offering high rates on savings accounts. And the thought of swapping American dollars for higher-yielding foreign assets seemed ludicrous and likely to lure J. Edgar Hoover’s team to stomp down your door. While the U.S. equity market was open to investors (the Dow Jones Industrial Average actually rallied after 1942), broker commissions were hefty and only about 2% of American families dared to own stocks. Stock investing seemed best-suited for Park Avenue swells, or for amnesiacs who forgot the 1929 crash. In contrast, a majority of American families participate in equities today. The trim, short lines of the Eisenhower jacket may have looked appealing, but it was rations, not fashion, that made Americans like Ike's style. In sum, during World War II, the savings of American families were secured in their home country and locked into bonds. Treasury paper bore three things: a paltry yield, a distant maturity, and the stern-looking photo of a former president. Of course, the limits on personal finance were not more dramatic than the limits on consumer purchases. After the Pearl Harbor attack, the U.S. War Production Board banned a wide range of items, including double-breasted suits, trouser cuffs, and pleated skirts, all of which wasted valuable material. To walk around in a big-shouldered, broad-lapelled zoot suit at that time was a near-criminal act. The trim, short lines
of the Eisenhower jacket may have looked appealing, but it was rations, not fashion, that made Americans like Ike’s style. It was not just the Eisenhower jacket that hemmed in America. While Roosevelt undid some of the damage of the Herbert Hoover administration by amending the dreadful 1930 Smoot-Hawley Tariff Act and building deposit insurance into banking, he raised individual taxes even higher than Hoover had and doubled the corporate tax rate from its 1930 level. Just as dire, he padlocked the economy in a cage of wage, price, and output controls, depleting it of any dynamism. FDR’s Agricultural Adjustment Act, for example, employed thousands of inspectors to drive by farms in trucks and fly over them in repurposed crop-dusting aircraft to make sure that farmers did not plant more crops or raise more livestock than the federal government permitted. Millions of acres of fluffy cotton plants and sweet corn cobs were plowed under, and millions of piglets were slaughtered. By 1935, America faced shortages of corn and cotton and had to import these staples from abroad. Rather than dwelling on the Great Depression of the 1930s, let’s take a look at “the Depression that never was,” immediately after American troops came home in 1945. World War II shuttered key parts of the civilian economy, while forcing millions of Americans to step away from their usual jobs. As the war ended, future Nobel laureate economists Paul Samuelson and Gunnar Myrdal predicted a dispiriting business relapse into the intensive-care unit. After all, millions
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July 2020
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