14.2 Government economic policies during wartime

World War II reshaped America's economy. The government implemented price controls, wage freezes, and rationing to manage inflation and ensure fair distribution of goods. These measures, along with increased taxes and war bonds, helped fund the massive military expenditures.

The war effort transformed consumer behavior and the labor force. Rationing changed consumption patterns, while employment soared, especially for women and minorities. These economic policies and social changes set the stage for post-war prosperity and pent-up consumer demand.

Economic Policies During World War II

Price controls and wage freezes

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• Price controls and wage freezes prevented inflation ensured fair distribution of goods maintained economic stability
• Office of Price Administration set maximum prices for goods and services introduced rationing system for scarce commodities (gasoline, sugar)
• National War Labor Board limited wage increases made exceptions for substandard wages or inequality adjustments
• Enforcement mechanisms included fines for violators public reporting of non-compliance rationing coupons and stamps

Fiscal policy for war financing

• Government spending increased dramatically for military expenditures (tanks, aircraft) war-related infrastructure Lend-Lease program
• Revenue Act of 1942 expanded income tax base introduced withholding tax imposed excess profits tax on corporations
• Fiscal policy funded war production controlled inflation reduced civilian consumption
• War Production Board and Office of War Mobilization coordinated industrial output allocation of resources

War bonds and national debt

• Government borrowing increased national debt Federal Reserve supported monetary policy
• War bonds (Series E, F, G) promoted through campaigns (celebrity endorsements) impacted personal savings rates
• National debt grew rapidly during war years created long-term repayment obligations
• Bond sales absorbed excess purchasing power managed inflation
• Post-war economy faced high debt-to-GDP ratio challenges transitioning to peacetime production

Economic policies vs consumer behavior

• Rationing changed consumption patterns (Victory gardens) led to black market development
• Employment increased labor force participation (women, minorities) raised household incomes through overtime and shift work
• Forced savings through rationing voluntary savings in war bonds altered spending habits
• Non-essential construction restricted urban centers grew near defense industries
• Social changes accelerated women in workforce migration to industrial areas civil rights discussions
• Post-war expectations included pent-up demand for goods (automobiles, appliances) shift towards suburban living expansion of consumer credit