WWI vs WWII on consequent economic depression/growth

World War I

Economic Impact of World War I

When the United States entered the conflict in 1914, the economy was already at full employment. The United States sent 4 million men across the ocean which was a small amount of the current workforce. While the amount of men fighting was not significant the cost to the economy was still about $.2 billion. Coupled with other expenses, including transfer payments to other nations that would never be repaid, the total cost of World War I in was $32 billion dollars[2000 base year] (%52 of GDP). . After World War I, the U.S. chose to de-mobilize, resulting in a small recession. The number of people employed by the military quickly declined. Along with the decline in manpower, there was a decline in wage hours since wartime production was no longer necessary. During this time, the U.S. added 3.5 million workers in the federal sector alone which allowed the economy to come close to full employment.

Economic Legacies of World War I

The most important economic legacy of World War I was the breakthrough of the United States as a major industrial nation in the world. Prior to the war, the nation was considered a debtor nation on international capital markets, but this status changed soon afterwards. Much of this is attributed to the damage sustained by England. After the war, England had trouble returning to the Gold standard, and the physical infrastructure of the country had suffered major war damages. The United States, on the strength of its geographic location was able to succeed England as a new economic giant. New York City came to rival London as the Global finance center. The other lasting legacy of the War was the creation of liberal economists. Prior to the 1920’s, very few people were advocates of central Government being involved in economic decisions.

The Roaring Twenties

Prosperity in America

• Failure is the first step towards success
• The Nouveau Riche
• A new technological age

Contributors to Success

• Increase in the savings rate
• Growth of new Industry
• The high standard of living wage

The Bull Market

• Lending on Margin
• The rise of big business
• Simply supply vs. demand
• Not logical

Data from http://www.measuringworth.com/DJA/result.php. It is a yearly average of the DJA.

Depression Strikes

Causes of the Depression

• Monetary factors
• Missing Workers
• Stocks return to Earth

Data from http://www.nber.org/databases/macrohistory/rectdata/08/m08084a.dat. Bureau of labor statistics was original source data.

Economic impact of the depression

• Reduced National income
• Reduced National savings
• Dollar devaluation
• Reduced Exports

A New War

Economic Help is on the Way

• The show must go on
• Growth of the Federal workforce
• Mobilizing for War
• Solutions to a problem

Data from Louis D. Johnston and Samuel H. Williamson, "The Annual Real and Nominal GDP for the United States, 1790 - Present." Economic History Services, October 2005, URL : http://www.eh.net/hmit/gdp/

The end of war

• Income equality returns
• Market to the World
• Continued Federal and defense employment

Post War Economy and the reasons for Success

• G.I. Bill
• Creation of FDIC
• Global integration
• Foreign Success

Conclusion

• More extreme business cycle swings
• A change in Landscape
• Growth of a power