Text of 60s-70s American Dream Baby Boom “Camelot” Company man Stagflation ARPANET
60s-70s American Dream Baby Boom Camelot Company man Stagflation ARPANET
80s 90s Corporate raiders Evil empire Arthur Laffer Dot-com bubble Black Monday
Ing. Tom Dud, PhD.
1945 Starting point The country that emerged from WW II was very different from what it had been four years earlier Prosperity had replaced depression Inflation was now the number one economic problem The U.S. accounted for of the worlds manufacturing output With just 7 percent of the worlds population The U.S. and the Soviet Union were the only superpowers left standing New international economic order
1950s decade of prosperity Many Americans feared that the end of World War II and the subsequent drop in military spending might bring back the hard times of the Great Depression But instead, pent-up consumer demand fueled exceptionally strong economic growth in the postwar period The nation's gross national product rose from about $200,000 million in 1940 to $300,000 million in 1950 and to more than $500,000 million in 1960 At the same time, the jump in postwar births, known as the "baby boom," increased the number of consumers
Number of births in the United States, 1934 to present
G.I. Bill The G.I. Bill was an omnibus bill that provided college or vocational education for returning World War II veterans as well as one year of unemployment compensation. It also provided many different types of loans for returning veterans to buy homes and start businesses By the time the original GI Bill ended in July 1956, 7.8 million World War II veterans had participated in an education or training program and 2.4 million veterans had home loans backed by the Veterans' Administration (VA)
The 1950s: The Eisenhower Years One big construction boom The automobile industry prospered Supplied Americas pent up demand and became the worlds leading exporter of cars The advent of television and the Korean War stimulated the economy 1946 7000 TV sets 1950 50 000 000 TV sets The Eisenhower administration Ended the Korean War and inflation Made no attempt to undo the legacies of the New Deal The role of the federal government as a major economic player became a permanent one
Changing labor force
Changing workplace Less blue collar jobs more white collar jobs 1947-1957 factory workers decreased by 4.3%, eliminating 1.5 million blue-collar jobs Greater participation of women in the workplace especially in the tertiary sector New corporate culture The Company man
1950s decade of prosperity Keynesianism Employment Act 1946 Is a definitive attempt by the federal government to develop macroeconomic policy The act creates the Council of Economic Advisers, an appointed advisory board that will advise and assist the President in formulating economic policy Goal - to promote maximum employment, production, and purchasing power
50s Rise of the suburbs
1960s Years of Change The U.S. underwent a kind of golden age of economic growth The middle class swelled, as did GDP and productivity Youngest president ever elected in 1960 John Fitzgerald Kennedy As president, he sought to accelerate economic growth by increasing government spending and cutting taxes, and he pressed for medical help for the elderly, aid for inner cities, and increased funds for education Great admirer of FDR Camelot
1960s Years of Change Lyndon Baines Johnson (1963-1969) Wanted to build a Great Society Started major social programs Medicare Medicaid Food stamps Vietnam War What had started as a small military action under Kennedy mushroomed into a major military initiative during Johnson's presidency
Advertising became major industry
Rising Car Culture Rapid rise in new car registrations 1945 25 million cars 1960 65 million cars The number of 2 car families doubles between 1951 and 1958 1956 Interstate Highway Act 26 billion USD to build highways 65 000 km of new highways was built
You can do almost everything in your car
1970s The stagflation decade Stagflation - an economic condition of both continuing inflation and stagnant business activity, together with an increasing unemployment rate Increasing dependence on oil imports from OPEC countries Oil shocks - OPEC quadrupled oil prices The U.S. was hit by the worst recession since the 1930s Collapse of the Bretton Wood system
1970s The stagflation decade Jimmy Carter became President in 1976 Rising budget deficits The money supply grew rapidly Inflation rose almost to double digit levels He faced the Iranian revolution in 1979 Gasoline prices went through the ceiling In October, 1979 the Fed stopped the growth of the money supply By January, 1980 the country was in recession The inflation rate was declining The nations productivity growth was at one percent, one third the postwar rate
Economic situation in 1980 The rise of inflation of the 1970s had resulted in an enormous increase in tax burden Social security tax and Medicare had also increased the personal tax burden. 31 million jobs had been destroyed between 1978 and 1982. Fully one-third of all private sector jobs that existed in 1978 had disappeared by 1982.
Reaganomics Attempts to solve the economic malaise that was continuing in the late 1970s were largely unsuccessful Reagan proposed a new idea to address the economic stagflation (lack of growth) Reagan believed that the root of the problem for the economy was: Intrusive government regulations of business and industry Expensive government social programs that offered handouts to non-productive citizens High taxes Deficit spending
Reagans Solution Supply Side Economics Tax cuts, rather than government spending, will create economic growth Arthur Laffer suggested that at some point rising tax rates discourage people from participating in taxable activities such as investing This is known as the point of diminishing returns where a policy provides benefits only to a certain point the effort/expense no longer produces a sufficient amount of desired outcome to be worthwhile If profits from investing are taken away by taxes, what is the point of investing?
Reagonomics - Results Income tax rates of the top personal tax bracket dropped from 70% to 28% in 7 years, while social security and Medicare taxes increased GDP growth recovered strongly after the 1982 recession and produced five straight quarters of growth averaging 8.4% The GDP grew during Reagan's remaining years in office at an annual rate of 3.4% per year, slightly lower than the post-World War II average of 3.6%
Reagonomics - Results Despite the tax cuts of 1981, federal tax revenues nearly doubled in the Reagan years. Real inflation-adjusted manufacturing output rose to its highest point of the post-WWII period. Domestic-based manufacturing employment fell from 20.3 million in 1980 to 19.2 million in 1990, a decline of 6%, probably as a result of productivity gains. U.S. exports of manufacturing goods grew by 90% between 1986 and 1992, compared with 25% for the rest of the OECD countries.
Reagonomics - Results More than 18 million new jobs were created in the 1980s in the U.S.this was more than Japan, Britain, and Germany combined. 82% of the jobs created were high-pay, high-skill managerial and technical positions. 12% were low-skill service jobs. While real wages declined from $11.41 per hour in 1978 to $10.02 per hour in 1990, workers total compensation increased as workers demanded increased benefits. Reaganomics did not gut social welfare programs. In fact, social welfare spending was the largest cause of the budget deficits of the Reagan administration.
Black Monday Black Monday refers to Monday, October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time The crash began in Hong Kong, spread west through international time zones to Europe, hitting the United States after other markets had already declined by a significant margin. The Dow Jones Industrial Average (DJIA) dropped by 508 points to 1738.74 (22.61%) The Black Monday decline was the largest one-day percentage decline in stock market history It caused no great recession
Clintonomics Between 1980-1992 America had undergone twelve years of conservative policies implemented by Ronald Reagan and George Herbert Walker Bush Economic recession in 1991-1992 Bill Clinton ran on the economic platform of balancing the budget, lowering inflation, lowering unemployment, and continuing the traditionally conservative policies of free trade In 1992, Bill Clinton was elected president of the United States of America. During Clintons presidency (1993 to 2001), the economic policies he put into place for the U.S. were termed Clintonomic