Strengths and weaknesses of US economy Flashcards
Impact of WW2
WW2 drove the US economy and was a strength.
Employment rose as jobs were created in the war industries.
There was also a mass employment of women to replace the men gone to fight in the war.
People spent less during war times so public savings also increased to $140 billion by 1945.
The government also got $13.8 billion from the Lend-Lease Scheme which supplied arms to allies during the war.
The US was also undamaged by WW2 due to oceans on either side so no money was spent on reconstruction.
The war boosted the economy and resulted in huge sums of money being available for public and private investment.
Public investment and federal spending
Federal government investment was key in the success of the American Economy.
Total federal spending was $580 billion in 1980.
Spending on the public stimulated the demand for goods and services.
The highway act in 1956 created the highway system.
This also increased the demand for cars which increased car production.
This allowed the economy to flourish.
The GI bill of rights gave low-cost loans to veterans to go to college and to buy a house.
$20 million was lent from 1945-55
Defence spending
Increased after WW1, boosted economy.
$22 billion spent in 1951
Approx. 60% of federal spending was on defence.
US spent vast sums of money on military, especially with two full scale wars - Vietnam, Korea
and troops in Middle East.
Tech for military was also used by civilians like satellites and Teflon for frying pans
Military industries employed thousands of Americans
Multinational corporations and foreign investment
Rise of multinationals saw a centralisation of economic power for few wealthy companies.
1955, 30% of US manufacturing was done by 30 out of 30,000 companies.
These companies also invested in other countries to get raw materials.
1970, US companies counted for 80% of the world international investment.
People saw the American dream lifestyle from TV which increased popularity of US products.
Transport costs were also looser than those in the US.
Globalisation
Improved American economy and spread American ideals across the globe.
Reflected in the growth of “everything American” - Rock and Roll, Habmurgers.
Because of increased global trade, several institutions were set up to help this process.
World exports rose by more than 8% a year over the period 1950-73.
The World Bank loaned money to developing countries especially after the collapse of European Empires.
The General Agreement on Trade and Tariffs encouraged a reduction in trade barriers. This removed the complicated rules which reduced goods that flowed into each country.
International competition
Weakness because while the US economy started to slow, other economies grew.
Japanese economy grew by 6,5%
West Germany Economy grew by 13%
This is because both countries exported a high level of their output.
West Germany exported 30% of its while US only exported 7%.
These countries were also aided by Marshall aid. Which rebuilt the damage after WW2.
This Marshall aid reduced the US’s balance.
Vietnam war
The Vietnam war drained and damaged the US economy.
By 1968, $82 billion was spent on the Vietnam War by the US government.
The paired with programmes and other expenditures a budging deficit was formed (govs spent more money that they had)
This caused inflation due to the government borrowing money to fix the deficit which made the US Dollar weaker.
This deficit reached $73.8 billion in 1980.
1970 US recession
Oil Crisis
The oil crisis was a weakness because it made the already fragile economy, more fragile.
The US was dependant on oil to use in their homes, cars and for industrial production.
In response to
Reaganomics
