Forgetting the horror caused by World War II, the Second World War economically changed the United States and the rest of the world positively. The U.S. and other countries, including Germany and Japan, entered the war with the bulk of their populations being lower class, having a minimal standard of living. Relatively shortly or at least within the first two decades after the end of the war the bulk of their populations had risen to a middle class status, having a comfortable standard of living for the majority of their populations. What happened?
The Great Depression broke out early in 1929. It brought about economic isolation with each nation attempting to survive by itself. Germany, Japan, and Italy attempted to recover by imperialistic advances. Italy expanded into North Africa, Japan into China and the rest of Asia. Germany intended to expand both East and West in Europe.
In the United States, separated by thousands of miles from Europe and Asia, there was no immediate threat of war. The country, under Republican President Herbert Hoover, just continued on essentially waiting for the capitalistic system to reassert itself. It didn’t.
The majority of the population was lower class, just barely surviving on their limited incomes. But at this point there was massive unemployment and no real jobs available. Men deserted their families they could no longer support, rode the rail lines as hobos, following rumors of work in one or another part of the country. The entire capitalistic system had broken down. And no one understood why or how to fix it.
In 1933 Franklin Delano Roosevelt became the 32 President of the United States. In his maiden speech on the new device, radio, he spoke of people having nothing to fear but fear itself. Roosevelt used radio to talk the nation through its irrational apprehensions of the Great Depression.
Roosevelt changed the function of government. Before he became President it provided a safe environment in which its population could function. With the Roosevelt Administration it took on responsibility for those people within the country who could not properly provide for themselves. What had been a matter handled by Church charities earlier would from then on be taken care of by the Federal Government. The problem had grown too large for the religious institutions to take care of.
Roosevelt called his program the 3 R’s: Relief, Recovery, and Reform. Under Relief, Roosevelt offered the New Deal, where the Federal Government would create jobs for the unemployed. There was everything from manual labor to theater projects for writers and actors. The New Deal even produced some films. There were projects like Hoover Dam, electrification of sections of the United States, and community theaters, plus innumerable other projects.
With all this conditions improved in the United States but the depressed state continued. There was still a high rate of unemployment. While conditions improved total Recovery never came about for the United States until shortly after World War II in Europe broke out with an endless need for food and war materials.
Reform was legislation that was to keep causes of the depression from occurring again. There were bank and other types of regulation.
On December 7, 1941 the United States entered War II after being attacked at Pearl Harbor, Hawaii. The War would not end until the unconditional surrender of Japan in 1945, after the dropping of two atomic bombs.
It was from this point that recovery began, first within the United States and then with Europe and Asia.
Once America entered the war the United States became the “Arsenal of Democracy,” involved in what was practically considered a holy war against the Axis Powers, the forces of evil. The U.S. supplied Allied Nations with the materials to fight the war. Initially the Allied nations stored their gold supplies in the United States for reasons of safety. In order to fight the war they spent that gold buying food and war supplies. After that when the gold was spent the United States developed a policy of “lend lease” which was actually a policy of giving to the Allies what they needed to continue their efforts against their enemies.
Where did all this money come from? The United States Government printed it and used it to pay for the goods and services produced. This money then was added to that already circulating in the National Cash Flow. Because money added to the Cash Flow is spent several times this added several times the amount initially added to the Cash Flow.
The U.S. also sent armies overseas to fight in North Africa, Europe, and Asia. Interestingly even with the casualties caused by the war its overall population still increased.
The entire nation was involved in fighting the war. People put in window boxes in their apartments or turned their lawns into “Victory Gardens,” growing vegetables. Housewives saved the excess fat from their cooking and turned it in to their butchers who, in turn, turned it over to manufacturers who used the grease in their production of war materials. Children collected old newspapers and tin cans that were reprocessed and reused. Virtually the entire families were involved in the war effort.
The government sold War Bonds. For $18.75 one could buy a War Bond that would return $25.00 in ten years. Larger denominations were also sold. Children in public schools bought and collected War Stamps which when the amounts were large enough were exchanged for War Bonds. Adults also contributed their excess money buying these. Largely everyone was putting money into the war effort.
In addition rationing was instituted shortly after the United States joined the war effort. Items of food like meat and many vegetables were rationed in the country with the bulk being sent overseas for the war effort. Gasoline and many other items were also rationed. Families were issued rationing books with all kinds of stamps in them, the amount depended upon the number of the family. Women went shopping with limits set by the rationing books.
All vehicles built during the latter part of 1942 until the end of the war in 1945 were military vehicles. There were none built for civilians. Virtually all the U.S. factories were converted to the war effort.
From 1940 on there were more jobs available than there were people to hold them. Once America had entered the war in December of 1941 people could work double shifts at the factories. In addition in 1942 many high school students worked after their school day. Women were brought into the factories. In 1943 for the first time in the general society Blacks in the Northern states also got jobs working alongside whites in the factories. All this to meet the production needs of the war effort which President Roosevelt kept increasing.
The major problem that evolved was that the working public was now earning more money than it could spend. Selling War Bonds was a device to take some of this money off the market. For people who wanted more than rationing allowed there was the Black Market, illegally selling items of food and other products without the use of rationing stamps. But even with this there was a tremendous buildup of money among the general public. And at the end of the war all this money would be looking for products to purchase.
It is worth considering briefly the question of where the money that the Federal Government spent came from. The statement was made that the Government printed it as it was needed. Keep in mind that under President Roosevelt the basis of money changed. At the beginning of 1933 money was gold in the form of coins. By the end of that year and thereafter the gold had been collected, melted down in blocks and stored in depositories. New paper money had been issued in its place. The new source of currency had no real value. It was a means of exchange: the production of goods and services for the potential to eventually purchase new goods and services. The wealth produced was the goods and services used during the latter part of the Great Depression and during World War II. The potential that the United States had, with everybody working, for production was the real wealth produced. And this principle remains true today.