Panic, Prosperity, and Progress: Five Centuries of History and the Markets

CHAPTER 13

Postwar Prosperity

It is widely recognized that the event that lurched the United States out of its Great Depression was World War II. America has the distinct advantage of being flanked by two great oceans, which allowed it to participate in the war by way of both personnel and materials, but avoid the devastating physical destruction suffered in Europe and Asia. As the war neared its end, many people, intellectuals and average citizens alike, feared that their society would revert back to the misery of the 1930s. What happened instead was profoundly and wholly unexpected.

■ A Return to the Depression?

War is, by its nature, rife with uncertainty, and American was understandably anxious as it suffered through the early stages of  World War II. By 1943, however, America had gained a foothold in both the European and Pacific theatres, and the prospect of a successful conclusion to the war began plausible.

At that time, famed economist Paul Samuelson spoke about postwar America. He stated in an article from 1943 entitled “Full Employment after the War,” which appeared in Seymour E. Harris’s Postwar Economic Problems (McGraw Hill):

When this war comes to an end, more than one out of every two workers will depend directly or indirectly upon military orders. We shall have some 10 million service men to throw on the labor market. We shall have to face a difficult reconversion period during which current goods cannot be produced and layoffs may be great. Nor will the technical ...