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US economy Flashcards

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1
Q

US economic boom 1945-1968

A

-economy doubled in size
-consistently low unemployment of 4-5%
-average inflation of 2.5%
-average annual take home pay rose from $1,300 in 1944 to $8,000 in 1968
-US emerged as wealthiest nation on earth, with 7% of world’s population but 40% of its wealth

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2
Q

unemployment 1945-1968

A

4-5%

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3
Q

inflation 1945-1968

A

2.5% avg.

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4
Q

rise in avg. annual take home pay 1944 to 1968

A

$1,300 to $8,000

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5
Q

US wealth 1945-1968

A

7% of global pop., 40% of wealth

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6
Q

capitalist

A

majority of economic activity in private hands (for profit)

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7
Q

impact of WWII on economy

A

drove growth as US emerged from great depression of the 30s
-employment in war industries and army
-mass employment of women to replace men in home industries
-not many consumer goods produced -> increase in private savings ($140bn by 1945)
-low cost loans (low interest)
-increase in tax rev. ($51bn in 1945)
-lend lease scheme and war bonds
-infrastructure undamaged by war
-companies merged and grew to avail of federal contracts

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8
Q

increase in private savings due to WWII

A

$140bn by 1945

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9
Q

tax revenue in 1945

A

$51bn in 1945

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10
Q

lend lease scheme + money earned

A

supplied arms to the allies during the war
earned US $13.8bn

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11
Q

money earned from sale of war bonds

A

$185bn

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12
Q

rise in federal spending from 1940 to 1980

A

$10bn in 1940 to $580bn in 1980
-stimulated demand for goods/services, increased economic growth

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13
Q

interstate highway act 1956

A

created the highway system in the US, fuelling demand for cars + allowing for development of new urban/suburban communities
-$43bn 1957-1972

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14
Q

employment act 1946

A

mandated the govt. to work for full employment. fed. govt. had to create policies that created jobs. truman increased min wage + employed more people in civil service

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15
Q

GI bill of rights 1944

A

provided low cost loans to vets to go to college, buy a house or start a business
-over $20bn lent between 1945-1955

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16
Q

housing act 1949

A

passed by congress, made fed funding available for urban redevelopment + slum clearance -> large scale building of new housing in cities and suburbs
-$13.5bn 1953-1986

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17
Q

govt spending on welfare programmes 1975

A

$286.5bn a year.
allowed lower income earners to spend more, which increased demand, increasing jobs

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18
Q

defence spending 1949 vs 1951 vs 1953

A

1949 - $13bn
1951 - $22bn
1953 - $50bn

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19
Q

% of US spending that was on defence

A

approx. 60%

-2 wars (vietnam + korea)
-financial aid to allies
-troops overseas (west germany, korea, middle east)

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20
Q

civilian applications of military tech

A

drove innovation e.g. satellites for tv signals, teflon coating

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21
Q

military industrial complex

A

one of the main reasons for high military spending was the close link between arms companies e.g. boeing, lockheed, the military hierarchy and the political process. corporations influenced politics by donating to politicians, lobbying, placing factories in congressional districts, and supporting anti-communist media campaigns. politicians passed laws and budgets that allowed higher military spending

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22
Q

eisenhower warning about military industrial complex

A

final address as president 1961, warned that the M-I complex had become powerful enough to exert an ‘unwarranted influence’ on the actions of the US govt. and would seek to promote a confrontational stance against the soviets in the cold war

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23
Q

corporate capitalism

A

form of capitalism where the market is dominated by large, bureaucratic, hierarchical corporations (massive companies with activities over many different sectors and countries

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24
Q

amount of US manufacturing done by corporations by 1955

A

by 1955, 30% of US manufacturing was being done by 50 out of 300,000 companies. many of these invested in foreign countries to form MNCs e.g. general motors, general electric, exxon-mobil

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25
Q

rise in overseas investment 1950-1973

A

rose from $19bn in 1950 to $160bn in 1973

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26
Q

proportion of global investment by US companies in 1970

A

by 1970, US companies counted for nearly 80% of the worlds international investment

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27
Q

reasons for rapid growth of US international trade

A

-bigger companies -> economies of scale
-transport costs in US often more expensive than est. factory + producing locally in another country
-US MNCs had more capital, better tech, higher productivity + better management than competitors (looser regulations + labour laws)
-dollar became world economy’s main trading currency, used for trade payments + reserve banking -> greater security for US businesses investing abroad
-Tax laws encouraged foreign investment, profits taxed in country where they were earned, encouraged to operate in low cost economies
-fed. govt insured against losses in politically unstable countries (risk free ventures)
-local subsidiaries used (HQ in US but set up local companies to do business abroad. reduced costs in overseas markets for local consumers)
-increased popularity of US produce abroad as people wanted ‘american dream’ lifestyle

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28
Q

EEC

A

european economic community; created prosperous market in western europe for US to capitalise off

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29
Q

condition of marshall aid

A

if you accepted US aid, you were agreeing to allow US trade and business in your country

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30
Q

impact of MNCs

A

-grew US economic influence
-potential investment + prosperity valuable asset to foreign policy
-used wealth to influence politics
-led to US support of corrupt govts e.g. the shah in iran, apartheid in south africa
-pressure to ensure companies had access to oil, became central to fp

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31
Q

globalisation

A

the spread of institutions, organisations, businesses and culture on a worldwide scale

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32
Q

growth in world exports 1950-73

A

international exports rose by over 8% a year from 1950-1973

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33
Q

IMF

A

international monetary fund set up to promote currency stability. provided emergency financing for states in crisis. helped US dollar become dominant world currency by paying in dollars only. designed to ensure economic crisis in one country did not spread. provided funds to ensure countries did not default on their loans

34
Q

world bank

A

loaned money to developing countries. as european empires collapsed in asia and africa, dozens of new states emerged in need of funding

35
Q

GATT

A

general agreement on trade and tariffs:
encouraged a reduction in trade barriers e.g. taxes or tariffs and complicated rules that impeded the flow of goods and capital between countries

36
Q

orgs. set up after WW2 to help simplify trade + keep international economy stable

A
  1. IMF
  2. world bank
  3. GATT
37
Q

1945 to 1970s: energy

A

US had cheap sources of energy
-domestic oil supplies plentiful after war
-access to significant amounts of oil from s. america + middle east

38
Q

% of world oil supplies controlled by US, britain and netherlands

A

65%

39
Q

price of barrel of oil during US boom

A

$2 - kept industry/prod. costs low + drove demand for more cars

40
Q

why was there cheap electricity in the 50s/60s

A

increased use of nuclear power

41
Q

US economic boom performance (virtuous cycle) 1945-1968

A

-low inflation
-low unemployment
-successive administrations ran surpluses on the fed. budget
-balance of payments surplus
-high consumer demand
-high worker productivity
combination of factors called virtuous cycle
after 1968 all factors would become negative

42
Q

international competition (growth of japan and west germany vs US in 1966)

A

1966 japan grew by 6.5%, West germany by 13% and US by 3.3%
-> US economy slowing down while other countries caught up

43
Q

productivity and wages in japan/germany vs US

A

by 1960s both countries had built sophisticated industrial bases with lower costs (lower wages + higher prod.)
-japanese productivity 3 times higher than US between 1960-73

44
Q

japan/germany output vs US

A

exported much higher level of their output than US
-W. Germany exported 30% of goods produced, US only 7%

45
Q

prices in Japan/germany vs US

A

sold goods on international market at cheaper prices than US -> lowered market share

46
Q

reduction in US share of global trade 1948 vs 1964 vs 1970

A

1948 - 25%
1964 - 15%
1970 - 10%

47
Q

overtake of the US trading bloc

A

overtaken by the EEC (later EU) in 1970s

48
Q

impact of international competition on US

A

imported goods cheaper -> encouraged consumers to buy foreign goods over US alternatives
-more money going out of country
-combined with money leaving for international aid, balance of payments went into deficit in late 1960s for first time since 1945

49
Q

US international financial aid 1945-1965

A

$140bn

50
Q

amount spent on vietnam every year by 1968

A

$82bn

51
Q

cost of great society programmes and other fed. expenditure in 1968

A

over $90bn yearly

52
Q

federal expenditure in 1968

A

$172bn

53
Q

government revenue in 1968

A

$153bn

54
Q

growth of US govt deficit 1965 vs 1970 vs 1975 vs 1980

A

1965 - $1.4bn
1970 - $28bn
1975 - $53.2bn
1980 - $73.8bn

55
Q

govt deficit as percent of GDP 1960s vs 70s vs 80s

A

60s - 1%
70s - 2%
80s - 4%

56
Q

deficit problems

A

-inflation: govt had to borrow money -> more money in economy but amount of goods/services did not increase -> price rise
-currency weakness: other states less willing to buy dollars (bad investment) -> weakened dollar + increased cost of imports
-higher interest rates: inflation + dollar weakness made US federal reserve (centr. bank) raise interest rates -> lowered amount of investment in economy + demand for goods (harder to buy on credit)

57
Q

1970s recession

A

-inflation rose: reduced consumer spending + job losses in manufacturing
-labour costs rose: 1960s wages rose but productivity fell. with less demand, businesses reduced workforces -> unemployment
-rapid unemployment rise
-welfare costs rose: had to be paid for by borrowing (less tax rev)

58
Q

inflation rise 1966 vs 1970 vs 1974 vs 1980

A

1966 - 3%
1970 - 6%
1974 - 11%
1980 - 13.5%

59
Q

stagflation

A

period of low growth, high unemployment + high inflation (combination of stagnant economy + inflation)

60
Q

opec

A

organisation for petroleum exporting countries

61
Q

1970s oil crisis/ OPEC embargo

A

1973, in response to US support of israel in arab-israeli war (yom kippur war), arab oil states increased price of oil by 400% in six month period, until march 1974. OPEC put total embargo on oil sales to US
-crippled US economy

62
Q

1979 oil crisis

A

after iranian revolution, supply of oil reduced again + prices rose by 100%

63
Q

gold standard

A

after ww2 US dollar fixed to rate of $35 per ounce of gold. abandoned by Nixon as it did not allow dollar to change value against other currencies, even when US experienced BOP problems

64
Q

Nixon’s economic changes

A

-abandoned gold standard -> weakened dollar, made imports more expensive + exports cheaper
-aim was to reduce demand for imports, increase demand for US goods at home and abroad
-imposed price and wage limits to control inflation + lessen pressures on US businesses
-effects wiped by 1973 oil crisis

65
Q

ford’s economic strategy

A

WIN - whip inflation now
-wanted to cut spending and reduce taxes but democrats in congress would not pass most proposals

66
Q

carter’s economic policies

A

-increase spending in some areas and offset by reducing it in others
-given power to ration petrol after 1979 oil crisis, did not help
-1980, inflation reached 13.5% and interest rates at 20%
-tried to implement public works schemes but didn’t take off

67
Q

supply side economic

A

growth would come to economy if private citizens invested more and barriers were reduced to the prod. of goods/services
-supported by reagan

68
Q

reagan education

A

degree in economics and sociology

69
Q

reagan inspirations

A

milton friedman of the chicago school of economics and the policies of margaret thatcher

70
Q

reagan’s program for economic recovery 1981 (Neoliberalism)

A
  1. tax cuts: cut personal taxes by 23% in first budget -> encourage spending to stimulate economy
  2. spending cuts: cut spending on 300 govt projects to reduce money in the economy and therefore inflation and the size of the govt
  3. regulation cuts: believed ‘red tape’ prevented expansion. prevented min wage increases, resisted increased workers rights, TU powers, health/safety regs etc.
71
Q

reagan spending cuts 1981

A

$31bn

72
Q

reduced spending on govt projects 1984

A

17%

73
Q

reagan cold war policy

A

massive increases in military spending, current equivalent of $550bn yearly on arms buildup

74
Q

effect of reaganomics (tax cuts)

A

tax rev did not change much. more money in people’s pockets, stimmed spending and saving -> increased money available for businesses to invest and grow

75
Q

effect of reaganomics (spending cuts)

A

drastic cuts in many areas but not military. overall govt spending grew considerably
budget deficit grew

76
Q

growth of budget deficit 1980-1985

A

1980 - $73.8bn
1985 - $212.3bn

77
Q

balanced budget and emergency deficit control act 1985

A

passed with aim of reducing deficit in 1985. however US still had deficit of $221.2bn in 1990

78
Q

effect of reaganomics (job creation)

A

unemployment peaked at 10.8% in 1982 but then fell: 7.2% in 1985 and 5.6% in 1990

79
Q

effect of reaganomics (economic growth)

A

US GDP grew avg of 3% per year after 1982
overall US economy 23% bigger in 1989 than in 1980

80
Q

effect of reaganomics (inflation)

A

13.5% when reagan entered office in 1981. fell to 4.65% by 1989

81
Q

assessment of reaganomics

A

-every year of his presidency, the US economy grew, inflation fell and unemployment declined
-wrongly assumed that tax cuts would increase govt rev.
-failure to control spending -> massive deficit that led to recession after he left office
-disproportionate gain for wealthy americans from tax cuts and business reg changes, while poor people struggled with welfare cuts, low wages that couldn’t keep up with inflation, and less protection from exploitation

82
Q
A

History (17 decks)

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