spring open, corporate taxes were cut (including a repeal of the “excess-profits” levy), and businesses encountered a more flexible, optimistic environment, sending stock prices higher. As a result, in the first six months of 1946, private investment leapt 50% higher than during all of 1945, before consumer demand had a chance to catch up. Prior to the war, labor unions had marched to demand shorter hours and had prodded the U.S. Senate to pass a bill limiting the workweek to 30 hours. But after 1945, returning soldiers – eager to grab a slice of prosperity – demanded to work longer hours, and so union leaders quietly shredded their faded protest leaflets. Increasingly confident After all, millions of soldiers were coming home and trading in their helmets and flak jackets, but for what? Their old jobs had vanished, businesses began hiring more, and average weekly work hours began to soar, giving millions of Americans the wherewithal to afford the radios, refrigerators, and cars that would roll off assembly lines. In its November 25, 1946 issue, Life magazine devoted a centerfold to “Family Utopia” and displayed the 1947 American Dream: a modest house with a children’s slide, a three-burner electric stove, and a modern dad, who, with Midway or Normandy in the past, now lusted for lawn furniture, a rubber boat, and a bow-and-arrow set.
of soldiers were coming home and trading in their helmets and flak jackets, but for what? Their old jobs had vanished, and many of their former employers had either gone bankrupt or had switched under the Second War Powers Act from stitching sofas to, say, fabricating pilot seats for fighter-bombers. Whereas almost 41% of U.S. GDP came from the government’s till in 1945, that share would shrink to just 14.4% by 1947. Even Rosie the Riveter would be laid off because no one could afford to fly on a passenger plane except movie stars and high-society types. Samuelson warned, “We shall have some ten million service men to throw on the labor market,” heralding “the greatest period of unemployment and industrial dislocation which any economy had ever faced.” What happened instead? When Japan surrendered in August 1945, the U.S. economy did indeed freeze, but only until November’s Thanksgiving holiday. Then, average weekly work hours began to climb. Textbooks routinely attribute the rebound to “pent-up demand”: returning soldiers were dying to buy cars and homes. But this is a lazy cliché. Where did returning soldiers and their families get the money to express their pent-up demand? Army privates and Navy sailors were paid $50 per month whether they charged through front lines or peeled potatoes at stateside bases. And Medal of Honor winners took home a bonus worth precisely $2. Here’s a more persuasive explanation: President Harry Truman and a Republican Congress let the cage of New Deal regulations
American Consequences
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