The Great Boom 1950-2000: How a Generation of Americans Created the World's Most Prosperous Society
464
The Great Boom 1950-2000: How a Generation of Americans Created the World's Most Prosperous Society
464eBook
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Overview
In The Great Boom, historian Robert Sobel tells the fascinating story of the last 50 years when American entrepreneurs, visionaries, and ordinary citizens transformed our depression and war-exhausted society into today's economic powerhouse.
As America's G.I.s returned home from World War II, many of the nation's best minds predicted a new depression—yet exactly the opposite occurred. Jobs were plentiful in retooled factories swamped with orders from pent-up demand. Tens of thousands of families moved out of cities into affordable suburban homes built by William Levitt and his imitators. They bought cars, televisions, and air conditioners by the millions. And they took to the nation's roads and new interstate highways—the largest public works project in world history—where Kemmons Wilson of Holiday Inns, Ray Kroc of McDonalds, and other start-up entrepreneurs soon catered to a mobile populace with food and lodgings for leisure time vacationers.
Americans and their families began to channel savings into new opportunities. Credit cards democratized purchasing power, while early mutual funds found growing numbers of investors to fuel the first postwar bull market in the go-go '60s. At the same time the continuing boom enriched the fabric of social and cultural life. A college education became a must on the highway to upward mobility; high-tech industries arose with astonishing new ways of conducting business electronically; and an unprecedented 49 million families had become investors when the 1981-2000 stock market boom reached 10,000 on the Dow.
The Great Boom is the first major book to portray the great wave of homegrown entrepreneurs as post-war heroes in the complete remaking and revitalizing of America. All that, plus the creation of unprecedented wealth—or themselves, for the nation, for tens of millions of citizens—all in five short drama-filled decades.
Product Details
| ISBN-13: | 9781250112910 |
|---|---|
| Publisher: | St. Martin's Publishing Group |
| Publication date: | 02/09/2016 |
| Sold by: | Macmillan |
| Format: | eBook |
| Pages: | 464 |
| File size: | 2 MB |
About the Author
Robert Sobel was a financial historian and Lawrence Stressin Distinguished Professor Emeritus of Business History at Hofstra University and the author of numerous books on finance, including IBM: Colossus in Transition and The Pursuit of Wealth. He died in June 1999.
Read an Excerpt
The Great Boom 1950â"2000
How A Generation of Americans Created the World's Most Prosperous Society
By Robert Sobel
St. Martin's Press
Copyright © 2000 Robert SobelAll rights reserved.
ISBN: 978-1-250-11291-0
CHAPTER 1
COMING HOME: A TIME OF DESPAIR AND HOPE
Turn from the war, to the postwar future. I think of the fearful men in the high places of economic power who are frightened at the thought of peace, and the cynical men who are starting to say that there is no right to full employment in any society. I think of the near certainty that our powerful industrial leaders will have learned nothing at the end of this war, and that like the fabulous lemmings of Norway they will march into the sea of economic chaos, moved as by some tropism to seek destruction; different, however, from the lemmings in that they carry with them the economic destiny of a whole people.
– Max Lerner, "The Human Condition: 1944," PM, August 1, 1944
One of the most articulate and popular journalists and academics of mid-twentieth-century America, Max Lerner was a passionate New Dealer who, when World War II broke out, was teaching at Williams College and writing articles for a wide variety of newspapers and magazines. Invited to become a columnist at the liberal New York newspaper PM, Lerner accepted the assignment, commenting on the war, home front, politics, and anything else that struck his fancy.
After the successful D-Day invasion of Europe on June 6, 1944, Lerner's thoughts turned to the peace that soon was to come. While welcoming the impending end of the war, Lerner was not optimistic at the prospect. The arithmetic of the situation was compelling. It indicated that the bad times of the late 1930s would soon return. Lerner wrote:
Today there are some 65,000,000 Americans fighting and working — roughly 10,000,000 in the armed forces, roughly 55,000,000 in all forms of industry and agriculture. This compares with about 45,000,000 in 1939. The difference is 20,000,000. Take off 5,000,000 for the women who will not want jobs after the war and for a standing Army. That still leaves 15,000,000 — a figure comparable with the unemployment at the depth of the depression.
The thought was neither new nor original.
Lerner's apprehensions echoed those of many New Dealers during the late 1930s, when talk of an end to federal programs that created jobs sparked rejoinders that discontinuing such a policy would return the country to the sorry state it had been in prior to the New Deal.
A Bleak Past and Bleaker Future
At the time there was a generalized lack of confidence in what passed for free enterprise, more particularly, in the economy's ability to right itself without programs inspired by intellectuals from New York and other centers of abstract thought, and then implemented by Washington bureaucrats. In advanced intellectual circles it was modish to believe that the country could be saved only by an American version of what once had been hailed as the "Mussolini Miracle" of Italy, before opinion turned against the Italian dictator following his alliance with Adolf Hitler.
This was understandable, given the severity of the Great Depression and the perceived successes of the New Deal, and to be anticipated, for during the 1930s the death knell for capitalism was being sounded throughout the world. In 1937 President Roosevelt spoke of a nation in which one-third of the population was ill-housed, ill-clad, and ill-nourished. The situation hadn't changed much at the time World War II erupted two years later, when the unemployment rate was more than 17 percent. According to the 1940 census, which calculated earnings on the basis of wages and salaries alone and excluded returns from investments, 70 percent of the American people fell into the Census Bureau's category of "earnings poverty." In 1938 presidential adviser Adolf A. Berle, Jr.,spoke of the "obvious financial and industrial crisis which is plainly indicated within the next few years." The following year another adviser, Harry Hopkins, said, "With twelve million unemployed we are socially bankrupt and politically unstable. This country cannot continue as a democracy with ten million or twelve million unemployed. It just can't be done." Then came the war and the end of unemployment its replacement being widespread labor shortages. But the idea of capitalism's dead end had not died. Would those predictions come true once the war ended?
This is not to suggest — as it was later on — that the Roosevelt Administration welcomed entry into the war as a solution to the problems of unemployment and depression. Even so, the thought was not completely alien to some. At Princeton in 1936 a group of students organized what they called Veterans of Future Wars, which attempted to obtain a federal bonus of $1,000 for each of the 15 million Americans bound to serve during such a conflict. Lewis Gorin, Jr., a Princeton senior, its first national commander, later wrote Prepaid Patriotism, in which he said that the bonus should be paid before the World War veterans squeezed the country dry with their demands for bonuses. The movement gathered tens of thousands of members on campuses throughout the country, and soon there was an auxiliary organization, the Association of Future Gold Star Mothers, which demanded government-paid trips to Europe during the next war so they could visit the graves of their sons who would die in combat. Another student organization, Future Profiteers, demanded advances on war contracts. It was a short-lived movement, however, falling apart with the arrival of the 1936 presidential election. It should be noted that most members eventually did serve in the armed forces during World War II.
There were other reasons to expect bad times ahead, and not only for the short run. Demography seemed to dictate decline. In a 1943 article dealing with postwar expectations, the editors of Fortune stated that "unless the economic, social, and cultural structure of the nation undergoes great postwar changes, the birth rate will recommence its downhill trend," which had begun in the nineteenth century and continued, with interruptions, into the 1930s. A 1938 poll indicated that 79 percent of American women were in favor of birth control, with 3 out of 4 giving the reason as "family income," or, to be more precise, the lack of same. The Fortune writer concluded that the American impulse to limit births, which would become permanent, would add to economic problems:
It has always been assumed in this country that an increasing population was not only normal but desirable. Now that the U.S. is faced with the leveling off of the population and the possibility of numerical decline, we must look ahead to the social, political, and economic effects implicit in those changes, and try to decide how to meet them. If the population should become stationary, capital investments, industry, and business could no longer be founded on numerical growth: they would have to be based on conservation and improvement rather than expansion, on quality rather than quantity. A stationery population or a somewhat smaller population would not necessarily be dangerous to the country's economic and social life so long as we took cognizance of it and adjusted our life to it.
The writer suggested that because of the expected population decline, it would become necessary for aged workers to remain on the job longer than anticipated. Ewen Clague of the Social Security Board recommended retraining working men and women at around the age of forty-five for jobs they might hold in their old age. Fortune concluded that by 1980 more than half of American voters would be more than forty-five years old, and would demand additional benefits from Social Security, and perhaps even government-provided medical care. How could the anticipated stagnant postwar economy deal with such matters?
Max Lerner and Fortune were not alone in their forebodings. University of New Mexico president J. Philip Wernette, who had been trained in economics; predicted:
Immediately after the war there will be a brief restocking period, when business and employment will be fairly good. When the restocking stimulus has spent its force, however, the outlook for the decades ahead is for continuous, chronic world depression, broken by occasional periods of severe depression. That is what we may expect, unless something is done to prevent it.
Alvin Hansen, a leading Keynesian economist, was troubled by the same forces he perceived in the economy and society as a whole. In his popular book After the War, Full Employment (1943), Hanson argued:
When the war is over, the Government cannot just disband the Army, close down munitions factories, stop building ships, and remove all economic controls. We want an orderly program of demobilization and reconstruction. The government cannot escape responsibility.
Paul Samuelson, soon to become the country's best-known academic economist by virtue of his highly popular textbook, agreed, predicting a major depression unless the government acted to stimulate the economy, and other experts took up the cry. As with Lerner, Samuelson's reasoning was based on experiences following the end of World War I and then the coming of the Great Depression:
The final conclusion to be drawn from our experience at the end of the last war is inescapable. Were the war to end suddenly within the next six months, were we again planlessly to wind up our war effort in the greatest haste, to demobilize our armed forces, to liquidate price controls, to shift from astronomical deficits to even the larger deficits of the thirties — then there would be ushered in the greatest period of unemployment and industrial dislocation which any economy has ever faced.
The war was over within two years, not six months. The transition to a peacetime economy was both swift and chaotic; even before the Japanese surrendered, a large number of consumer items were freed from the price controls imposed during the war, and Washington canceled many contracts for ordnance, including 30 percent of those for aircraft. In mid1945, with the war over, meat, butter, and tire rationing ended and additional products were freed from War Production Board controls. The armed forces were soon demobilized. On V-J Day there were more than 12 million men and women on active duty. Two years later, the number had been reduced to 1.5 million. Within the defense-oriented sectors of the economy, the job loss was 2.6 million. The GNP declined by 1.6 percent from 1945 to 1946. The government conducted the largest surplus property sale in history, as factories were disposed of at 20 percent of cost.
Economic decline was the gospel during the immediate postwar period. It even found its way into the college textbooks. One of the most popular of the time, An American History (1950) by the noted historians Merle Curti, Richard Shryock, Thomas Cochran, and Fred Harrington, informed freshman American history students that major economic problems were occurring as the servicemen were being discharged:
Even at home, all was not well. Prosperity appeared to depend in substantial part on exports for which foreign countries could not pay; and on an armament program which increased an already staggering tax burden. The individualism and the opportunity of an earlier America seemed to have faded; and some felt that the United States had suddenly grown old. Predictions of disaster were common, and despair became fashionable in intellectual circles. No longer did Americans speak of the inevitability of progress. Rather they talked of a confused and uncertain future.
Almost half a century later, former Economist analyst and Englishman-turned-American Michael Elliot wrote what by then had become the standard view of the situation at the end of the war.
When the war in Europe started in 1939, America was struggling, battered and bruised, from an economic recession that was far deeper and more wounding than anything known in Europe. ... At the end of World War II, by contrast, America bestrode the narrow world like a colossus. Its military machine, enjoying scientific and technological advances far beyond those available to any other fighting men, had won two wars, each a wide ocean away from home. On the twin rocks of its economic and military might, America then built a society which was the envy of the world — a society in which ordinary working people could enjoy a standard of living, with spacious homes and modern appliances, beyond the dreams of those in other nations. The outside world was kept at bay, like children pressing their noses to the panes of a party to which they have not been invited.
How could those seers at the end of World War II have been so wrong? Put it down to the mindset developed during the Great Depression and sustained throughout the war. How could they have failed to perceive the strengths the nation possessed, such as the activities of the returned veterans, a key element in the prosperity that would mark the scene in post–World War America?
The arithmetic that led the pundits to anticipate a depression was compelling and convincing. Absent massive federal public-works programs larger than anything attempted in the 1930s, the United States would sink back into depression. Samuelson was convinced that "peacetime prosperity could be assured only if the slack left by business investment and expenditures could be taken up by government expenditures."
Before the war, Samuelson had been an ardent New Dealer, and his highly successful textbook reflected his beliefs in the wisdom of government intervention in the economy. Later, in the 1960s, he would argue for a major government role even when all was going well with the private sector. Not so historian Richard Hofstadter, generally categorized as a moderate who, unlike Samuelson, did not offer prescriptions for reform or play a political role. Writing in The American Political Tradition and the Men Who Made It (1948), which like Samuelson's economics textbook became a best-seller in the late 1940s and afterwards, Hofstadter started by stating, "Since Americans have recently found it more comfortable to see where they have been than to think of where they are going, their state of mind had become increasingly passive and speculative."
Hofstadter also wrote:
An awareness of history is always a part of any culturally alert national life; but I believe that what underlies this overpowering nostalgia of the past fifteen years is a feeling of insecurity. The two world wars, unstable booms, and the abysmal depression of our time have profoundly shaken national confidence in the future. During the boom of the twenties it was commonly taken for granted that the happy days could run on into an indefinite future; today there are few who do not assume just as surely the coming of another severe economic slump. If the future seems dark, the past by contrast looks rosier than ever.
Academics and government officials were not alone in believing the end of the war would usher in a new depression. Scores of perfectly respectable and intelligent businessmen agreed. Perhaps the most visible of these was Sewell Avery, the CEO of Montgomery Ward, one of the nation's leading retailers.
In his 1945 message to shareholders, Avery predicted hard times ahead, for which Montgomery Ward was well prepared. Avery's beliefs were not derived from the sources referred to by Samuelson and government economists. Rather, they came from the writings of Geoffrey Moore, an eccentric business-cycle theorist, who noted similarities between credit growth in the 1920s and what was happening in the immediate post–World War II period, leading him to conclude that a bust was in the making. In addition, Avery kept charts and statistics on his desk going back to the Napoleonic Wars, prepared to show and explain them to any and all. After doing so, he would invariably ask, "Who am I to argue with history?" As a result, Montgomery Ward did not expand in the late 1940s and early 1950s, while arch rival Sears Roebuck purchased land in suburbs throughout the country and erected department stores that helped destroy Avery and his company.
Avery might have had better fortune in defending his position by observing that Congress seemed to agree with him. By large majorities in both houses, a rather conservative Congress passed the Employment Act of 1946. Originally it was called the Full Employment Act of 1946 but in its final form the "Full" was dropped, because Congress was fearful of defining "full employment." This was to be a typical compromise bill. The old New Dealers were interested in full employment, but also in eliminating poverty in America. The thought at the time was that if unemployment could be ended it would dispose of the issue, since a person who was employed was, by definition, not poor. The legislation declared:
It is the continuing policy and responsibility of the Federal Government to use all practicable means ... to coordinate and utilize all its plans, functions, and resources for the purpose of creating and maintaining, in a manner calculated to foster and promote free competitive enterprise and the general welfare, conditions under which there will be afforded useful employment opportunities ... and to promote maximum employment, production, and purchasing power.
(Continues...)
Excerpted from The Great Boom 1950â"2000 by Robert Sobel. Copyright © 2000 Robert Sobel. Excerpted by permission of St. Martin's Press.
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Table of Contents
Contents
Title Page,Copyright Notice,
Dedication,
Epigraph,
PROLOGUE,
INTRODUCTION,
1 COMING HOME: A TIME OF DESPAIR AND HOPE,
2 A HOME AND CAR OF ONE'S OWN, AND WHAT THEY IMPLIED,
3 THE FAMILY: ITS WORK, PLAY, AND INVESTMENTS,
4 THE CREATION OF WEALTH ON WALL STREET,
5 THE ELECTRONIC COUNTRY,
6 THE END OF THE POSTWAR PERIOD,
7 ALTERNATE MEANS TO WEALTH,
8 THE NEW RULES OF THE GAME ON WALL STREET AND ON THE CAMPUSES,
9 THE NEW VIEW OF RETIREMENT AND EDUCATION,
10 THE THIRD GENERATION,
ACKNOWLEDGMENTS,
SELECTED BIBLIOGRAPHY,
INDEX,
About the Author,
Praise for The Great Boom,
By the Same Author,
Copyright,
What People are Saying About This
It's clear The Great Boom doesn't have all the answers. Still, as food for thought, this book's a feast.