On Mon, 13 Oct 2003 14:31:13 GMT, "Ed Huntress" wrote:
"Gary Coffman" wrote in message
.. .
On Sun, 12 Oct 2003 20:14:25 GMT, "Ed Huntress"
wrote:
The US economy since WWII has been built on an
underworked, overpaid middle class. May they rise again.

The reason for that was that at the end of WWII the US was the only
major industrialized nation left with an intact infrastructure. The rest
of
the world was either smashed flat, or was made up of remnants of a
colonial infrastructure which held them to peasant level. So the US
could allocate resources profligately without enduring any negative
consequences.

I'm real curious about why you think that should have led to such a big
social and economic change in the US. What's your rationale? With numbers,
please. No fuzzball theories. g

I just told you why. The US had no effective economic competition
at the end of WWII. US companies could sell everything they could
make. They didn't have to care much about costs or quality. If the
unions wanted more money, fine, they gave it to them to keep the
wheels turning and the profits rolling in. The US was top of the heap,
the men in the grey flannel suits had the world by the tail and could
do no wrong. Coca Colonialism was in full swing, and there was
little the rest of the world could do about it.

The Red Menace also fueled the fire. The taxpayer would fork over
inordinate amounts of money to defend against it, and government
borrowed even more. Huge industries, which would have otherwise
withered at the end of the war, fed off that paranoia and bellied up
to the federal trough to feed. All that money circulated through the
economy, driving it even further and faster.

I'll supply you with a few illustrative numbers since you asked.

Numbers: The US GNP was $70 billion in 1939, but rose to $174
billion by 1948. That was fueled mostly by federal spending and
federal borrowing for the war effort. US budget, $43 billion in 1940,
climbed to $98 billion by 1945. Also rationing ended in 1948 and
pent up consumer demand was unleased. The GNP shot up to
$400 billion by 1952.

But realize that numbers are only a part of economics. Psychology
plays at least as large a part in economic behavior as the numbers.

What we had post-war was a classic demand pull situation. Demand
was so large it could not be satisfied, even by factories running 3 shifts.
That changed the psychology of the market from the pre-war depression
era maliase to a go for broke optimism which caused people to spend
and spend and spend, borrow, borrow, and borrow, then spend, spend,
spend some more.

But of course it couldn't last. Eventually all those 20 year bonds
started maturing, commercial loans started coming due, etc, and
the government's response was to run the printing presses night
and day, generating a roaring inflation which reached double digits
in the 1970s.

Also, the rest of the world rebuilt. US businesses no longer faced
meager competition. People who had suffered the brunt of war and
were hungrier than those in the US were willing to work harder for
less money, and they had brand new state of the art plants to do it
in (often built with US aid money). Finally, even previously peasant
economies began to industrialize in earnest, and thus we have the
Asian Tigers, China, and coming soon, India.

The US was still top of the heap, but by a much smaller margin,
and its businesses started to have to be more efficient to compete
for a piece of the action, which means increased productivity, which
means reduced employment for a given level of output.

Today the world is a much more competitive place than it was in
Eisenhower America. Demand pull is no longer the driver it was in
the 50s and 60s. People and businesses are starting to realize that
unlimited growth won't continue to pull the economy. Debt service
now takes a huge chunk of the federal budget, and total debt,
government, commercial, and consumer, has soared to levels
where there is no realistic hope that it can ever be paid off.

People and companies are learning that they have to scratch
harder for the dollars that are out there, because others in the
world are willing, and now able, to do so too.

Gary