The Impact of World War II

The Economy

The Slide from Isolationism

America after WWI was 'isolationist' – had refused to join the League of Nations or get involved in international relations (see this webpage).  The Neutrality Act of 1939 allowed US firms to sell to countries involved in the war, on a 'cash-and-carry' basis, but the Johnson Act of 1934 forbade the US to lend money to countries that had not repaid US loans made to them during World War I – which included Great Britain. 

Right up to Pearl Harbor groups such as the 'America First Committee' and 'Mothers' Crusade', and most Republicans, remained fiercely opposed to getting involved in the war ...  and even after Pearl Harbor there were Americans who accused Roosevelt of failing to warn the US Pacific Fleet of the attack, so as to 'create a reason' to go to war.

However, as the war progressed, the United States found itself gradually drawn into involvement:

Going Deeper

The following links will help you widen your knowledge:

Basic account from BBC Bitesize

YouTube

Impact of World War II on the U.S. Economy and Workforce - simple and clear

AQA-suggested Resource:

Chris Lowe on the Impact of WWII

Economic Impact of the War [AFTER CPR]

1. Arsenal of democracy

   • Before the US entered the war, 'Cash and Carry' and 'Lend-Lease' may have saved democracy, but the huge demand for war materials made US businesses huge profits. 

   • By 1944, the USA was producing half of all of the weapons being used in the war.  

    

2. Federal spending

   • After the US joined the fighting, a massive increase in federal spending to support the war effort poured money into the US economy, causing it to boom. 

   • The US federal budget, $9 billion in 1940, grew to $98 billion by 1945..

   • The total cost of the war to the US government was $341 billion, most of which went into the economy.

   • To finance the war, the government issued war bonds, raising over $185 billion.  This also helped prevent inflation by reducing the amount of money in circulation. 

    

3. Techological developments

   • New technologies included: radar, penicillin, the first computers (ENIAC), the jet engine, synthetic rubber, the atomic bomb ...  and spin off inventions such as superglue and duct tape. 

   • Mass-production and time-and-motion principles spread rapidly across the economy.

   • Henry Kaiser's California shipyards were able to reduce the production time for a Liberty Ship (keel to completion) from 309 days to record four days 15⅓ hours. 

    

4. Employment

   • The war ended the Depression – unemployment, 14.6% in 1940, fell to 1.2% by 1944.  General Motors, for example, employed an extra ¾million workers during the war. 

   • 16 million people served in the armed forces and some 14 million worked on the home front.

   • Women and minorities entered the workforce to replace men who went to fight; by 1843, more than a third of the US workforce was female.

   • Demand for workers (and the need to cooperate with the unions) led to a rise in wages and improved working conditions; the income of the average worker doubled/ the income of the bottom 20% rose by 68%. 

    

5. Regulation and rationing

   • The Office of War Mobilization (OWM) was set up to coordinate the government’s war effort. 

   • The War Production Board (WPB) oversaw the conversion of industries to war production and ensured that raw materials were allocated as production firms needed them.

   • The Office of Price Administration (OPA) was set up to control production and prices.  The General Maximum Price Regulation (‘General Max’) kept inflation and wage increases down.  Tyres, gasoline, sugar, and meat were rationed (the rationing system was run by a workforce of 100,000 volunteers) to control prices and ensure fair distribution.

   • The War Manpower Commission took control of allocating civilian workers to war work (especially important in agriculture):

   • The US Crop Corps launched the Bracero Programme (which leased out prisoners-of-war and conscientious objectors to work in agriculture); other projects were the Victory Farmers Volunteers (for 11-17-year-olds) and the Women’s Land Army.

   • Union leaders agreed not to strike during the war.  New employees joined trade unions, which grew powerful

    

6. Capacity

   • Firms swtitched to war production: e.g. lingerie factories began making camouflage netting; baby carriages became field hospital food carts; lipstick cases → bomb cases; beer cans → hand grenades; adding machines → automatic pistols; and vacuum cleaners gas mask parts. 

   • Companies like Ford and General Motors converted their facilities to produce military vehicles and equipment.  The Willow Run plant in Michigan, for instance, was built by Ford and became the largest factory under one roof, producing B-24 Liberator bombers.  By the end of the war Ford's war production was greater than Italy's.

   • The US Maritime Commission built shipyards to build Liberty Ships, e.g. the Kaiser Shipyards on the West Coast.

   • Railroads (tonnage almost doubled 1939-44), ports (New York funnelled three million troops and their equipment overseas), airbases, power generation (Grand Coulee Dam, 1942), telephone network. 

    

7. Production

   • The economy grew at 11%pa.  In 1940, the US GDP was $101 billion; by 1945, it was $212 billion.

   • More than half a million new businesses started up during the war.

   • Production of goods such as aircraft, ships, and tanks surged: e.g. the U.S.  produced 300,000 aircraft, 102,000 tanks, 20 million small arms and 2.5 million trucks during the war.  The defence industries, 1.5% of the US economy in 1937, grew to 50% in 1945.

   • It was not all war materials.  Firms such as Coca Cola, Heinz, Hershey’s and Wirigley’s expanded production, producing ration packs for soldiers fighting abroad.

   • Old industries – coal, steel, oil, ship-building and railroads ‘re-ignited’.  Farming production rise by a third – esp.  large-scale farming boomed – as foreign production was reduced by the war.

   • Much to Eleanor Roosevelt’s fury, the anti-big-business ethos of the Second New Deal was abandoned, and war production businesses were allowed to make huge profits.  Secretary of War Stimson observed, ‘I'd rather have more sinful aluminum now than good aluminum too late’. 

   • By 1945, the USA was responsible for half of all of the products being manufactured in the world. 

    

8. Results

   • Under ‘General Max’, prices only increased 15%, but wages increased 65% – so the standard of living improved for most Americans.

   • Policies at the end of the war aimed at transitioning to a peacetime economy, notably:

     • the G.I.  Bill (offered training, home loans and unemployment benefits to help them into employment)

     • the Veterans Health Administration (VHA) expanded healthcare services for veterans

     • provision of housing (e.g. Levittown in New York, a planned suburban community for white veterans and their families).

   • The US changed from Isolationist to interventionist, and didn't change back unil Trump. 

   • The US estbalished itself as a global economic superpower.

   • Military/defence industry spending, 1% of GDP before the war, continued at 8-20% pa after the war – American’s economy (and government) became dominated by a powerful ‘military-industrial complex’.

   • Many families were able to save during the war boom; after the war they started to spend it, which continued the boom after the war. 

   • Sustained economic growth and prosperity in the post-war period, leading to the rise of the American middle class.