What Really Happened To The US Economy Circa 1945-1980

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As WW2 was ending and the war production machine coming to a grinding halt it was assumed that the US would revert back to Depression days, particularly with so many young men returning from battle.  In fact, there was an initial slowdown and people professing that we would soon be back to soup kitchens and men selling apples by the side of the road.

 

That did not happen, and for a number of reasons.  First, the GI bill was used in part to defer young men from going into the workforce.  My father used the GI bill to obtain an engineering degree based upon interests he developed in the Army.  He was the only sibling out of 13 to secure a college degree. Also to the point, men received training in the war they would have never gotten on their own. The first commercial jet pilots in the 1950s were mostly WW2 air core.

 

Second, was the pent up demand and need to replace durable goods.  From 1942 to 1945 you couldn't buy a new car, fridge, stove, etc.  The television was introduced in 1947.  Soon factories were humming with demand for new Fords and this new medium, television.  Back then durable goods had a far shorter life span.  The velocity of money takes over as factory workers flushed with cash could no buy or desire and want, not just absolute need.

 

Third, until the entrance of Japan in the early 1970s all other countries had little or no industrial base.  Moreover, technology that was based upon large onsite mainframes meant offshoring production was impossible.  The introduction of the desktop in the 1970s changed that scenario, along with more modern and regular air travel.  Countries opening their economies also was instrumental.

 

Fourth, more workers were covered by unions and unions had more sway.  They could cripple a company's operations through a strike (and many strikes took place).  Eventually after the two sides had enough financial pain they found a compromise.

 

Fifth, we were fighting a massive campaign with the Cold War.  The US was out to prove that capitalism was far better than a planned, central economy.  That would not have been possible if jobs were moving overseas and vast underemployed ran wild.

 

Sixth, with the Depression fresh in the minds of American and politicians, and no politician wanted a repeat of the 1930s, economic and Fed policy was dedicated towards full employment.  By the 1970s 20 years of full employment, ever rising wages, and misguided policy was causing double digit inflation.  Finally by 1980 Fed Chairman Paul Vocker did something unthinkable; he jacked up interest rates to unheard of levels even though it caused a deep recession and high unemployment (that at one point reached low double digits). From then on the focus of the Fed and the Treasury was the control of inflation versus super low unemployment.  By 2008 monetary policy no longer worked to juice up the economy, although that did not stop the Fed from using it.

 

Seventh, was the significant amount of personal and corporate savings and low levels of debt.  Prior to the 1970s most Americans did not have a credit card, or maybe something like a department store card.  Starting in the 1980s bankers threw out financial prudence allowing Americans to load up on debt to enhance their lifestyle.  Moreover, the introduction of securitization in the 1970s meant that banks would no longer hold those loans on their balance sheet.  They simply sold off the loans, collected a nice fee and re-lent, repeating the process over and over.  However, with the risk off their balance sheet credit standards quickly eroded.  The end result is that there is far fewer dollars for productive investment.  Companies have loaded up on debt to do acquisitions (which destroys employment) and stock buy backs (which adds nothing to employment).

 

This is not an exhaustive list by any means. That period was a conflux of circumstances, policy, global position, changing culture and morals, military might, management focus, etc.  This is why its so difficult to return the US to its glory days of 1946-1980.  Yes its possible but many parties would want this to occur, and two the major participants, business and government are not ready and willing to change.  Not to mention Americans would have to give up their love of cheap crap from China and save instead of consume.

Comments

michael d zitterman Added Mar 19, 2017 - 1:08am
After WWII, we had full employment ++ because we were rebuilding a decimated world.
 
The "minimum wage" concept is a critical factor that has done great damage, especially to the weakest among us... creating a permanent underclass.......
 
mz
mikiesmoky@aol.com
Bill Kamps Added Mar 19, 2017 - 8:26am
Interesting George,  while all these things contributed to the prosperity of the US in the 1960s, they didnt all contribute equally.  The biggest contributor was the lack of industrialization in the rest of the world.  This allowed the US companies to be extremely profitable, and grow quickly, therefore allowing them to pay workers well, give them great benefits, and so on.  In the 1960s one third of world GDP was in the USA. That is an astounding number for 5% of the population and that made the US incredibly wealthy compared to the rest of the world.
 
Returning to the glory days, as you say, is very difficult because policy makers didnt create the glory days in the first place.  Its not like we had great policy then, and bad policy now.  We had pretty ad hoc policy all along, its just that in the 1960s the world situation allowed us prosper easily, and now it is more difficult. 
 
I think we suffer from unrealistic expectations created by the wealth of the 1960s.  The result of these prosperous decades is that the  middle class was really living as though they were wealthy.  In the rest of the world only the very wealthy have single family homes, and often even they live in condos, rather than homes because they are so expensive.  In the rest of the world only the very wealthy have two cars, and so on.
 
These unrealistic expectations created the living beyond our means syndrome.  The use of debt can be a good or bad thing depending on how it is used. When one is trying to hang on to a lifestyle that is slipping beyond one's means, one is tempted to use debt unwisely.  This unwise use of debt not only existed in our personal lives but transferred to public policy, as the government also lived beyond its means.  If people were borrowing a lot, it was then comfortable for the government to borrow a lot to perpetuate a lifestyle.
 
Another issue is that we failed to realize we are in competition with the rest of the world.  We were on top, and thought it would always stay that way.  We underestimated that people from other countries would work hard for less. Not everything we import from overseas is crap, some of it is pretty good, and comes at an attractive price. Why shouldnt we buy it ? We are in competition with the rest of the world, unfortunately we are largely failing to compete, in fact we still help other countries compete with us.
 
Government and corporations were not wise then and unwise now.  They always reacted in an ad hoc way in their own best self interest.  It so happened, that during those prosperous decades that the interests of the corporations/government and the middle class were aligned.  Stability was a good thing when economic growth was rapid.  This was not by design, but by accident.
 
I have seen you say that CEOs used to stay in their jobs, and now they cycle through every few years.  Well CEOs do what is in their best self interest.  In those past decades their best path for wealth was staying in a growing company and reaping the benefits.  Now companies dont grow much, because of world competition, and often the growth is an illusion, so they have to change jobs often for them to become personally wealthy.  Its not like CEOs used to be moral and now they are not, they always worked the system to their interest, its just that their interest and ours used to be aligned and now they are not, and they dont care.
 
There are certainly things we can do to make the situation better than it is.  However, I think it is impossible to return to the days when one third of the worlds GDP will be in the USA.  That is what made everything else easy.
 
As individuals we have to adapt to the changing world.  There was only one generation in our history where people could reasonably expect to work at the same job for their career.  That was never true in the rest of the world, and it likely wont be true again in the USA. Our expectations need to be adjusted.  The world just changes too fast, and the kind of world economic dominance we enjoyed once, cant return because it is unnatural for 5% of the population to produce 35% of the goods. Others will react to try to get their share of the pie.
 
You have asked, do I think we will become more like India or Brasil.  I would answer no, I think we will become more like Europe, where there are less single family homes, and less reliance on the car.  It wont be exactly the same because Europe is more compact.  But we will moderate our expectations, we are already seeing that, and we will react more to the competition overseas.  It is normal.
Cliff M. Added Mar 19, 2017 - 11:37am
Here's what really happened. The Great Recession provided the perfect storm for those that could exploit the labor market if they chose to. In a labor market that was shrinking rapidly all of the angles were played.Demand slowed and ridding themselves of any higher priced talent became the game.Not dealing with the immigration situation played a key role in eliminating a large part of the men that were previously breadwinners. They realized if they could bring the labor force down to skeleton proportions it was more money in their own profits.Government policy also was key. When a period of stimulus was direly needed the opposite approach was taken.
 In this process they also hurt demand further by eliminating many middle class jobs. Investment in main street and business growth became minimal with profits instead going to the "Wall Street Casino". This continued process led to a period of anemic growth which is still the norm today.
  Now we have elected Trump on the premise that things would change.On the contrary the early days of this new administration appear to be opposite of what Trump campaigned on. The Republican congress appears to content with more blood letting and appeasment of the contributor class.Hopefully Trump will live up to his campaign promises and something will be done to help the still shrinking and struggling middle class.
Eureka-Perspectives Added Mar 19, 2017 - 11:48am
George,
 
I think another factor that has changed the whole equation, starting in the 1980's, was tax policy.  Policy makers had come to the conclusion that they had been very successful in making the country great between 1946 and 1979 and they needed a new carrot.  That was the reasoning of the supply side tax structure that would move more money to the top and through "Trckle Down" create more jobs. The problem was, trickle down did not work and more and more money moved to the top 10 percent of the population and sat there. 
 
Then around 25 years later Bernanke came along and used his college dissertation conclusions to justify adding 5 trillion dollars to the FED's balance sheet.  That did not work either because there was no underlying demand for real product only speculative demand leveraged from the FED balance sheet.  The reason for this problem is tied to the fact that the money is sitting at the top doing nothing.
 
In my opinion, the current intensity in Trump's Economic Washington is that there is real fear based on the Bernie and Trump wave of populist anger, that something will happen that will pull all the money from the top and overturn the wealth game.  Ironically things like this usually happen by accident, and the team in Washington is an accident waiting to happen.
Cliff M. Added Mar 19, 2017 - 11:57am
Eureka- Perspectives,
    I like your perspectives. It will be a tooth and nail battle to change with those at the top in  control of the issues but the vote. The new Republican Congress's platform will only alienate the average voter even more.
George N Romey Added Mar 19, 2017 - 12:07pm
Eureka you are very correct in your facts.  Obama's economic team in 2009 told him he could either bail out the banks or the American people, not both.  Following at the urging of Geithner he went with the banks.  He was nothing more than a tool of the neoliberal class that funded his rise to power. 
 
I agree that it will take some extraordinary for our current economic path to change.  Those that the top have it too good and they see no reason for a resurgence in the middle class.  Only when they fail because of collapsed demand and their paper wealth goes away will they see the value in a strong middle.
Stone-Eater Friedli Added Mar 19, 2017 - 12:32pm
The Marshall Plan paid off. Might be a recipe for the next war as well.
Bill Kamps Added Mar 19, 2017 - 12:45pm
Well it would have been risky to not bail out the banks, just as it would have been risky not to bail out GM.  So at least with GM they did bail out some number of workers.  I dont like that it seemed necessary, but having more Lehman Bros would haves sent even larger shock waves through the economy.   Its possible if the American people were bailed out, letting more big banks fail, would not have mattered, but that is a pretty risky course. I say that being no fan of the banks, but I do know that people's fears would have been raised.
 
The recession of 2008, did not start the long decline that George refers to, it did accelerate it, but it hardly started it.  The decline started way back in the 1970s, when thinking we were on top of the world companies like GM were building our own crap, so the Japanese and other companies got a foot hold here in the US.
 
I dont believe government or corporations ever gave priority to the middle class.  Whether it does well or not is more an accident of circumstance, than a result of policy.  I dont think either really cares, unless it affects them, and yes it may be in their interest to make the middle class more strong, but to them that seems like a lot of work.  That is why you see revolving doors with CEOs, and members of government, they have to  move around to keep and increase their wealth.
 
This is not a problem for them, because they have created compensation packages that give them huge bonuses when they leave. So leaving is probably the most profitable thing most of these people can do.  If you make $5-6M a year in salary, but get $150M if you leave, then constructing a scenario where you leave, is the best thing you can do, for yourself. 
 
I think expecting government or corporations to fix things so the country works for the middle class is tilting at windmills.  I think those entities want things to work "well enough". The country is still far better off than most countries.  I dont see the revolution coming that George predicts, or hopes for, and if there is one, the same group of people will run the country afterward, the rich and well connected.  They have run everything for as long as there has been civilization. 
 
I challenge anyone to show  me a revolution that resulted in something other than the rich and powerful taking control of the country.  Maybe just a different group of the rich and powerful, than before, but still the rich and powerful.
George N Romey Added Mar 19, 2017 - 12:59pm
Bill you must not read much I what I write because I have talked about the long decline and that the 2008 meltdown (like Trump) was a symptom of an economic system in crisis.  Our entire corporate model is based upon a strong US consumer and when that fails the gimmicks like subprime loans start.  We see it today in the explosion of payday lenders, cash advance stores and pawn shops/car title lenders.  However, gimmicks can't be substituted long term for real value and our economic system will crash again, and very hard.
 
Revolution comes in many forms.  It's just not people running around with pitchforks looking for the allege culprits to poke.  Much of what happened to this country in the 1930s was a revolution as was the civil rights and Vietnam protests in the 60 and early 70s.  Again, would have anyone in the year 2000 guessed a President Trump, or at least this version of Donald Trump?  Of course not.  To assume Americans will be like a loyal dog that takes beating after beating but doesn't bit back is foolish and naïve.  We by nature are a much more in your face people because our Constitution allows us so.  Do you think the Russian press would ever get away with be so critical of Putin the way the American press is of Trump?
Patrick Writes Added Mar 19, 2017 - 7:38pm
The government had to bail out the banks because it was on the hook anyway via the FDIC. The FDIC (my understanding) is not set up to handle a major collapse of most of the major banks. So when it runs out of money, the government would have to step in to reimburse millions of depositors nationwide. So what's easier, simply stop the banks from collapsing to begin with or manage the massive payouts after the fallout of the mass collapse? 
 
The problem is the Glass-Steagall repeal. This law used to insulate regular depositors from big stock market crashes (worked from 1930's until 2008). Now the entire banking industry is at huge risk of falling over every time there is a big drop in the stock market--which happens about every 10 years. 
 
So banks are gambling in the stock market with grandma's fixed income and Joe Sixpack's nest egg and the paperboy's weekly paycheck. And if they screw up, Uncle Sam will come to the rescue. And the banks know it!
 
The government's answer was Dodd-Frank (solving the problem of 'too big to fail' which pretty much the entire top 10 of U.S. banks already are). But this will allow the government mysterious powers to apparently tell banks to do whatever the government wants them to do (the 2800 page law apparently draws up countless new regulatory agencies with hazy directives that aren't even spelled out in the law). Boiled down, it's the government saying "trust us, we'll make sure the financial industry and the banks all behave, we just won't tell you how we'll do this". 
 
The future is not bright. 
Patrick Writes Added Mar 19, 2017 - 8:10pm
I think in the 1930's FDR and his people agonized about the plight of the working man. They tried to create policies (sometimes of questionable legal authority) that would help people get working again. They overdid it at times. 
 
This top heavy, almost micromanaging about the common man continued into world war II with movies and pamphlets for the GI's about the most mundane stuff (famous manual of 'how to get along with British people--don't insult their bad tasting coffee they just don't know and neither do you know how to make a good cup of tea').
 
And Eisenhower was basically a democrat (he was best mates with FDR during the war) so this stuff continued into 1950's. Making movies for schoolchildren about the most mundane of things ('how to wash your hands before lunch' or 'how to stay safe from polio'--I don't know I wasn't alive then but this stuff has been endlessly mocked in popular media for my entire life). 
 
So I'm making an argument that people in government agonizing over the plight of what was deemed 'the common man' all the way through the Democrat led 1960's until Nixon. 
 
Then in the 1980's it seemed to change to 'the common man is fat and lazy' epitomized in movies like Gung Ho in 1986. The common man is a loser that needs to work harder. 
 
Something across all society seems to have changed in the 1980's.
Mike Haluska Added Mar 20, 2017 - 9:24am
What happened was the United States was the only major industrial country not decimated by WWII!  We not only rebuilt Europe and Japan, we were the only source for food, clothing, steel, autos, appliances, radios, etc. for decades.   
Billy Roper Added Mar 20, 2017 - 9:33am
And of course the availability of cheap credit after W.W. II resulted in a consumer goods boom. Factories switched over from making guns and tanks and ships and bullets to making cars and t.v.s and washing machine. Everyone had to have one because their neighbors did. Many people went into debt for the first time. Since then, it's only gotten worse. Now, consumer credit debt, bought and sold in huge bundles by investment banks just like mortgages were before the housing bubble burst in 2008, is ready to pop.
 
This writer explores from a survivalist’s perspective target="_blank">how the coming collapse of the credit market could lead to the economic failure of the United States, creating anarchy and sparking large-scale social and political violence.
 
“It will not take much else to make it reach a tipping point now.
 
A simple spark will set off this fuel fire, a simple bump in the interest rates for more then a few weeks will bring down our markets, proving once and for all that the people cannot repay even the interest on the debt these banksters say we owe.
 
A so-called bank holiday will be declared to stop the outflow of the failing money system. The state owned banks would confiscate funds from their depositors just as they did in Cyprus, to shore up their balance sheets.
 
People will panic nationwide, withdrawing money from the failing system, while creating riots; the nation will need to impose martial law to quell the rioters. Food stamps will not be enough to feed the nation, the store shelves will be bare within 3 days, and all commerce will cease. The nation will struggle under the weight of it, this will set off race riots, as throngs of disgruntled people will meet in the streets mobs will camp out in front of government buildings…”
Jeff Jackson Added Mar 20, 2017 - 10:27am
Funny how some essays always result in anarchy, chaos, and Balkanization. I must be the only person seeing a pattern here.. We're doomed, doomed...Maybe. The phenomenal recovery after WWII was a confluence of many things. One of the things that amaze me even today was all of the money that we poured out- we were, as a nation, heavily in debt, but we got out of it fairly fast, um, because the middle class was making money. The idle rich class don't pay off national debts, the middle class does. By the way, the CEOs didn't make thousands of times what the average worker made back in those good old days. And we didn't have all the traders we have now, the quants, how in the world did we pay off that crushing national debt?
The middle class made money, and we paid back the highest national debt in our history.  We aren't going to quant trade our way, nor outsource our way, nor globally economically  trade our way to prosperity. Aldous Huxley said: "That men do not learn very much from the lessons of history is the most important of all the lessons of history." 
Eureka-Perspectives Added Mar 20, 2017 - 10:39am
Jeff, well said.
Cliff M. Added Mar 20, 2017 - 11:00am
Eisenhower.
George N Romey Added Mar 20, 2017 - 11:01am
All comments very well said. I agree with Patrick there was a least a modest concern for the ordinary man.  That changed in the 1980s, just look at our culture.  Ward Cleaver was out, Blake Carrington was in.  In many ways we did it to ourselves.  Sure someone dying of lung cancer can blame the tobacco companies but they chose to smoke.
Cliff M. Added Mar 20, 2017 - 11:09am
A Republcan
Cliff M. Added Mar 20, 2017 - 11:12am
Who made the well being of the majority his main concern.
Eureka-Perspectives Added Mar 20, 2017 - 11:38am
Enter your comment here...
Eureka-Perspectives Added Mar 20, 2017 - 11:39am
Harry Truman
Jeffry Gilbert Added Mar 20, 2017 - 11:46am
David Rockefeller finally died at 101 Monday of congestive heart failure. Proving yet again only the good die young.
Bill Kamps Added Mar 20, 2017 - 12:08pm
George, I did read what you wrote, all of it, but some others were pointing at the 2008 recession, not so much as a result but a cause.  Sorry if it seemed I claimed you said it. 
 
While Trump has the possibility of leading real change, Im not sure it will happen.  He already is claiming he "fixed" the jobs problem because of a few headline anecdotes.  Hopefully he will make real change, instead of just becoming another master of spin, that "proves" he is doing things.  I am disappointed with his unnecessary proposed increase in defense spending.  I dont know why spending 10x more than the Russians is not enough !  Even Susan Collins, normally a sensible person, said defense spending has to go up, I dont think these people have any idea where all that money really goes !
 
I dont think we really disagree much.  I dont think prosperity of the past was planned, and therefore I dont think its return is that easy.  We achieved it because we had little competition and had the resources to exploit that.  I dont think corporations of the 1950s were more moral, or more egalitarian than today, they were just doing so well that some of the riches spilled over to the middle class.  Now the rich have to scramble to get and stay rich, and there isnt that  much to spill down to  the middle class.
 
The rich and corporations never cared about the middle class.  Yes FDR fretted some over it, because he inherited 30% unemployment. If unemployment were at more normal numbers, he wouldnt have given a fig.
 
I also think that our idea of the middle class, is really quite wealthy by world standards, and that our expectations need to change.  The middle class of the rest of the world will have their standard of living increase, while ours will decrease some.  That doesnt mean it will be terrible, if people live in condos and there is more relying on public transportation, and things like Uber, it may  be a good thing.  We dont have to consume so  much to be comfortable.  Single family housing construction is decreasing, and more multi-family units are being built.
 
You are correct the people are not going to do nothing, but what I think they will do is adapt, not revolt, but we shall see.  I do know that until they start taking a look at defense spending, no one is getting serious about change.   We dont need to spend more than the next nine countries combined to be safe, and we dont need to increase our defense spending, by $50 billion, which is the total that the  Russians spend.
George N Romey Added Mar 20, 2017 - 12:21pm
Bill my guess is that corporations in the 50s to 70s saw the American consumer as a customer in the way Henry Ford did.  Ford was not benevolent, more he knew where his bread was buttered.  Globalization has changed the view as the United States as the premier and in many cases sole market in the world.
 
I went to business grad school in the early 90s when globalization was gearing up as the next and biggest thing since the industrial revolution.  It was professed that US companies would have access to new markets in South America and Asia.  However, American corporations in particularly Asia just exploited those markets for cheap, abundant labor with no need to follow wage and hour, safety and health and other regulations. They were not interested in developing mass new middle class markets in India, China or Indonesia.  And unlike Japan, governments of those countries have not been focused on creating a huge new middle class.  Sure, there has been some byproduct of social mobility but for the most part born poor in China, India, Indonesia, Vietnam, etc. and you will probably remain poor.
 
I doubt that Trump will effect much change.  He has too many people in both parties that only want small changes in the margins.  He doesn't have the political chops of a TR or FDR, or even an Eisenhower or JFK.  I see very little getting done on jobs, taxes, regulations, investment, and fixing education.  He may well face another 2008 meltdown when the stock market finally realizes all the wonderful things are not going to be forthcoming.  Like Bush and Obama he will simply be led around on a chain by the Federal Reserve and the Treasury Secretary. 
 
 
Cliff M. Added Mar 20, 2017 - 1:03pm
Fiscal policy is the main reason for the changes.After ww2 government spending on infrastructure and high tax rates on the top encouraged reinvestment in growth rather than the purchase of paper assets.
Dino Manalis Added Mar 20, 2017 - 3:43pm
A superpower should have a superpower economy, the Soviet Union made that clear, but the United States should be doing much better.  There are lots of problems, but divisiveness and gridlock exacerbate conditions.  Pro-growth policies have to be implemented as soon as possible, as well as turn deficits into surpluses and pay down the debt before we become like Greece.
Cliff M. Added Mar 20, 2017 - 4:25pm
The big problem is those in control are totally content with the kaos and gridlock. They have successfully divided and conquered .
Eureka-Perspectives Added Mar 20, 2017 - 8:17pm
This has been an interesting thread, lots of history talk and logical interpretation. So I am just thinking out loud, what if we are keying on the wrong bench marks, what if what we are seeing is a model of a maturing economy, one that is moving toward a community model, less global, where you fight for quality rather than quantity. I see this in my 30+ year old kids. Maybe Trumpism , for lack of a better term, is the last fight for ostentatious 80's rich style pretensions.
George N Romey Added Mar 20, 2017 - 8:26pm
Eureka as the young generation gets older but remains impoverished they will begin to make changes.  Just as the Baby Boomers and Generation X laughed off the Great Depression/WW2 generation warning of too much debt, value of thrift and more simple means.  If we have a global economic collapse that would accelerate the change.
Cliff M. Added Mar 20, 2017 - 9:41pm
Eureka- Perspectives,
  I hear where your coming from. MY two kids are in their 20's. It seems that they are looking more for contentment than over reach. They both are ambitious both don't really have that success at all cost's mindset.Maybe we should be going back to the very, very fine house with 2 cats in the yard era. My crew has seen both the good and the bad. I would be content just getting to the no worries stage.
Peter Corey Added Mar 20, 2017 - 10:31pm
>Second, was the pent up demand . . .
 
???
 
What "demand"? There was no "demand", pent up, or otherwise.
 
Say's Law asserts that "supply" and "demand" are, at bottom, the same thing; because as a "demander of someone else's goods, you can only exchange something that you have produced and added to the overall "supply." If you yourself haven't produced anything, you can exchange anything for someone else's goods; if you can't exchange anything, you don't represent any economic "demand" (you probably, no doubt, have wants and needs, but they aren't the same thing as "demand").  If everyone was impoverished from over 10 years of an economic downturn, then by definition, there simply was no "pent up demand."
 
The reason the US did not revert back to an economic depression when the war ended and the GIs returned home was that many of the pro-labor laws were abolished that had been in place since the Hoover administration (Hoover was very pro-union). When wages and salaries, for example, were unfrozen by the federal government, returning GIs could offer their labor at a new job for the going market wage rate . . . which, no doubt, were low; but the increase in productivity that quickly occurred as a result of the newly-hired labor force greatly expanded the supply of goods (TVs,  radios, phonographs, refrigerators, air conditioners, cars, houses, agricultural produce, meat, etc.) for everyone, thus causing prices — "average" prices for all goods — to decline. It was this decline in prices of all goods (relative to wages and salaries) that allowed everyone to buy things that previously they thought of as luxury goods, or which were simply unavailable at any price. Mass participation in an increase of material wealth is what grew the US middle class after WWII. Basically, all it required was deregulating the labor market. The war gave the feds the excuse to do just that.
Eureka-Perspectives Added Mar 20, 2017 - 11:08pm
Peter:
Interesting perspective, the perspective that the abolishment of pro-labor laws led to the growth of the 1946-1980 period.  Where can I read up on this conclusion, did you do the research, or might I find it in some published work.
Peter Corey Added Mar 20, 2017 - 11:50pm
Greetings, Eureka-Perspectives!

Here are some websites you might find relevant:
 
1) Lee Ohanian (UCLA), at: http://www.leeohanian.com/index.html
Ohanian is an economist at UCLA specializing in the study of economic crises, depressions, etc. He has many articles on the Great Depression and the post-WWII recovery.
 
2) https://www.mercatus.org/publication/economic-recovery-lessons-post-world-war-ii-period
The Mercatus Center at George Mason University (Fairfax, VA) has many interesting articles on the Great Depression and the post-WWII recovery. See this excerpt from the above-linked site:
 
"The U.S. war economy from 1942 to 1945 can be described as a command economy. Extensive economy-wide price controls outlawed the use of the price mechanism to direct resources to their most highly valued uses. An array of federal bureaucracies, including the Office of Price Administration, the War Production Board, the Office of Civilian Requirements, and War Manpower Commission directed resource allocation to arm and equip the millions of American and Allied soldiers in battle against the Axis enemy. Arms manufacturers could obtain raw materials without bidding up prices as government orders directed the materials to them by edict.
 
Although these efforts were uniformly supported by the public at the time, they inevitably reduced the resources allocated to the production of private consumption and investment goods. [NB: and according to Say's Law, if you have less "consumer supply" you must, by definition, also have less "consumer demand."] Moreover, price controls and bureaucratic directives were pervasive. Certain consumer goods, such as automobiles and other durables, were simply not produced in the war years. There were periodic shortages of goods ranging from milk to men’s pajamas. The quality of goods deteriorated as producers tried to evade price ceilings, and illegal markets were pervasive. The government actually seized firms and directed their operations.
 
When the war ended, however, the command economy was dismantled. By the end of 1946, direct government allocation of resources—by edict, price controls, and rationing schemes—was essentially eliminated. [NB: those price controls at the time also included a freeze on wages and salaries (that's actually when firms began offering company-paid health insurance as a "lure" for talented employees, since firms could not simply offer higher salaries or wages), which were also abolished after the war].  Tax rates were cut as well, although they remained high by contemporary standards. By any measure, the economy became less subject to government direction."
 
3) http://www.capitalism.net/Capitalism/CAPITALISM_Internet.pdf
"Capitalism", a treatise on economics by George Reisman (Pepperdine University) has some interesting things to say about controls on prices and wages in general, as well as during WWII. Start on PDF page 262 ("The Prosperity Delusion of Price Controls: The World War II 'Boom')
 
Hope this helps!
 
Eureka-Perspectives Added Mar 22, 2017 - 11:12am
Peter,
 
Your comments spurred me to look into your premise,
the perspective that "the abolishment of pro-labor laws led to the growth of the 1946-1980 period."
 
So I thank you for that nudge and I just wrote a new article on WriterBeat this morning titled:
 
 Declining Union Membership and the Increase in Inequality
Dave Volek Added Mar 25, 2017 - 12:57pm
Great article George. American workers were in a good position after WW2. I would just add that, at the time, American (and Canadian) workers were also also the best educated in the world. The ability to read instructions and do simple math has a great benefit on the shop floor.
 
Contrary to the US and Canada, Europeans had workers who missed a lot of good education during the war and as the school systems were being built up in the next two decades. These workers weren't just as productive as America workers. 
 
In terms of education, much of the world caught up with the American young people by about 1970. In other words, the American workforce lost one important advantage. Add another 20 years to allow the less educated workers to retire, the American workforce was on par with the rest the world.
 
I have to agree that there really is no going back to the "good old days". The education advantage is lost; the infrastructure advantage is lost. Most of the  young people who don't go beyond high school are going to be on a subsistence income.
George N Romey Added Mar 25, 2017 - 2:29pm
Dave we keep sending people to college for worthless degrees incurred tens of thousands of debt to do so.  At least in a country like Germany young people are not saddled with that debt upon trying to establish independent living.
Jeff Michka Added Mar 25, 2017 - 6:21pm
Jeff Jackson states:The phenomenal recovery after WWII was a confluence of many things.- Finally someone uses the appropriate term, confluence, to describe what usually is stated on WB as a plot or conspiracy.  And I don't know about "the many things," but just one: We were the only real economy left standing after the big II.  There's no magic in being there, just good fortune.  And US industry ignored "luck of the draw," ascribing post WWII economy more often to "their brillance," able to poo-poo and ignore people like Doc Deming, smug in "we can have 10% quality failures and be just fine."  and "We don't need to be better, cause we're so smart".  Fit that into why Geo Romey can't get  job.
John G Added Mar 25, 2017 - 6:30pm
One thing, the stagflation of the 70s was largely a product of the OPEC embargoes and price rises.
So it was cost push inflation and the battle was in who was going to lose in the income squeeze.
Big business saw their opportunity in the 'crisis' and ran with it.
Keynesian demand management lost out to monetarism and neoliberalism became the defining political economic doctrine of the next 45 years.
Now we are living with the inevitable results of giving power to FIRE.
Dave Volek Added Mar 26, 2017 - 11:21am
George: We have that problem too in Canada, but probably not to that extent as the US. The province of Alberta has been criticized for only graduating half the teachers from its universities that it really needs. But the truth is that Alberta has no troubles recruiting graduate teachers from Ontario and Nova Scotia who are graduating far too many teachers. In essence, Alberta is getting a return on the investment made by the taxpayers of Ontario and Nova Scotia. And, of course, if the graduate teachers don't want to move away from their home provinces, they enter the workforce competing for occupations against those who haven't had the big investment of a post-secondary education.
 
While more education is never truly wasted, putting all those government resources (my quick estimate is $250,000) for a four-year teaching degree is another sign of how poorly western democracy manages things.
 
It's time to consider Tiered Democratic Governance.
 
 
George N Romey Added Mar 26, 2017 - 2:28pm
John and Dave great comments.  Remember from the end of WW2 until the 1980s the US was engaged in a huge PR war within the Cold War.  The "American Way of Life" had to be seen to the world as vastly superior to Communism or Socialism.
 
Business either through agreement or forcefully had to allow for a prosperous Middle Class. By the 1980s the USSR was falling apart, business was through being subordinate to the working class, the Depression/WW2 generation was retiring in masses, and RR convince Americans that trickle down, big business would take Americans to dizzying new heights (remember the Citibank commercial, Americans want to succeed not just survive.)  Add to that new economies that had emerged in the US and Germany and the Federal Reserve switched from a focus of full employment to control of inflation. From that point on the Middle Class went into slow but steady decline. 
Dave Volek Added Mar 26, 2017 - 9:46pm
George: For the average American and Canadian worker, I consider the period between 1945 to 1980 an aberration of history. Never before had any blue collar  work force been actually able increase their level of prosperity so significantly. The rest of the world has caught up (education, infrastructure, whatever), and now international competitive pressure is forcing that demographic to accept less than the previous generation in the same demographic.
 
As much as I would like this trend not to happen, with more automation, this trend is likely to continue. I think any politician who believes he or she can fix this is selling a fake bill of goods to get elected.
 
I was watching a CBC news report the other day. It says there is a great shortage of hi-tech workers in Canada. But these workers require more than a high school education. More STEM subjects are in order for the next generation.