Question

In: Economics

Did the Second World War have any negative impacts on the economy of the United States?

Did the Second World War have any negative impacts on the economy of the United States?

Solutions

Expert Solution

The WWII was preceded by the Great Depression which saw reduced production and an unemployment rate of 25%. With the start of the WWII, production increased in the form of increased demand for arms and ammunitions and grains to feed the military. More men were needed to supply this increased demand and the US economy rapidly improved as output increased rapidly. The economy grew at double digit growth rates. Women were encouraged to contribute to the labour force, which further raised productivity. The American economy witnessed a tremendous revival following the dark days of the Great Depression. Keynesian economics took the forefront where government spending that is fiscal policies were considered to be the most important.

The US also became a global economic superpower following WWII. It exported a significant amount of goods and services, both capital and labour intensive. Truman's economic policies made America a global leader. Per-capita income consistently increased and Americans witnessed a golden era of economic prosperity following WWII.

Thus it is clear that the WWII had extremely positive impacts on the American economy. There were a few negative impacts too-

  • Increased military spending often at the cost of reduced spending for economic and social reforms.
  • The New Deal funding for groups who held up the interests of the under-priviledged and under-representated were also cut by Congress.
  • The increased military spending, while leading to a higher output also resulted in higher trade deficitis.
  • There were no dearth of employment opportunities but wages were significantly low and work hours were long.

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