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Post–World War II economic expansion

Post–World War II economic expansion is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Post–World War II economic expansion rather than just read about it. In short: The post–World War II economic expansion, also known as the postwar economic boom or the Golden Age of Capitalism was a broad period of worldwide economic expansion beginning with the aftermath of World War II and ending with the 1973–1975 recession. The United States, the Soviet Union, Australia and Western European and East Asian countries in particular experienced unusually high and sustained growth, together wit…

Post–World War II economic expansion — main illustration
Post–World War II economic expansion — illustration

Key takeaways

  • Post–World War II economic expansion belongs to science; place it in that map before memorising details.
  • Learn the definition first, then one example that makes the definition concrete.
  • Connect Post–World War II economic expansion to a quantity you can measure, compute or draw — that is where exam questions come from.
  • Reproduce the core statement of Post–World War II economic expansion from memory before moving on to harder problems.

Reference excerpt

The post–World War II economic expansion, also known as the postwar economic boom or the Golden Age of Capitalism was a broad period of worldwide economic expansion beginning with the aftermath of World War II and ending with the 1973–1975 recession. The United States, the Soviet Union, Australia and Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment. Contrary to early predictions, this high growth also included many countries that had been devastated by the war, such as Japan (Japanese economic miracle), West Germany and Austria (Wirtschaftswunder), South Korea (Miracle on the Han River), Belgium (Belgian economic miracle), France (Trente Glorieuses), Italy (Italian economic miracle) and Greece (Greek economic miracle). Even countries that were relatively unaffected by the war such as Sweden (Record years) experienced considerable economic growth. The boom established the conditions for a larger series of global changes at the height of the Cold War, including postmodernism, decolonisation, a marked increase in consumerism, the welfare state, the space race, the Non-Aligned Movement, import substitution, counterculture of the 1960s, the beginning of second-wave feminism, and a nuclear arms race.

Timeline In 2000, economist Roger Middleton wrote that economic historians generally agree that 1950 represented the beginning year of the golden age, while Robert Skidelsky states 1951 is the most recognized start date. Both Skidelsky and Middleton have 1973 as the generally recognized end date, though sometimes the golden age is considered to have ended as early as 1970. This long-term business cycle ended with a number of events in the early 1970s:

the collapse of the Bretton Woods monetary system in 1971 the closing of the gold window by President Richard Nixon as a response to the Bretton Woods collapse the continued growth of international trade in manufactured goods, such as automobiles and electronics the 1973 oil crisis, the 1973–74 stock market crash, and the ensuing 1973–75 recession While this is the global period, specific countries experienced business expansions for different periods; in Taiwan, the Taiwan Miracle lasted into the late 1990s, for instance, while in France the period is referred to as Trente Glorieuses (Glorious 30 [years]) and is considered to extend for the 30-year period from 1945 to 1975.

Global economic climate

OECD members enjoyed real GDP growth averaging over 4% per year in the 1950s, and nearly 5% per year in the 1960s, compared with 3% in the 1970s and 2% in the 1980s. Skidelsky devotes ten pages of his 2009 book Keynes: The Return of the Master to a comparison of the golden age to what he calls the Washington Consensus period, which he dates as spanning 1980–2009 (1973–1980 being a transitional period):

Skidelsky suggests the high global growth during the golden age was especially impressive as during that period Japan was the only major Asian economy enjoying high growth (Taiwan and South Korea at the time being small economies). It was not until later that the world had the exceptional growth of China raising the global average. Skidelsky also reports that inequality was generally decreasing during the golden age, whereas since the Washington Consensus was formed it has been increasing. Globally, the golden age was a time of unusual financial stability, with crises far less frequent and intense than before or after. Martin Wolf reports that between 1945 and 1971 (27 years) the world saw only 38 financial crises, whereas from 1973 to 1997 (24 years) there were 139.

Causes

Productivity

High productivity growth from before the war continued after the war and until the early 1970s. Manufacturing was aided by automation technologies such as feedback controllers, which appeared in the late 1930s were a fast-growing area of investment following the war. Wholesale and retail trade benefited from new highway systems, distribution warehouses, and material handling equipment such as forklifts and intermodal containers. Oil displaced coal in many applications, particularly in locomotives and ships. In agriculture, the post WWII period saw the widespread introduction of the following:

Chemical fertilizers Tractors Combine harvesters High-yielding variety Pesticides

Keynesian economics

Keynesian economists argue that the post war expansion was caused by adoption of Keynesian economic policies. Naomi Klein has argued the high growth enjoyed by Europe and America was the result of Keynesian economic policies, and in the case of rapidly rising prosperity that this post war period saw in parts of South America, by the influence of developmentalist economics led by Raúl Prebisch.

Infrastructure spending

One of Eisenhower's enduring achievements was championing and signing the bill that authorized the Interstate Highway System in 1956. He justified the project through the Federal Aid Highway Act of 1956 as essential to American security during the Cold War. It was believed that large cities would be targets in a possible war, hence the highways were designed to facilitate their evacuation and ease military maneuvers.

Military spending Another explanation for this period is the theory of the permanent war economy, which suggests that the large spending on the military helped stabilize the global economy; this has also been referred to as "Military Keynesianism". This also goes into hand with retired WWII vets with pensions to spend.

Financial repression This period also saw financial repression—low nominal interest rates and low or negative real interest rates (nominal rates lower than inflation plus taxation), via government policy—resulting respectively in debt servicing costs being low (low nominal rates) and in liquidation of existing debt (via inflation and taxation). This allowed countries (such as the US and UK) to deal with their existing government debt level and also to reduce the level of debt without needing to direct a high portion of government spending to debt service.

Wealth redistribution

… excerpt ends here. Continue reading the full article.

Illustrations

Post–World War II economic expansion: In the United States and several other nations, the post–World War II boom led to major suburban development and urban sprawl, aided by increasing automobile ownership and cheap oil, as shown in this suburban development in Colorado Springs, Colorado in March 2008.
In the United States and several other nations, the post–World War II boom led to major suburban development and urban sprawl, aided by increasing automobile ownership and cheap oil, as shown in this suburban development in Colorado Springs, Colorado in March 2008.
Post–World War II economic expansion: Per capita GDP of various industrialized countries between 1920 and 1976
Per capita GDP of various industrialized countries between 1920 and 1976
Post–World War II economic expansion: In the United States, unemployment fluctuated during the 1950s, but dropped steadily during the 1960s.
In the United States, unemployment fluctuated during the 1950s, but dropped steadily during the 1960s.
Post–World War II economic expansion: Allied war bonds matured during these years, transferring cash from governments to private households.
Allied war bonds matured during these years, transferring cash from governments to private households.
Post–World War II economic expansion: Many Western governments funded large infrastructure projects during this period. Here the redevelopment of Norrmalm and the Stockholm Metro, Sweden.
Many Western governments funded large infrastructure projects during this period. Here the redevelopment of Norrmalm and the Stockholm Metro, Sweden.

Worked examples

Example 1 — a first encounter with Post–World War II economic expansion

Start with the simplest possible case. Write down what Post–World War II economic expansion claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Post–World War II economic expansion before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Post–World War II economic expansion ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Post–World War II economic expansion

In research
Post–World War II economic expansion appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry
Engineering practice reuses Post–World War II economic expansion in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom
Post–World War II economic expansion is common in secondary-school and first-year university syllabi. It links to neighbouring topics Economic booms, Gold standard, Post–World War II economic booms, so understanding it makes those chapters shorter.
In everyday life
Look for Post–World War II economic expansion outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.
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How to study Post–World War II economic expansion in 20 minutes

  1. Read the reference excerpt below once, without taking notes.
  2. Close the page and write down what Post–World War II economic expansion means in your own words.
  3. Compare your version with the excerpt and mark what you missed.
  4. Work through the three examples above with pen and paper.
  5. Explain Post–World War II economic expansion out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Post–World War II economic expansion in simple terms?

The post–World War II economic expansion, also known as the postwar economic boom or the Golden Age of Capitalism was a broad period of worldwide economic expansion beginning with the aftermath of World War II and ending with the 1973–1975 recession. The United States, the Soviet Union, Australia a…

Why does Post–World War II economic expansion matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Post–World War II economic expansion?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Post–World War II economic expansion.

Tags

  • Economic booms
  • Gold standard
  • Post–World War II economic booms

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