On September 2, 1945, Japan formally surrendered unconditionally and World War 2 was over. Germany had surrendered unconditionally earlier, on May 8, 1945. Italy had given up two years before on September 8, 1943. The Axis Powers no longer existed after Japan surrendered. The war was over.
Allowing for the massive bombing destruction and the millions killed during the war, many cities, both belonging to the Allies and the Axis had been bombed to almost complete rubble. The world was then at peace but recovery from the destruction still had to come about.
Keep in mind that if economic conditions had been better in the period between the two wars World War II would never have occurred; the people who gained control of Italy, Japan, and Germany would never have been successful in taking over these countries without the dire economic conditions brought about by the depression. The ultimate cause of the war was the Great Depression.
The war, both in the United States and otherwise, had been a time of deprivation. In order to win the war people had done without much of the goods and services needed for proper living. Virtually all production for the duration of the conflict had been aimed at winning the war. Countries could now begin recovery in Europe and Asia, while in the United States it was a time for a return to civilian goods. There had been no actual fighting in America.
Before World War II most people in the United States were still coming out of the Great Depression; they were surviving more or less. Conditions improved under President Roosevelt but the economic level that had existed before 1929 was never reached. Then, for about five years, the country had been involved in fighting a major World War. Production in most industries had been involved in fighting World War II. Most of the goods and services produced went into the war effort. Civilians did without.
Production in most industries had geared up to its maximum point. The President was continually calling for higher production goals. If an individual wasn’t in the military he or she was involved in some form of industry or they were farmers producing as much food as they could and receiving top dollar for their products. People invested their new excess funds in war bonds or they had banked this money. During the war there wasn’t much upon which to spend their earnings. Most production, as we’ve seen, was for the war effort.
Now in 1945, with the war over, people wanted the luxuries they had never really had. Industry in the United States turned from war production to civilian production. Automobile plants retooled and began producing civilian cars. It would take several years to just meet the demand for new automobiles.
A new industry that began at this time was television. While the technology had been developed in the 1930s it was not practically applied until the mid-forties. People bought large cabinets containing seven inch screens that initially broadcast in black and white for a few hours each evening.
Basically what happened in the United States was a nation flush with money and flush with new or reconstituted older industries was raring to make up for what they had missed over the last five years. The remnants and probably even the memory of the prewar depression were gone.
In addition the nation through Congress wanted the soldiers brought back home as quickly as possible now that the war was over. The country felt extremely grateful to the G.I’s for what they had done and Congress, in addition to bringing the troops back home, came out with the G.I Bill. Veterans, who had left school to join the military were offered an opportunity to go back to school and finish their education. The Federal Government would fund them, living expenses, tuition, and books.
Some veterans returned to high school and finished up the last year or two there in a few months and then went on to college. Even if they were married and had children the government would fund them. For many, who had never thought of higher education, it was easier to go to school than immediately get a job. This included those with families.
Consequently many came back to high school, finished in a short period of time and went on to college. It didn’t matter what their responsibilities were the government funded them. A whole generation of individuals who had originally never intended to go to college got higher education degrees and subsequently became members of the middle class with higher incomes than they had ever conceived. .
In addition for those who didn’t want to go to college the Federal Government funded them opening up their own business. Many became, among other things, television technicians and store owners.
In essence the Federal Government through funding and education created and encouraged the existence of a large middle class. It transformed the United States into something it had never been before, mainly a middle class nation. This meant much higher expectations for the majority of Americans throughout the nation and a much higher standard of living for virtually everyone within the country.
The process of doing this, the spending of all this money by the Federal Government massively increased the National Cash Flow within the country, which, in turn, also worked toward raising everyone’s standard of living.
Europe emerged from the war as a basket case. A good part of the war had been largely fought there. Its major cities were largely destroyed. Many had to be rebuilt almost from scratch. They had the labor but not the funding.
Secretary of State and former General George C. Marshall in a speech given in 1947 recommended foreign assistance by the U.S. to help rebuild Europe. This became, what President Harry S. Truman called, The Marshall Plan or European Recovery Program. It was passed in both Houses of Congress on a bipartisan basis in 1948 and signed by the President that year. The United States spent over 13 billion dollars in 1948 dollars; that would equal 135.4 billion dollars in September 2017 dollars. This was money given to the European nations.
The program lasted four years. Eighteen European countries participated in it. The Soviet Union and the Eastern Bloc Countries, which the Soviets controlled, refused any of this aid. This actually made it easier for the bill to sail through a Republican dominated Congress.
The United States provided similar aid in Asia but they were not part of the Marshall Plan.
The question that now arises is: Was the United States totally altruistic, helping both its allies and enemies in World War II? Interestingly the answer to that question is both Yes and No.
We did help those eighteen countries and shortly thereafter the Asian nations also recover from the ravages of World War II. In fact, their new infrastructures were far more modern than that of the United States. But what we supplied was the money to buy the goods that allowed both the recovery and modernization. The actual goods needed were purchased mostly from the United States. The production of these goods also added to the overall prosperity of the country supplying them. Simply stated, we gave these countries a checking account to be used essentially in the United States.
The question then arises: Where did all this money come from? Taxes were certainly not raised in the United States to pay for all this productivity used by these nations for economic recovery.
To understand this we have to think back to what President Roosevelt did in the United States in 1933; he doubled the U.S. money supply by taking the country off the gold standard. Money was no longer gold, instead paper currency became a means of exchange not really backed by anything of value. It was created by having the government of the nation simply printing and issuing it. As long as the supply of money in circulation did not exceed the amount of goods and services that the country could produce there was no real inflation and it retained its value as a means of exchange.
The major currency in the world in 1945 was the American dollar. It was in demand throughout the globe. There was no way inflation could occur then. It stabilized all the other currencies, which were measured against it. The United States printed the money as needed and spent it within the country and throughout the world. From these dollars both in and out of the country massive human productivity occurred and recovery from the war came about historically in a relatively short period of time. The results were prosperity for both the recipients of the funds and also for the suppliers of the money.
It is vital to remember that money is now an object of exchange. It itself has no real value except that which is arbitrarily assigned to it by the nation that prints it. By making it the object of exchange the money then served to enhance the productivity needed to restore the different nations to a new level of economic productivity. The different nations, after World War II, reached a new level of prosperity that was greater than what had existed before the Great Depression.
Keep in mind that that was just a starting point for each individual nation. The economies were higher and more sophisticated than they had been earlier but they were still in flux. The national economies could still go up or down bringing about continued grown, recession, or depression. But by 1952 were at a higher economic point than they had ever been prior to that time.
Also the true key to the real wealth of a nation today is determined by the extent of its productivity. This overall productivity is controlled by the distribution of the money throughout the society. If everyone get a reasonable amount to spend over each period of a year then the nation’s potential can be reached. But if the distribution is totally unequal then the productive potential becomes limited and the Gross Domestic product (All the goods produced in a twelve month period.) is limited. This can occur by making money itself the object of wealth rather than just the means of exchange.