What factors contributed to the U.S economy flourishing during the early cold war period?

Question

Wars, cold or otherwise, are bad for economies, right? So why did American capitalism flourish during the early cold war period (shortly after World War II)?

I think there are several positive effects:

• Economic expansion, growth
• Wide-ranging improvements in living standards
• Breadth of access to a better life
• Low unemployment
• Decline in poverty rate
• Industrial supremacy around world

How could all this happen while a cold war was going on?

Could anyone help me identify some contributing factors?

Answer 1

The early Cold War period was the golden age of American capitalism because it co-incided with the rise of the so-called World War II generation, the cohort of then young men (and a few women) born between 1915-1925, that fought and won World War II.

A grateful American public passed the so-called GI Bill that paid these ex-soldiers' college tuitions. In turn, these were unusually mature students who had already received an "education" in the trenches; George Bush Sr. completed a four year program at Yale in 2 and a half years. Shaped by wartime experiences working together, and working with the latest technology, these young men then went out and reshaped American business. A group of ten "whiz kids" who had gone to the U.S. Defense Department, then Harvard Business School together, entered Ford Motor Company as a team and effectively took it over.

These men entered their midlife managerial years during the early stages of the Cold War, and one of them, Ronald Reagan, won the Cold War with the "Star Wars" program late in his managerial career.

Answer 2

First of all, I would challenge your statement that wars are bad for the economy. On the contrary, I believe history would inidcate that wars are actually very good for the economy. During periods of war there is higher employment, more manufacturing and exporting (especially of war materials), and usually more innovation.

After World War II, a lot of jobs were created because of the need for rebuilding. While almost all of this rebuilding happened in Europe, there were several American countries involved with it, resulting in boosts to the American economy.

Furthermore, even though the "Cold War" was not an actual war, a lot of the same factors were in play. The US was still manufacturing weapons at a high level as a preventative measure, but that still meant that a lot of people were employed. The increase in defense spending resulted in an increase in disposable income which in turn resulted in more spending, which meant the wealth was being spread among multiple sectors.

Answer 3

If it was a Golden Age for American capitalists, it's probably because they got a lot of countries like Greece (which was facing Communist-Royalist Civil wars) to support them through Harry Truman's Doctrine, the Marshall Plan and NATO, all of which came into operation before the mid 1950s, which I would regard as the early Cold War period. And by getting all this support, they actually stopped the spread of Communism in those countries. This is the sort of thing that capitalists then would call 'victory'. Apart from this, you can consider factors like the first man to land on the Moon being from a capitalist country.

Answer 4

Because of:

• low unemployment

• lower income inequality

• higher social responsibility of corporations

A working class family could then afford things which are very hard to come by today, such as sending kids to college.

Interestingly (but not coincidentally), the income tax rates for rich people were much higher than now.