How far did the US benefit from the recovery of the post-war

economies in the period 1945-1971?

In the post-World War 2 world, previously dominant economies such as the UK
and Japan saw their economic viability destroyed by the war, leaving the US as
a major economic (and also political) superpower. In the following decades,
commonly termed as the Golden Years, the US was able to benefit greatly from
the recovery of the post-war economies (such as Japan, Germany, and Europe)
in terms of expanding its domestic economy, extending economic influence and
advancing its political agenda. However, especially in the later years, the US
suffered from the emergence of foreign competitors born out of this very
recovery.
Firstly, the recovery of the post-war economies granted the US commercial
access to foreign markets that provided the demand needed to fuel domestic
production and growth. WWII contributed to American recovery from the Great
Depression as it provided increased demand for military and consumer goods
as the industrial capacity of most of the world was either destroyed in the
process of war, or directed towards war efforts. The massive drop in
unemployment from 13.9% in 1940 to 2% in 1945 and a doubling of
manufacturing output between 1939-1943 exemplify this. However, after the
war, demand for military goods fell drastically, leaving America with great
industrial and manufacturing capacity without a sufficiently large market.
Despite their domestic market, any further economic growth would have to be
largely fuelled by foreign demand. As articulated by then Assistant Secretary of
State Dean Acheson, in 1944, The important thing is markets. [] You must
look to foreign markets. Coupled with the international economys need for
American exports due to the destruction of industrial capacity in Europe, the UK
and Japan, the world depended for many years on imports of U.S-made goods
(Abrams). This was achieved through various policies such as GATT, IMF and
the conditioning of aid like Marshall Aid, on access to domestic markets,
ultimately leading to a nearly 290% growth in exports between 1948-1968.
Americas GNP more than doubled from $212 billion in 1945 to $503 billion in
1960, demonstrating how the access to foreign markets allowed for the further
expansion and growth of the American economy.
Secondly, the recovery of the post-war economies allowed for US firms to take
advantage of the expansion of the global economy through their foreign
investments. While post-war recovery affected domestic economies the most,
American firms were able to capitalize upon this expansion to reap its benefits
by investing in foreign firms and establishing American branches outside US
borders. For example, between 1950-1065, leading U.S. corporations increased
their manufacturing subsidiaries in Europe nearly fourfold. Only 20,000 of
General Motors cars were produced outside of the US in 1950, but by 1962,
they were manufacturing 133,000 automobiles with expansion to a capacity of
175,000 under way. The Hilton Hotels was the worlds first international hotel
chain and expanded greatly in the 1950s and 1960s. In fact, by 1967, there
were over 3,600 US firms operating internationally as opposed to a mere 988 in
1950. It was the recovery of these economies that transformed the US allies
into viable economic powerhouses, enabling the further expansion of global
economic growth. US firms were able to take part in this rapid process of
growth and recovery, but the scale and extent to which they benefitted would

not have been possible without the recovery and thus ability of the post-war
economies to host and supply efficient workers and resources to these
American firms. Hence, the post-war recovery benefitted the US economy in
terms of extending its economic influence over foreign economies and also in
terms of reaping additional economic rewards from recovery outside of the
American market.
Thirdly, the economic recovery translated into an overall increase in the
standard of living for the average US citizen, allowing for broader-based
affluence domestically. The average American benefitted in two ways. Firstly,
growing international demand for US exports as established previously
translated into increased manufacturing and production, and consequently an
increase in demand for labour. According to the Federal Reserve Bank, the
manufacturing industry employed 11922 thousand people in February 1946 but
eventually grew to employ 19409 thousand people in June 1979. More than
this, by 1960, the median American family had 30% more purchasing power
than in 1945 and 60% of the American population had attained a middleclass standard of living by the mid-1950s compared with only 31% in the last
year of prosperity before the Great Depression. Secondly, Americans benefitted
from a wider variety of consumer goods available for consumption due to the
increasing manufacturing capabilities of the recovering economies such as
automobiles and television sets. With increased purchasing power, more
Americans were both willing and financially able to consume such goods. By
the end of the decade, 96% of families owned a refrigerator, 87% a TV set, 75%
a car, and 75% a washing machine. Most crucially, it was that this increase in
wealth was broad-based and its impact was not concentrated amongst a select
group of Americans, but also the blue-collared workers who experienced a
steady rise in their take-home pay ($68 to $78, taking into account inflation)
between 1958 and 1964.
Fourth, the US also benefitted from the economic recovery of the war-torn
economies as it contributed greatly to the success of their Cold War agenda of
containing Communism. The principle of Containment was premised upon the
belief that economic stability translated into reduced susceptibility to
Communist rhetoric; hence any help rendered should be primarily through
economic and financial aid which is essential to economic stability and orderly
political processes (Truman Doctrine, March 1947). The political success and
thus benefit manifests in the non-Communist regimes of American economic
bulwarks of Japan and West Germany. More importantly, it was that these
nations remained committed to the principle of Wilsonianism, its democratic
processes and involved in the free market. In West Germany, 57% of imports in
1947-49 were financed by the Marshall Plan (which cost the USA $1.4 billion in
total) and helped the West Germans reach pre-war production levels in only
three years. The aid provided by the US targeted at containing Communism led
to the rapid recovery of Europe and Japan (the Supreme Commander of the
Allied Powers channeled $2 billion into the post-war Japanese economy) and
thus arguably the success of the American foreign policy agenda, culminating
in political benefits.
However, such benefits did not last. Rather, in the later years of the 1960s-70s,
it was precisely the recovery of these economies and the consequent
competition they posed that led to the weakening of the American economic

hegemony, much to the detriment of the average US worker. The post-war

recovery meant that the nations that were once dependent on the US for
growth were now able to independently generate economic activity, and in
fact, overtake the US in various industries like the automobile industry due to
growing competitiveness and efficiency. Hence the later years of the period
saw the US importing more than it exported, leading to its first trade deficit
since WWII in 1969, suggesting that not only was domestic consumer demand
for imports rising, it was not matched by foreign demand for US exports due to
the emergence of cheaper, better quality alternatives produced by the
competing post-war economies. Notably, the Factory Belt employment in the
manufacturing sector declined by 32.95 between 1969 and 1996, and in the
late 1960s, signs of decline were already present as the manufacturing sectors
share of employment was about 26% but fell to 11% by the end of the century.
By 1969, imports had increased their share of the U.S. auto market, with
Volkswagen selling 548,904 vehicles, followed by Toyota with 127,018 cars. It
was thus observed that since 1953, the US has experienced a major reduction
of its share of world trade [] the gains were made by Western Europe,
especially Germany, the CPEs and Japan (Branson, Giersch, Peterson, 1980)
This was because not only were US firms declining in their competitiveness and
efficiency in the world market, there was growing demand for German exports
in the American economy itself allowing for Germany to nearly triple its share
of the manufacturing exports of the advanced industrial economies, its quotient
increasing from 7.3% to 19% in the 1950s (Brenner, 2006). Hence, even
though the US was able to benefit greatly from post-war recovery in the initial
period, the American economy was beginning to suffer from the emergence of
competition born out of post-war recovery that were gaining market share at
the expense of American firms.
The trend that can be observed is that in the period 1945-1971, the US
benefitted from the post-war recovery of the global economy in the short run,
but saw its economic dominance challenged in the later years by the very
recovery of these economies. The detriments came in the forms of falling
exports due to an inability to compete with the emerging economic powers of
West Germany and Japan, among others. However, we must also consider the
extent to which the US was able to benefit even in the earlier period since the
US arguably merely continued the expansion of the war years [] between
1950 and 1973, it grew more slowly than any other industrial country except
Britain (Hobsbawm) suggesting that the benefits accrued did not originate
from the recovery of these economies but was merely supported by the global
economic recovery. Even so, the harms in the later period ultimately
culminated in the Nixon shocks (1971) where President Nixon essentially
removed the system of the US peg, forcing the world back into floating
currencies, eventually leading to the collapse of the Bretton Woods system. The
significance is that this decision of American perceptions of the international
economy in relation to itself, and hence the Nixon shocks is indicative and
reflective of the perceived economic harms being inflicted upon the American
economy. That being said, 1971 did not mark the end of the Golden Years yet
as the detriments were most keenly felt after 1971 during the Crisis Decade
and that 1968 was neither an end nor a beginning, but only a signal
(Hobsbawm) of troubles lying ahead. In conclusion, I believe that that the US
did benefit to a large degree from the recovery of the post-war economies. Not
only did it lead to a dramatic increase in the standard of living for the average

American despite the eventual harmful effects but it also led to definite political
benefits for the US.