The Americas: 1945-79
The US economy since WW2
Defence spending
● Fiskback (2016) - defence spending has been an ever-shrinking share of GDP
○ 10% in the 1950s but 4% after 1990
● US developed their military to counter the USSR
○ Included an arms race, military interventions in Korea, Vietnam and
elsewhere
○ One theory - this increased Soviet military spending and led to their
bankruptcy
● 1980s - Reagen increased spending from 5-6% of GDP
○ Included spending on the Strategic Defence Initiative (unsuccessful)
○ Controversial
● Post WW2, the US was still “world police-man” - intervening in after the Iraqi
invasion of Kuwait (1990)
● Post 114 federal budget surplus caused by the Cold War peace dividend
● Post 2001, war spending in Afghanistan / Iraq and increased government
spending caused a deficit of 3.5% of GDP in 2009
Productivity
● Fishback (2016) - 2 periods of rapid productivity growth: 1950-1970s and
1980s-2000s
● Knowledge of science and mechanical developments contribute to invention
and innovation
● Engineering advances have improved consumer electronics (smartphones)
● Medical innovations have made lives longer and less painful (heart
transplants, cancer treatments)
● Advances have needed the deployment of human capital
○ 1940 - 40% of Americans finished high school
○ 2015 - 88% of US adults had a high school diploma or GED
● College graduation has risen from 5-30% (cohorts born in 1900 vs 1980)
● US unis attract global students - many stay and become entrepreneurs
The business cycle
● Fishback (2016) - US experienced major downturns in the late 1970s, 1980s
and 2007-9
● Employment Act (1946) - it is the policy responsibility of the govt to promote
enterprise, welfare, max employment, production and purchasing power
, ● 1946-69 - 2.7% GDP growth per year, low inflation (2.5%) and low
unemployment (4.7%)
○ Consensus that Keynesian fiscal policy can stabilise the business cycle
● 1970s - stagflation and breakdown of the Phillips Curve
○ OPEC raised oil prices in 1973 and 1979
● Nixon uses wage and price controls unsuccessfully
○ The Fed tries to use expansionary monetary policy - only caused
inflation of 10%
● 1980s - the Fed raises interest
○ Reduces inflationary expectations and inflation
○ Causes a recession and high unemployment
Growth of government
● Fishback (2016) - biggest change in the US 20th century is the growth of the
government
● 1900-50 - the Fed expands in response to crises (world wars and great
depression)
● Ratchet effect - cannot make the government smaller once it has grown
● Growth of the welfare state
○ Social insurance - benefits in the case of disability, illness, injury,
retirement
● US spends less on welfare than the UK / Canada
○ When private health insurance is added, the US spends the same
● 1964 - expansion of Medicare
○ Provided healthcare for the elderly
○ Pay as you go system (along with Social Security - pensions)
■ Sustainability depends on the ratio of workers to claimants
● Spending shaped by demographics
○ Baby boom cohort reaching eligibility for Medicare / socials security
Women in the US economy since WW2
Legal changes
● Doepke, Tertlit, Voena (2012) - legal changes since 1945 affected the
economic status of women in the US
● Before WW2, legal barriers restricted women working
○ Restricted hours worked, wages and work conditions
○ Could not work night shifts
○ Marriage bars excluded married women from certain jobs - teaching
● Civil Rights Act (1964) ensured equal treatment in the labour market
● Women had more control over their bodies
○ Marital rape was legal until 1976
The US economy since WW2
Defence spending
● Fiskback (2016) - defence spending has been an ever-shrinking share of GDP
○ 10% in the 1950s but 4% after 1990
● US developed their military to counter the USSR
○ Included an arms race, military interventions in Korea, Vietnam and
elsewhere
○ One theory - this increased Soviet military spending and led to their
bankruptcy
● 1980s - Reagen increased spending from 5-6% of GDP
○ Included spending on the Strategic Defence Initiative (unsuccessful)
○ Controversial
● Post WW2, the US was still “world police-man” - intervening in after the Iraqi
invasion of Kuwait (1990)
● Post 114 federal budget surplus caused by the Cold War peace dividend
● Post 2001, war spending in Afghanistan / Iraq and increased government
spending caused a deficit of 3.5% of GDP in 2009
Productivity
● Fishback (2016) - 2 periods of rapid productivity growth: 1950-1970s and
1980s-2000s
● Knowledge of science and mechanical developments contribute to invention
and innovation
● Engineering advances have improved consumer electronics (smartphones)
● Medical innovations have made lives longer and less painful (heart
transplants, cancer treatments)
● Advances have needed the deployment of human capital
○ 1940 - 40% of Americans finished high school
○ 2015 - 88% of US adults had a high school diploma or GED
● College graduation has risen from 5-30% (cohorts born in 1900 vs 1980)
● US unis attract global students - many stay and become entrepreneurs
The business cycle
● Fishback (2016) - US experienced major downturns in the late 1970s, 1980s
and 2007-9
● Employment Act (1946) - it is the policy responsibility of the govt to promote
enterprise, welfare, max employment, production and purchasing power
, ● 1946-69 - 2.7% GDP growth per year, low inflation (2.5%) and low
unemployment (4.7%)
○ Consensus that Keynesian fiscal policy can stabilise the business cycle
● 1970s - stagflation and breakdown of the Phillips Curve
○ OPEC raised oil prices in 1973 and 1979
● Nixon uses wage and price controls unsuccessfully
○ The Fed tries to use expansionary monetary policy - only caused
inflation of 10%
● 1980s - the Fed raises interest
○ Reduces inflationary expectations and inflation
○ Causes a recession and high unemployment
Growth of government
● Fishback (2016) - biggest change in the US 20th century is the growth of the
government
● 1900-50 - the Fed expands in response to crises (world wars and great
depression)
● Ratchet effect - cannot make the government smaller once it has grown
● Growth of the welfare state
○ Social insurance - benefits in the case of disability, illness, injury,
retirement
● US spends less on welfare than the UK / Canada
○ When private health insurance is added, the US spends the same
● 1964 - expansion of Medicare
○ Provided healthcare for the elderly
○ Pay as you go system (along with Social Security - pensions)
■ Sustainability depends on the ratio of workers to claimants
● Spending shaped by demographics
○ Baby boom cohort reaching eligibility for Medicare / socials security
Women in the US economy since WW2
Legal changes
● Doepke, Tertlit, Voena (2012) - legal changes since 1945 affected the
economic status of women in the US
● Before WW2, legal barriers restricted women working
○ Restricted hours worked, wages and work conditions
○ Could not work night shifts
○ Marriage bars excluded married women from certain jobs - teaching
● Civil Rights Act (1964) ensured equal treatment in the labour market
● Women had more control over their bodies
○ Marital rape was legal until 1976
