America's Postwar Economic Transformation: From Anxieties to Prosperity

1. Chapter 36 The Cold War Begins, 1945-1952

2. I. Postwar Economic Anxieties • The decade of the 1930s had left deep scars: • Joblessness and insecurity pushed up the suicide rate and dampened the marriage rate • Babies went unborn—pinched budgets and sagging self-esteem wrought a sexual depression • The war banished the blight of depression • The faltering economy threatened to confirm the worst predictions of the doomsayers: • Who foresaw another Great Depression • Gross national product (GNP) slumped in 1946-47 • An epidemic of strikes swept the country

3. I. Postwar Economic Anxieties(cont.) • The growing power of organized labor deeply annoyed the conservatives. • Obstacles that slowed the growth of organized labor: • Congress passed the Taft-Hartley Act over President Truman’s vigorous veto • It outlawed the “closed” (all-union) shop • Made unions liable for damages that resulted from juris- dictional disputes among themselves • Required union leaders to take a noncommunist oath • The CIO’s Operation Dixie: • Aimed at unionizing southern textile workers and steel workers, failed to ease fears of racial mixing

4. I. Postwar Economic Anxieties(cont.) • Some groups of women proved difficult to organize • Union membership peaked in the 1950s • The Democratic administration took steps to forestall economic downturn: • It sold war factories and government installations to private business at fire-sale prices • It secured the passage of the EmploymentAct of 1946: • Made government policy “to promote maximum employ-ment;” a three-member Council of Economic Advisers: • To provide the president with the data and the recom-mendations to make that policy a reality.

5. I. Postwar Economic Anxieties(cont.) • 1944 passage of the Servicemen’s Readjustment Act: • Better known as the GI Bill of Rights, or the GI Bill: • Made generous provision for sending the former soldiers to school • Some 8 million veterans advanced their education • Majority attended technical and vocational schools • Some 2 million attended colleges and universities • The total spent on education was $14.5 billion in taxpayer dollars • The Act enabled the Veterans Administration (VA) to guarantee $16 billion in loans for veterans to buy homes, farms, and small businesses • The bill nurtured the robust and long-lived economic expansion and profoundly shaped the entire history of the postwar era.

6. II. The Long Economic Boom, 1950–1970 • The 1950s American economic surge: • America’s economic performance became the envy of the world • National income nearly doubled in the 1950s • Nearly doubled again in the 1960s • Shooting through the trillion-dollar mark in 1973 • Americans, 6% of world’s population, were enjoying about 40% of the planet’s wealth • Fantastic eruption of affluence • Prosperity underwrote social mobility • Paved the way for the success of the civil rights movement

7. II. The Long Economic Boom, 1950-1970 (cont.) • It funded vast new welfare programs, Medicare • It gave Americans the confidence to exercise unprece-dented international leadership in the Cold War era. • Americans drank deeply from the gilded goblet: • Make up for the sufferings of the 1930s • They determined to “get theirs” while the getting was good • They hungered for more • Size of the “middle class” household earning between $3,000 and $10,000 a year • By the end of the decade the average American family owned a lot.

8. II. The Long Economic Boom, 1950-1970 (cont.) • 60% now owned their own homes in 1960, compared to 40% in the 1920s • Women reaped the greatest rewards: • Urban offices and shops provided a bonanza of employment • The great majority of new jobs created went to women • Especially in the service sector • Women accounted for ¼ of the American workforce at end of the war and nearly ½ five decades later • Yet popular culture glorified the traditional feminine roles of motherhood and mothers • The clash between the demands of suburban housewifery and the realities of employment eventually sparked a feminist revolt in the 1960s.

9. III. The Roots of Postwar Prosperity • What propelled this economic growth: • The Second World War itself: • The United States used the war to fire up its factories and rebuild its economy • Much rested on the underpinnings of colossal military budgets (see Figure 36.1) • Fueled by massive appropriations for the Korean War and defense spending (10%) • Pentagon dollars primed the pumps of high-technology industries—aerospace, plastics, and electronics

10. III. The Roots of Postwar Prosperity (cont.) • The military budget financed much scientific research and development (“R and D”) • Unlocking the secrets of nature was the key to unleashing economic growth • Cheap energy fed the economic boom: • Americans and Europeans controlled the flow of the abundant petroleum of the Middle East • They kept prices low • Americans doubled their consumption of oil: • Endless ribbons of highways • Installed air-conditioning in their homes • Engineered a sixfold increase in the country’s electricity-generating capacity between 1945-70.

11. II. The Roots of Postwar Prosperity (cont.) • Workers chalked up spectacular gains in productivity—the amount of output per hour of work: • 1950s on average productivity increased 3% per year • Enhanced by the rising educational level of the work force • By 1970 nearly 90% of the school age population was enrolled in educational institutions • Better educated and better equipped in 1970s could produce twice as much as the 1950s • Changes in the nation’s basic economic structure

12. II. The Roots of Postwar Prosperity(cont.) • Conspicuous was the accelerating shift of the work force out of agriculture • Consolidation produced giant agribusinesses able to employ costly machines • Mechanization, rich new fertilizers, government subsidies and price support; one farmworker could now feed 50 people, compared to 15 people in the 1940s • Farmers now plowed their fields in air-conditioning tractor cabs, listening to stereophonic radios • By the end of World War II, famers made up 2% of working Americans–yet fed much of the world.

13. Figure 36-1 p832

14. IV. The Smiling Sunbelt • The population redistribution set in motion by World War II: • Americans had always been people on the move • After 1945, an average of 30 million people changed residences every year • Families especially felt the strain of separation • Popularity of advice books on child-rearing: • Dr. Benjamin Spock’s The Common Sense Book of Baby and Child Care • In fluid postwar neighborhoods, friendships were hard to sustain • Mobility exacted high human cost in loneliness/isolation

15. IV. The Smiling Sunbelt(cont.) • The growth of the Sunbelt— • A fifteen-state area stretching from Virginia through Florida, Texas, Arizona and California • Had doubling of its population • The South and Southwest was a new frontier • Distribution of population increase, 1958 (see Map 36.1) • Federal funds in the states of the South and West were annually receiving $444 billion more than those of the North • A new economic war between the states seemed to be shaping up.

16. Map 36-1 p835

17. V. The Rush to the Suburbs • America’s modern migration from the cities to the new suburbs (see pp. 836-837) • Government policies encouraged movement away from urban centers • Federal Housing Administration (FHA) and Veterans Administration (VA) • Home-loan guarantees a home in the suburbs • Tax deductions for interest payments on home mortgages was a financial incentive • Government-built highways sped communities to suburban homes; facilitated this mass migration.

18. V. The Rush to the Suburbs(cont.) • The home construction industry boomed in the 1950s and 1960s • Levittown revolutionized the techniques of home construction • Helped people move to the suburbs • Critics wailed at the aesthetic monotony of the suburban “tract” development • “White flight” to the suburbs left the inner cities black, brown, and broke (see pp. 870-871) • Shopping malls were another post-World War II invention • Government policies aggravated this spreading pattern of residential segregation • Refused mortgages, loans limited black mobility, sending them into public housing projects—solidifying racial separation

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20. VI. The Postwar Baby Boom • Upheavals of the baby boom: • The huge leap in the birthrate in the decade and a half after 1945: • Marriages were in record numbers at war’s end • Began immediately to fill the nation’s empty cradles • Touched off a demographic explosion adding 50 million to the nation by the end of the 1950s • Crested in 1957 • By 1973 fertility rates had dropped below the point necessary to maintain existing population figures without further immigration.

21. VI. The Postwar Baby Boom(cont.) • This boom-or-bust cycle of births begot a bulg-ing wave along the American population curve • For example, increase of elementary school enrollments to nearly 34 million in 1970 • With a closing of elementary schools and unemployment of teachers throughout the late 1970s • By 1960s economic shift of baby products to youth products (“youth culture”) • By 1970s the aging baby boomers culture changed again.

22. VII. Truman: The “Gutty” Man from Missouri • Presiding over the postwar period was the “accidental president” Harry S. Truman • Truman was called “the average man’s average man” • First president in many years without a college education • He had farmed, served as an artillery officer in France during World War I, and failed as a haberdasher • Involved somewhat in Missouri politics, rose from a judgeship to the U.S. Senate • Though a protégé of a notorious political machine in Kansas City, he managed to keep his own hands clean.

23. VII. Truman: The “Gutty” Man from Missouri (cont.) • Started the presidency with humility but gradually gained experience: • He gathered old associates of the “Missouri gang” to gather around him and was stubbornly loyal to them • Had trouble in his public appearances • He had down-home authenticity • Few pretensions, rock-solid probity • A lot of old-fashioned character trait called moxie

24. VIII. Yalta: Bargain or Betrayal? • The Yalta conference: • The final fateful conference of the Big Three, February 1943 at the former tsarist resort on the Black Sea • Stalin, Churchill and the fast-failing Roosevelt • Momentous agreements and plans: • Final plans to smash the buckling German lines • And assign occupation zones in Germany • Stalin agreed that Poland, with revised boundaries, should have a representative government based on free elections.

25. VII. Yalta: Bargain or Betrayal?(cont.) • Bulgaria and Romania were to have free elections—a promise flouted • The Big Three announced plans for fashioning a new international peacekeeping organization—the United Nations • The most controversial was the Far East: • Roosevelt’s standpoint: Stalin should enter the Asian war, and pin down Japan, which Stalin fulfilled after Germany collapsed: • The Soviets received: • The southern half of Sakhalin Island and Japan’s Kurile island • Granted joint control of the railroads of China’s Manchuria

26. VII. Yalta: Bargain or Betrayal(cont.) • Special privileges of the seaports of Dairen and Port Arthur • These concessions gave Stalin control over the vital industrial centers of America’s weakening Chinese ally • Roosevelt’s critics: • He sold Jiang Jieshi (Chiang Kai-shek) down the river • Also that he assailed the “sell-out” of Poland and other Eastern European countries • Roosevelt’s defenders: • Stalin, with his red army, could have secured more of China • If Stalin had allowed free elections in Poland and the liberated Balkans, things would have been different

27. VII. Yalta: Bargain or Betrayal(cont.) • The Big Three were not drafting a compre-hensive peace settlement: • They were sketching general instructions and testing one another’s reactions • Broken promises that were overlooked • More specific understandings among the wartime allies awaited the arrival of peace.

28. IX. The United States and the Soviet Union • United States and Soviet Union reaching cordial understanding would be hard: • Communism and capitalism were historically hostile social philosophies: • The United States did not officially recognize the Bolshevik government until 1933 • Soviet skepticism was nourished by the long delays of Americans and British to open up a second front against Germany • Britain and America had frozen their Soviet “ally” out of the project to develop atomic weapons • Washington abruptly terminated the lend-lease aid to USSR in 1945

29. IX. The United States and the Soviet Union (cont.) • Different visions of the postwar world separated the two superpowers: • Stalin aimed to guarantee the security of the Soviet Union • By maintaining an extensive Soviet sphere of influence in Eastern and Central Europe, the USSR could protect itself and consolidate its revolutionary base as the world’s leading communist country • Many Americans saw the “sphere of influence” as an ill-gained “empire” • The “sphere of influence” clashed with Roosevelt’s and Wilson’s “open world” –decolonized, demilitarized, democratized with a strong international org. for global peace.

30. IX. The United States and the Soviet Union (cont.) • Both countries were isolated from world affairs before World War II • United States through choice • The Soviet Union through rejection by other powers • Both had a “missionary” diplomacy—trying to export to the world their political doctrines • Each believed in their own particular ideology—thus some confrontation was unavoidable.

31. IX. The United States and the Soviet Union (cont.) • In the fateful progression of events: • Suspicion and rivalry • Between communistic, despotic Russia • And capitalistic, democratic America • Cold War: • A tense standoff for four and a half decades • It shaped Soviet-American relations • It overshadowed the entire postwar international order in every corner of the globe • It also molded societies and economies and the lives of individual people all over the planet.

32. p841

33. X. Shaping the Postwar World • Bretton Woods Conference: • Bretton Woods, New Hampshire, in 1944 • The Western allies established the International Monetary Fund (IMF): • To encourage world trade by regulating currency exchange rates • Founded the International Bank for Reconstruction and Development (World Bank): • To aid economic growth in war-ravaged and underdeveloped areas • The United States took the lead in creating these bodies and supplied much of their funding. The Soviets declined to participate (see pp. 842-843).

34. X. Shaping the Postwar World(cont.) • The United Nations Conference opened on April 25, 1945: • Roosevelt shrewdly moved to establish the new international body before the war’s conclusion • Meeting at the San Francisco War Memorial Opera House, representatives from fifty nations fashioned the United Nations Charter • The United Nations (U.N.): • Was a successor to the League of Nations • Differed in many ways: • The League adopted rules denying the veto power to any party to a dispute

35. X. Shaping the Postwar World(cont.) • The U.N. realistically provided that no member of the Security Council, dominated by the Big Five (United States, Britain, France, the USSR, and China), could have action taken against it without its consent • The U.N. also featured the General Assembly which could be controlled by smaller countries • In contrast to the American reception of the League in 1919, the Senate overwhelmingly approved the U.N. Charter on July 28, 1945, by a vote of 89 to 2.

36. X. Shaping the Postwar World(cont.) • The United Nations, headquartered in New York City, has had some successes: • Helped to preserve peace in Iran, Kashmir, and other trouble spots • It played a large role in creating the new Jewish state of Israel • The U.N. Trusteeship Council guided former colonies to independence • Through such arms as UNESCO, FAO, WHO, has brought benefits to peoples the world over

37. X. Shaping the Postwar World(cont.) • The new technology of the atom tested the spirit of cooperation • The new organization failed badly: • Bernard Baruch called for a separate agency to have world-wide authority over atomic energy, weapons, and research: • The Soviet Union called for the total outlawing of nuclear weapons by every nation • The Soviet Union used the veto power to scuttle proposals • A priceless opportunity to tame the nuclear monster in its infancy was lost.

38. Table 36-1 p843

39. XI. The Problem of Germany • Hitler’s ruined Reich created problems for all the wartime Allies: • They agreed that the cancer of Nazism had to be cut out of the German body politics—involved in punish-ing Nazi leaders for war crimes • The Nuremberg war crimes trial 1945-1946: • Tried 22 top culprits • Accusations included • Committing crimes against the laws of war and humanity • Plotting aggressions contrary to solemn treaty pledges • Justice, Nuremberg-style, was harsh.

40. XI. The Problem of Germany(cont.) • 12 accused Nazis swung from the gallows, and 7 were sentenced to long jail terms • “Foxy Hermann” Goering escaped the hangman by swallowing a hidden cyanide capsule • Other trials continued for years • Critics condemned these trials as judicial lynching: • Because the victims were tried for offenses that had not been clearcut crimes when the war began • Beyond punishing the top Nazis, the Allies could agree on little about postwar Germany • American Hitler-haters wanted to dismantle the industrial- ized German factories and reduce the country to a potato patch

41. XI. The Problem of Germany(cont.) • The Soviets, denied American economic assistance, were determined to rebuild their shattered land by extracting enormous reparations from the Germans • Both clashed headlong with the reality that an industrial, healthy Germany economy was indispensable to the recovery of Europe • Along with Austria, Germany had been divided into four military occupation zones: • Each one assigned to one of the Big Four powers (France, Britain, America and the USSR) (see Map 36.2) • The Western Allies: • Refused to allow Moscow to bleed their zones of the repar-ations that Stalin insisted he had been promised at Yalta

42. XI. The Problems of Germany(cont.) • They began to promote the idea of a reunited Germany • The communists responded by tightening their grip on their Eastern zone • It was apparent that Germany would remain indefinitely divided: • West Germany became an independent country, wedded to the West • East Germany, along with other Soviet-dominated Eastern European countries Poland and Hungary, became nominally independent “satellite” states bound to the Soviet Union • Eastern Europe virtually disappeared from Western sight behind the “iron curtain” of secrecy and isolation • The division of Europe would last some 4 decades.

43. XI. The Problems of Germany(cont.) • What about Berlin? • Deep within the Soviet zone • Divided into two sectors occupied by troops of each of the four victorious powers • In 1948 after controversies over: • German currency reform and four-power control • The Soviets abruptly choked off all rail and highway access to Berlin • Berlin was a huge symbolic issue for both sides

44. XI. The Problems of Germany(cont.) • The Americans organized the gigantic Berlin airlift: • American pilots ferried thousands of tons of supplies a day to the grateful Berliners • Western Europe took heart from this demon-strated American commitment in Europe • The Soviets finally lifted the blockade in May 1949 • This same year the two Germanys, East and West, were established. The Cold War congealed.

45. p844

46. Map 36-2 p845

47. XII. The Cold War Congeals • Stalin, seeking to secure oil concessions, broke an agreement and removed his troops from northern Iran: • Moscow’s hard-line policies in Germany, Eastern Europe and the Middle East wrought a psycho-logical Pearl Harbor • Americans were upset by the Kremlin’s unwillingness to continue the wartime partnership

48. XII. The Cold War Congeals(cont.) • Truman’s response to various Soviet challenges: • Containment doctrine: • Crafted by George F. Kennan • Held that Russia, whether tsarist or communist, was relentlessly expansionary • Said that the flow of Soviet power could be contained by “firm and vigilant containment” • Truman Doctrine: • Truman went before the Congress on March 12, 1947 and requested support of his doctrine

49. XII. The Cold War Congeals(cont.) • He asked for $400 billion to bolster Greece and Turkey • United States support for those who were resisting “Communist aggression” • Claims that he pitched his message in the charged language of a holy global war against godless communism—a description of the Cold War • Theologians, like Reinhold Niebuhr (1892-1971) supported Truman • Vocal enemies of fascism, pacifism, and communism • Christian justice, including force if necessary, required a “realist” response to “children of darkness” like Hitler and Stalin.

50. XII. The Cold War Congeals(cont.) • Threat in Western Europe: • Especially France, Italy, and Germany • Danger of being taken over from the inside by Communist parties • On June 5, 1947, Secretary of State George C. Marshall invited the Europeans to get together and work out a joint plan for economic recovery • If they did, the United States would provide substantial financial assistance • This forced cooperation would eventually lead to the creation of the European Community (EC).