, compared with 3% in the 1970s and 2% in the 1980s.^[3]

Skidelsky devotes ten pages of his 2009 book Keynes: The Return of the Master to a comparison of golden age to what he calls the Washington Consensus period,which he dates as spanning 1980–2009 (1973–1980 being a transitional period):^[2]

Skidelsky suggests the high global growth during the golden age was especially impressive as during that period Japan was the only major Asian economy enjoying high growth (Taiwan and Korea at the time being small economies) – it was not until later that the world had the exceptional growth of China raising the global average. Skidelsky also reports that inequality was generally decreasing during the golden age, whereas since the Washington Consensus was formed it has been increasing.

Globally, the golden age was a time of unusual financial stability, with crises far less frequent and intense than before or after. Martin Wolf reports that between 1945–71 (27 years) the world saw only 38 financial crises, whereas from 1973–97 (24 years) there were 139.^[4]

[edit] Causes

[edit] Keynesian economics

Allied war bonds matured during these years, transferring cash from governments to private households.

The national debt of the United Kingdom was at a record high percentage of the GDP as the war ended, but was largely repaid by 1975.

Keynesian economists argue that the boom was caused by the adoption of Keynesian economic policies, particularly government spending ("fiscal stimulus"). This view is disputed by non-Keynesian economists, notably neoclassical economists, such as the monetarist school.^[2] An article capturing the very positive economic outlook in the US titled "We Are All Keynesians Now" was published in 2008 by Time Magazine ^[5]

Journalist Naomi Klein has argued the high growth enjoyed by Europe and America was delivered by Keynesian economic policies, and in the case of rapidly rising prosperity the golden age saw in parts of South America by the influence of developmentalist economics led by Raúl Prebisch.^[6]

[edit] Immediate post-war policy

Propaganda poster for the Marshall Plan.

Among the causes can be mentioned the rapid normalization of political relations between former Axis powers and the western Allies. After the war, the major powers were determined not to repeat the mistakes of the Great Depression, some of which were ascribed to post-World War I policy errors. The Marshall Plan for the rebuilding of Europe is most credited for reconciliation, though the immediate post-war situation was more complicated.

The post-World War I period was shaped by the Treaty of Versailles, whose Article 231 of the Treaty of Versailles (the "war guilt clause") attributed guilt to the losing Germans and instituted World War I reparations, which delayed the normalization of relations. There was also occupation of Germany's industrial Saar region by France and Britain, and protectionism in the Great Depression era.

Following World War II, the victorious Allies first followed a policy of deindustrializing and extracting resources from Germany under the Industrial plans for Germany – the Morgenthau Plan in America and the Monnet Plan in France – which involved dismantling German factories and removing them to victor nations, largely France and Russia – and destroying what could not be dismantled – together with the forced labor of millions of former German prisoners of war, the occupation of the Saar region by France (as had been done in the post-WWI period), extensive logging by Americans, and transfer of German technology, patents, and scientists to victor nations, the latter under Operation Paperclip.^[7] The Morgenthau Plan was then abandoned, being replaced by the Marshall Plan, which called for the rebuilding of Europe, including Germany. Some elements of the Morgenthau Plan continued under the Marshall Plan, and eventually ended officially in 1955. The occupation of the Saar was resolved by returning it to Germany in 1957, and the establishment of the European Coal and Steel Community to avoid further conflicts. The Coal and Steel Community formed the foundation of what was to become the European Union in later years.

The effect of the extractive de-industrialization of Germany was in the short-term beneficial to victors and detrimental to Germany, but following the rollback of the Morgenthau Plan, Germany's post-war economic recovery (the Wirtschaftswunder) shortly began.

[edit] Institutional factors

Institutional economists point to the international institutions established in the post-war period. Structurally, the victorious Allies established the Bretton Woods system, setting up international institutions designed to ensure stability in the world economy. This was achieved through a number of factors, including promoting free trade, instituting the Marshall Plan, and the use of Keynesian economics.

Within Western Europe, there was a growth of supranational entities, beginning with the European Coal and Steel Community and continuing into the European Union. These were part of an atmosphere of increased economic and political integration, and reduced military tension. This was under the umbrella of the North Atlantic Treaty Organization, under which the United States led and largely provided external defense during the Cold War, allowing a European focus on economic rather than military development.

[edit] Military spending

An alternative explanation for this period is the theory of the Permanent arms economy which suggests that the large spending on the military helped stabilise the global economy; this has also been referred to as "Military Keynesianism".

[edit] Specific countries

Assembly of the Volkswagen Beetle in West Germany.

A transistor radio made by Sanyo in 1959. Japan manufactured much of the world's consumer electronics during this period.

The economies of Japan, Germany, France, and Italy did particularly well, each of these countries caught up to and exceeded the GDP of the United Kingdom during these years, even as the UK itself was experiencing the greatest absolute prosperity in its history (the UK Conservatives' re-election slogan in 1959 was "You've never had it so good"). In France, this period is often looked back to with nostalgia as the Trente Glorieuses, or "Glorious Thirty", while the economies of Germany and Austria were characterized by Wirtschaftswunder, and in Italy it is called Miracolo economico.

Most developing countries also did well in this period, especially compared to the 1980s and 1990s, which were plagued by debt and financial crises, with the notable exceptions of India, the People's Republic of China and the Four Asian Tigers.

[edit] United Kingdom

A 1957 speech by British Primer Minister Harold Macmillan^[8] captures what the golden age felt like, even before the brightest years which were to come in the 1960s.

Employment figures sourced from a standard economics textbook ^[9] show that unemployment was significantly lower during the Golden Age than before or after:

In addition to superior economic performance, other social indexes were higher in the golden age; for example the proportion of Britain's population saying they are "very happy" has fallen from 52% in 1957 to just 36% in 2005. ^[10]

[edit] Effects

The economic success of the United States allowed the Apollo Program, concluding the Space race.

The increased free time of adolescents caused the rise of youth subcultures such as Mods.

It had many social, cultural and political effects (not least of which was the demographic blip termed the baby boomers). Movements and phenomena associated with this period include the height of the Cold War, postmodernism, decolonization, a marked increase in consumerism, the welfare state, the space race, the Non-Aligned Movement, import substitution, opposition to the Vietnam War, the civil rights movement, the sexual revolution and the beginning of second-wave feminism, and a nuclear arms race. In the United States, the middle class began a mass migration away from the cities and towards the suburbs. Thus, it can be summed up (at least for the middle class) as a period of stability and prosperity in which most people could get a job for life, a spouse, child, house, dog and picket fence - see American Dream.

In the West, there emerged a near complete consensus against strong ideology and a belief that technocratic and scientific solutions could be found to most of humanity's problems, a view advanced by U.S. President John F. Kennedy in 1962. This optimism was symbolized through such events as the 1964 New York World's Fair, and Lyndon Johnson's Great Society programs, which aimed at eliminating poverty in the United States.

[edit] Decline

The optimism waned however in the 1970s as high oil prices (due to the 1973 oil crisis) hastened the transition to the post-industrial economy, and a multitude of social problems began to emerge. During the 1970s steel crisis, demand for steel declined, and the Western world faced competition from newly industrial countries. This was especially harsh for mining and steel districts such as the North American Rust Belt and the West German Ruhr area.

[edit] See also

[edit] Post-war context

• Bretton Woods system, monetary system of this period
• European Coal and Steel community
• Counterculture of the 1960s
• Cold War
• Post-World War II baby boom
• Second Great Migration (African American)

[edit] Contemporary booms

[edit] Europe

• Greek economic miracle
• Record years, Sweden.
• Spanish miracle
• Trente Glorieuses, France
• Wirtschaftswunder, Germany and Austria

[edit] East Asia

• East Asian Tigers
• Japanese post-war economic miracle
• Miracle on the Han River, Korea
• Taiwan Miracle

[edit] Notes and references

[edit] Further reading

Chronological order of publication (oldest first)

• Marglin, Stephen A.; Schor, Juliet B. (1992), The Golden Age of Capitalism: Reinterpreting the Postwar Experience, Oxford University Press, http://www.us.oup.com/us/catalog/general/subject/Economics/History/?view=usa&ci=9780198287414.

  A collection of seven essays by non-neoclassical economists, combining macroeconomics and institutional economics. 

• Cairncross, Frances; Cairncross, Alec (1994), The Legacy of the Golden Age: 1960's and Their Economic Consequences, Routledge 
• Webber, Michael John; Rigby, David L. (1996), The golden age illusion: rethinking postwar capitalism