12.1 Economic Growth and the American Middle Class

The post-war era saw unprecedented economic growth in America. Fueled by pent-up demand, technological advances, and the baby boom, GDP soared. The GI Bill enabled millions of veterans to get an education and buy homes, expanding the middle class.

Government policies, like low interest rates and infrastructure investments, further boosted growth. Key industries like automotive, electronics, and aerospace thrived. This economic boom transformed American society, raising living standards and creating new opportunities for millions.

Post-War Economic Boom

Economic Expansion Factors

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• "Golden Age of Capitalism" characterized by sustained economic growth, rising productivity, and increased standard of living
  • GDP growth averaged 4% annually from 1947-1973
  • Productivity increased by 3% per year during this period
• Pent-up consumer demand fueled rapid economic expansion
  • Americans purchased durable goods (automobiles, refrigerators, washing machines)
  • New car sales increased from 70,000 in 1945 to 6.7 million in 1950
• Conversion of wartime industries to peacetime production created new job opportunities
  • Aircraft manufacturers like Boeing transitioned to commercial airplane production
  • Shipyards repurposed for civilian vessel construction
• Technological advancements adapted for civilian use spurred innovation
  • Jet engines led to commercial aviation industry growth
  • Electronics advancements resulted in consumer products (transistor radios)
• Baby boom increased demand for housing, consumer goods, and services
  • 76 million babies born between 1946 and 1964
  • Housing starts rose from 142,000 in 1944 to 1.7 million in 1950
• United States' dominant position in global economy allowed for increased exports
  • U.S. share of world manufacturing output reached 50% by 1953
  • Marshall Plan facilitated European markets for American goods
• Keynesian economic policies maintained full employment and economic stability
  • Government spending increased from 16% of GDP in 1947 to 30% by 1960
  • Full Employment and Balanced Growth Act of 1978 codified economic goals

GI Bill and the Middle Class

Educational Impact

• Servicemen's Readjustment Act of 1944 (GI Bill) provided benefits to World War II veterans
• Education provisions enabled millions to attend college or vocational schools
  • 7.8 million veterans used GI Bill education benefits
  • College enrollment doubled between 1940 and 1950
• Created more educated and skilled workforce
  • Percentage of Americans with bachelor's degrees rose from 5% in 1940 to 25% by 1980
• Contributed to technological advancements and innovation across industries
  • Many GI Bill graduates became engineers and scientists during the Space Race
  • Advancements in fields like computer science and biotechnology

Economic Mobility and Housing

• Home loan guarantee program facilitated widespread homeownership among veterans
  • VA guaranteed 2.4 million home loans between 1944 and 1952
  • Homeownership rate increased from 44% in 1940 to 62% by 1960
• Benefits helped create expanded middle class
  • Median family income rose from $3,083 in 1945 to$5,657 in 1960 (adjusted for inflation)
• Impact on social mobility allowed many working-class veterans to enter middle class
  • Reduced income inequality with Gini coefficient decreasing from 0.41 in 1945 to 0.35 in 1970
• Success led to subsequent educational assistance programs for veterans
  • Post-9/11 GI Bill in 2008 expanded educational benefits for modern veterans

Government Policies for Growth

Fiscal and Monetary Measures

• Employment Act of 1946 established federal responsibility for economic management
  • Created Council of Economic Advisers to guide policy decisions
• Fiscal policies stimulated economic growth and job creation
  • Interstate Highway System initiated in 1956 with $25 billion federal investment
  • Space program spending reached $5.9 billion by 1966
• Federal Reserve maintained low interest rates to encourage borrowing and investment
  • Federal funds rate averaged 2.7% between 1954 and 1957
• Expansion of Social Security and introduction of Medicare/Medicaid increased economic security
  • Social Security beneficiaries increased from 1.3 million in 1945 to 25.7 million in 1970
  • Medicare and Medicaid covered 20 million Americans by 1970

Research and Labor Policies

• Government support for research and development led to civilian economy innovations
  • Defense Advanced Research Projects Agency (DARPA) founded in 1958
  • NASA's Apollo program spurred advancements in materials science and computing
• Labor policies ensured workers benefited from economic growth
  • Union membership peaked at 35% of workforce in 1954
  • Minimum wage increased from $0.40/hour in 1945 to$1.60/hour by 1968
• Regulatory policies aimed to maintain fair competition and economic stability
  • Celler-Kefauver Act of 1950 strengthened antitrust laws
  • Securities Acts Amendments of 1964 expanded SEC oversight of financial markets

Key Industries of Expansion

Manufacturing and Consumer Goods

• Automotive industry experienced significant growth
  • Car ownership increased from 54% of households in 1948 to 79% by 1970
  • Big Three automakers (GM, Ford, Chrysler) dominated global market
• Consumer electronics industry emerged as major economic driver
  • Television ownership rose from 9% of households in 1950 to 95% by 1970
  • Introduction of color TV in 1954 spurred further growth
• Petrochemical industry expanded to meet growing energy demands
  • U.S. oil production doubled between 1945 and 1960
  • New synthetic materials transformed manufacturing (nylon, polyester)

Construction and Services

• Housing and construction industry boomed with suburban development
  • Levittown developments created model for mass-produced housing
  • 11 million new housing units built between 1948 and 1958
• Service sector grew in importance as incomes rose
  • Retail sales increased from $123 billion in 1945 to$219 billion in 1960
  • Fast food industry emerged (McDonald's founded in 1955)
• Telecommunications industry developed rapidly
  • Telephone ownership increased from 62% of households in 1950 to 93% by 1970
  • Microwave relay networks expanded long-distance communication capabilities

Defense and Aerospace

• Aerospace and defense industries grew due to Cold War tensions and Space Race
  • Defense spending averaged 7.5% of GDP between 1948 and 1970
  • Boeing 707, first successful commercial jet airliner, introduced in 1958
• Technological advancements led to civilian applications
  • GPS technology developed for military use in 1970s
  • Microwave ovens, originally based on radar technology, became household items