The Way We Won: America's Economic Progress During World War II (2023)

America's response to World War II was the most extraordinary mobilization of a sluggish economy in world history. During the war, 17 million new civilian jobs were created, industrial productivity increased by 96%, and after-tax corporate profits doubled. Government spending helped spark the corporate renaissance that eluded the New Deal. The needs of the war directly consumed more than a third of industrial production, but the increase in productivity also ensured a notable supply of consumer goods for the population. The United States was the only country that saw a boom in consumer goods, despite rationing during the war. In 1944, real weekly wages before taxes in manufacturing were 50% higher than in 1939, due to wage increases and overtime bonuses. The war also created entirely new technologies, industries, and associated human skills.

The war brought full employment and a fairer distribution of income. Blacks and women entered the labor market for the first time. wages increased; as well as savings. The war brought with it the consolidation of the union force and far-reaching changes in farm life. Living conditions were better than before.

Since the mobilization also included the ideological argument that the war was being fought in the interests of ordinary men and women, social solidarity extended far beyond the trenches. Public opinion believed that veterans should not return unemployed to a country without opportunity or education. This led to the GI Bill, which helped lay the foundation for the remarkable postwar expansion that followed. The war also made us more of a civil society than we were before.

It is not an exaggeration to say that the United States simultaneously won the war abroad and the peace at home. To be sure, the historical conditions of the American economic boom during World War II were unique. But we can learn a lot from this achievement if we face our problems today.

Historians, economists, and politicians have long wondered why this remarkable social and economic mobilization of latent human and material resources made war necessary. The answer, I think, is partly ideological. World War II brought the ideological breakthrough that finally brought the United States government out of the Great Depression. Despite the New Deal, even President Roosevelt could not intervene enough to encourage a full recovery. By 1938, he had lost his majority in Congress and a conservative coalition was back, crushing the New Deal programs. As the economy began to recover, FDR cut government spending to balance the budget, which contributed to the recession of 1938. The war was like a tidal wave, sweeping over this conservative coalition; The old ideological restraints have collapsed and public spending has fueled a recovery.

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For a time, the government became the buyer of half of all the goods produced by the American people. An important and underestimated fact, however, is that although the government intervened far more than in World War I, imposing wage and price controls and surcharges, raising funds through war bonds, rationing goods, and forcing industry to go to the war. to work in production. FDR negotiated a sense of partnership rather than simply imposing the government's will.

The stereotype of FDR as a lover of regulations belies the experience of the 1940s, when Roosevelt ended his Cold War on business. War planning was much more corporatist than New Deal planning, with much less class warfare. Eleanor Roosevelt was still much more anti-business than Franklin and was often angry with him.

After 1940, the application of antitrust rules virtually ceased. The liberals were upset that ALCOA was a big, bad monopoly. But, as Secretary of War Stimson noted, "I would rather have more sinful aluminum now than good aluminum too late for war." However, the government financed a competitor of Reynolds Aluminum, which helped motivate ALCOA to produce aluminum and gave the government a second supplier.

Despite the entente with the deal, FDR was still willing to promote black and female employment, partly because he believed that overall productivity and wartime morale demanded it. He also continued to promote the union movement. For example, he insisted that Ford Motor Company meet its responsibilities under the Wagner Act. When Ford refused, Roosevelt canceled a lucrative government contract. This helped create the impetus for the great Ford strike in the spring of 1941, which brought the first union to Ford. But on other regulatory issues, FDR made concessions. A government that relied on the mobilization of these companies during the war could not win them simultaneously with antitrust cases.

Basically, Roosevelt made the decision to mobilize the owners of mines, factories and businesses. He realized that Congress could provide the money but could not build the planes, design the tanks, or assemble the weapons. Without industry input, mass production would never get off the ground. The challenge, then, was to engage the owners of the country's most important economic assets as active participants in the defense effort. He also recognized that the private sector could not raise all the capital needed to expand the factories or risk leaving them without orders and excess capacity after the end of the war. So the federal government, through the Reconstruction Finance Corporation, advanced the money needed to expand the factories and often leased them to the industry. The government opened new sources of supply of raw materials and created fast mass transportation. The government also entered synthetic rubber and aluminum production and other booming industries, and helped promote new technologies.

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Contrary to the cliché of a warlike "command economy", there was a remarkable entrepreneurial spirit, in stark contrast to conditions in Germany or the socialist planned economies. Roosevelt brought in dozens of top executives as "dollars a year" men to help run government commissions so that companies would not feel like the government was just telling them what to do. He allowed companies to make a profit. He used the government to create markets and help companies build new factories and equipment, which companies often leased and then bought cheaply after the war.

It's hard for us today to imagine how such an entrepreneurial spirit could coexist with war mobilization, but it did. One reason, of course, was profit opportunity, although the war tax on excess profits prevented the kind of windfall that occurred during World War I. More fundamentally, a spirit developed in each company to outperform its competitors in order to serve the country. In his informal chats, Roosevelt explained to people why it was necessary to mobilize his prolific genius to win the war. Encouraged by the strong morale promoted by the president, companies and workers worked together to obtain the "E for Excellence" citations that he sold. He not only produced more than his competitor, he produced more than you in the previous quarter and in the previous quarter.

Henry Kaiser's shipyards, for example, managed to reduce production time for Liberty Ships from 365 days to 92, 62, and finally one day. In general, the economy grew at an annual rate of 11 or 12 percent during the war.

The Air Corps aces toured the factories; The pilot told the workers that it was not the pilots who were heroic, but their planes. War production posters emphasized that factories and soldiers formed a continuous front, a theme that Roosevelt also addressed in his speeches. People understood early on that America's dominant contribution to the war would be its production. Pressured by his military advisers to act more like an economic czar, Roosevelt declined that role. The military constantly urged him to introduce compulsory national service, which required people to enlist or work at one of the military installations the government would assign them. Roosevelt successfully resisted this idea during the war, theorizing that somehow the dynamics of democracy would suffice: if jobs existed, people would put their mattresses in their cars and go where there were jobs. of work. He had an extraordinary view of the crowded highways heading south and west. In a fireside chat, he advised people to buy tickets. And the Hammond company in New York sold out its entire inventory of 2,000 cards in a single morning. Although the mobilization was chaotic and there were too many people in some places and not enough people in others, it worked. And the United States still produced more than any other country without the regulated labor that some of the military wanted.

Roosevelt resisted and delayed most of the decisions that concentrated government power. For example, in the spring of 1942, when a rudimentary system of price and wage controls was in effect, Harold Smith, his treasurer, declared that the time for comprehensive controls had come. But the president was concerned that this would result in an overly regulated economy, and he rejected the proposal.

In short, an almost forgotten lesson of the war is that strong government involvement does not necessarily imply a command economy. Despite the mobilization, much of the economy was not affected by the controls. No one was told where to move or work. Production for the government was still done freely by the producers and the government in a contractual arrangement; and the companies argued about these contracts all the time. Private ownership remained dominant across the country, but there were gains. In the World War II experience, the things that we revere in capitalism, the parts that encourage energy, efficiency, and entrepreneurship, were still there. The war harnessed that energy, not restricted it.

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In the early years of the war, Roosevelt consciously pursued a conversion program to bring industry to a wartime footing. Linen factories began making camouflage netting, baby carriages became food carts for field hospitals. Lipstick cases became bomb cases, beer cans became hand grenades, machines became automatic pistols, and vacuum cleaners became parts of gas masks. There was planning behind these changes; someone had to see the similarity between lipstick cases and cartridges. While FDR delayed the transition of major consumer industries such as autos for as long as possible, there was a clear and deliberate plan. After the war, the transition to civilian industry, largely accomplished after FDR's death in April 1945, was more abrupt. But it was not without a degree of planning.

The Cold War served as an economic stimulus in the same way that World War II did in the early 1940s. But the Cold War is over, and not one iota of conversion policy remains. And one of the dominant lessons of World War II is that unless there is a conversion or reconversion plan, people are subject to the whims of the free market.

Wartime conversions have not been without their difficulties, but most of them have resulted from too little planning, not too much. In 1942, after a delay, the government finally had to force the automobile industry to convert its factories to make airplanes. Four hundred thousand autoworkers were thrown onto the streets before this change could occur. All car dealers and salesmen were suddenly out of a job. Eleanor Roosevelt had a falling out with General Motors Chairman William Knudsen because a year earlier he was unwilling to agree to a plan. What she finally made it work was the realization that there had to be a plan, that the government was behind the plan, and that the plan had public support. In 1992, despite all the rumors, there is no collective effort to plan for the aftermath of the Cold War.

World War II produced remarkable social achievements. In the factories during the war, attempts to boost morale, such as holding more softball games and building additional canteens and gyms, also fostered a sense of community. The logic of mobilization produced a logic of social progress.

In particular, Eleanor Roosevelt successfully argued that a fully productive workforce requires the talents of all, blacks and women alike; and if women go to work in factories, their children need childcare. She showed that absenteeism was high in factories because concerned women returned home to care for their children. She had restaurants prepare hot meals so women could take home hot dinners. As a result of these measures, productivity rates skyrocketed.

When Henry Kaiser built his big shipyard in California, the government paid for 24-hour day care. It was a state-of-the-art facility with the best kindergarten teachers because it was considered a pioneer test of early childhood education. Workers from any shift could bring their children. If they worked at night, they could put their children to sleep. Working the day shift gave the children an education they never had before. Children, especially those from lower-class families, have made great progress. But when the war ended, all the centers were closed. The teachers were fired the day after the Hiroshima bombing.

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The war ended longstanding opposition to women working outside the home. In fact, in the 1930s, due to a lack of jobs, many states enacted laws that prohibited married women from working if their husbands had jobs. In the Kelsey-Hayes strike of 1941, the United Auto Workers went on strike against hiring women for men's jobs, fearing it would lower the pay scale. Finally, when women were needed to fill vacancies, the UAW understood that the answer was obviously equal pay for equal work. Unfortunately, that momentum also evaporated with the end of full employment at the end of the war.

The various facets of the war economy worked hand in hand. The war was financed by a combination of taxes and loans, but FDR's control over interest rates guaranteed by the Federal Reserve would remain low. Wage and price controls and rationing ensured that full employment and scarcity did not lead to inflation and panic buying. Public investment provided the capital the factories needed. An economic understanding of the workers ensured that there would be no disruptive strikes. It was all in one piece. The government has been a source of full employment, macroeconomic recovery, technological advancement, worker education, reindustrialization, and a host of secondary social advances.

Can we achieve the same benefits today without war? In retrospect, the war economy seems like it was all carefully planned and somehow unavoidable. But of course Roosevelt was the great improviser. Some of what happened during the war has no equivalent in peacetime, the rationing, the ten million men in uniform. But a lot of it happens. For example, we could have much more public investment in technology, infrastructure and education. We don't want or need wage and price controls, but to achieve the same containment we certainly could have what economists call an incomes policy that links wages to real productivity gains. We could have excess taxes on profits. And if in 1942 they had childcare facilities in war production factories, we certainly can today. With industry starved for capital and the banking system reeling, a new Reconstruction Finance Corporation would also make sense.

Fifty years ago, a shared desire to win the war and a sense of revenge against the Japanese and the Nazis created a sense of national community. The first task today is to define the common problem of the nation, which requires a comprehensive look.

Without war, the job of leadership is to help people understand our competitive economic position in today's world. Leaders need to remind the public that we still have resources and talent, but we must reorganize and reorganize the relationship between government and people, just as we did during World War II.

There have been critical moments in our nation's history when the relationship of government to private business had to change to allow for both economic expansion and democracy to flourish. Now is one of those times. The experience of World War II shows how bold these efforts must be.

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What was the way we won America's economic breakthrough during World War II? ›

The government developed new sources of supply for raw materials and created quick mass transportation. The government also went into the business of producing synthetic rubber and aluminum, as well as other emerging industries, and helped stimulate new technologies.

How did World War II impact the American economy? ›

American factories were retooled to produce goods to support the war effort and almost overnight the unemployment rate dropped to around 10%. Women went to work to fill jobs that were traditionally held by men.

What happened to the economy during WW2? ›

The gross national product of the U.S., as measured in constant dollars, grew from $88.6 billion in 1939 — while the country was still suffering from the depression — to $135 billion in 1944. War-related production skyrocketed from just two percent of GNP to 40 percent in 1943 (Milward, 63).

What happened to the US economy as a result of the war? ›

Public debt and levels of taxation increased during most conflicts; • Consumption as a percent of GDP decreased during most conflicts; • Investment as a percent of GDP decreased during most conflicts; • Inflation increased during or as a direct consequence of these conflicts.

What helped the US be successful in WWII? ›

By 1944 America led the world in arms production, making more than enough to fill its military needs. At the same time, the United States was providing its allies in Great Britain and the Soviet Union with critically needed supplies. Many Americans volunteered to defend the nation from enemy bombing or invasion.

What helped US win WW2? ›

Inventions like synthetic rubber, the jeep, the atomic bomb, and even duct tape helped the Allies win World War II by allowing their militaries to wage war on an overwhelming scale.

What helped the US economy grow after WW2? ›

Driven by growing consumer demand, as well as the continuing expansion of the military-industrial complex as the Cold War ramped up, the United States reached new heights of prosperity in the years after World War II.

What was the impact of World War 2 on the American economy quizlet? ›

In 1939 9,500,000 people were unemployed, in 1944 there were only 670,000! General Motors also helped unemployment as they took on 750,000 workers. The USA was the only country to become economically stronger because of WW2. Over 500,000 business were also set up $129,000,000 worth of bonds were sold.

How did the US economy change after WW2 quizlet? ›

The United States experienced on economic boom and social transformation. How did the US grew as consumer and entertainment society after World War II? 1) New technologies from war were shifted to business to produce new goods. 2) New manufacturing processes allowed businesses to extremely efficient.

What were the key economic changes after WWII? ›

The private economy boomed as the government sector stopped buying munitions and hiring soldiers. Factories that had once made bombs now made toasters, and toaster sales were rising. On paper, measured GDP did drop after the war: It was 13 percent lower in 1947 than in 1944.

Did the economy improve after ww2? ›

United States. The period from the end of World War II to the early 1970s was one of the greatest eras of economic expansion in world history. In the US, Gross Domestic Product increased from $228 billion in 1945 to just under $1.7 trillion in 1975.

How did the world economy change after ww2? ›

The post-Second World War economic boom was an era of considerable prosperity that followed the recovery period and ended with the 1973-1975 Recession. These years are also referred to as the "Golden Age of Capitalism" in the West, although Eastern Europe and parts of Asia also saw significant growth in these years.

How did America change after ww2? ›

Following World War II, the United States began an economic boom that brought unparalleled prosperity to a majority of its citizens and raised Americans expectations, breeding a belief that most economic and social problems could be solved.

How did World War 2 change the world? ›

World War II also marked the beginning of trends that took decades to fully develop, including technological disruption, global economic integration and digital communication. More broadly, the wartime home front put a premium on something that's even more crucial today: innovation.

Does war improve economy? ›

The basic story with spending on a war, or any other military spending, is that it provides a boost to demand in the economy. In this sense, it is like anything else that would provide a boost in demand, such as increased spending on health care, child care or housing.

Who helped win ww2 the most? ›

Among historians the verdict is mixed. While it is acknowledged that Soviet soldiers contributed the most on the battlefield and endured much higher casualties, American and British air campaigns were also key, as was the supply of arms and equipment by the US under lend-lease.

Who benefited from WWII? ›

The United States benefited the most from WWII as it had a large population, technological prowess, and the capital necessary to change WWII machinations into business and industry that benefited the civilian. Europe saw great growth post-WWII; it just happened slower than it did in the United States and Japan.

How much did the US help in ww2? ›

Totaling $11.3 billion, or $180 billion in today's currency, the Lend-Lease Act of the United States supplied needed goods to the Soviet Union from 1941 to 1945 in support of what Stalin described to Roosevelt as the “enormous and difficult fight against the common enemy — bloodthirsty Hitlerism.”

Did the US help win ww2? ›

By late 1944, the American M1 rifle, B-29 heavy bomber, P-51 Mustang fighter, Gato-class submarines, Essex-class aircraft carriers, and Iowa-class battleships were the best weapons of their class. America did not win World War II alone. But without the United States, the war against Axis fascism would have been lost.

What were the most important reasons why the Allies won World War II? ›

He picked out three factors that he thought were critical: the unexpected 'power of resistance' of the Red Army; the vast supply of American armaments; and the success of Allied air power.

What were the 5 reasons for Allied victory? ›

Some reasons for the Allied victory
  • Superior manpower of the allies. In the final stages of the war, Germany's manpower was dwindling. ...
  • Extensive resources of the Allies. The Central Powers had taken on too much. ...
  • Allied control of the seas. ...
  • Failure of the last German offensive. ...
  • Surrender of Germany's allies.

Was WWII good for economy? ›

The Second World War was certainly an economic success story, in that it coincided with the most rapid economic growth in U.S. history. Much of this growth came not in the recovery from the Depression, but in the post-1940 period, when the country was already more or less at full employment.

Was the US economy good after ww2? ›

As the Cold War unfolded in the decade and a half after World War II, the United States experienced phenomenal economic growth. The war brought the return of prosperity, and in the postwar period the United States consolidated its position as the world's richest country.

What are three effects of WWII? ›

By the end of World War II, much of Europe and Asia, and parts of Africa, lay in ruins. Combat and bombing had flattened cities and towns, destroyed bridges and railroads, and scorched the countryside. The war had also taken a staggering toll in both military and civilian lives.

Why was ww2 so important? ›

World War II was, arguably, the most significant and influential event of the twentieth century. The devastation is almost incalculable: total military and civilian deaths are estimated at 70 to 85 million, about 3% of the global population during that time. World War II also saw the dawn of the nuclear age.

What was one result of WWII? ›

Britain and France lost most of their empires due to World War II. Germany, Italy, and Japan were conquered and occupied. The Soviet Union lost its most productive citizens—more than twenty million died in the war.

How did the economy get better after WW2? ›

The private economy boomed as the government sector stopped buying munitions and hiring soldiers. Factories that had once made bombs now made toasters, and toaster sales were rising. On paper, measured GDP did drop after the war: It was 13 percent lower in 1947 than in 1944.

What are a few reasons why the US economy boomed after World War II? ›

The economy thrived after World War II in large part because America made it easier for people who had been previously shut out of economic opportunity — women, minority groups, immigrants — to enter the work force and climb the economic ladder, to make better use of their talents and potential.

How did the US economy change during World War II quizlet? ›

In 1939 9,500,000 people were unemployed, in 1944 there were only 670,000! General Motors also helped unemployment as they took on 750,000 workers. The USA was the only country to become economically stronger because of WW2. Over 500,000 business were also set up $129,000,000 worth of bonds were sold.

How America changed after ww2? ›

Following World War II, the United States began an economic boom that brought unparalleled prosperity to a majority of its citizens and raised Americans expectations, breeding a belief that most economic and social problems could be solved.


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