Chapter 1The National Railroad NetworkThe Age of the Industrial CapitalistIndustrial DevelopmentThe Great DepressionThe Recession of 1937-38What Went Wrong?What Went Wrong? (Continued)What Finally Brought the United States Out of the Great Depression?The End World War IIThe Suburbanization of America After WW II1940s and 1950sThe 1950s: The Eisenhower YearsThe Soaring Sixties: The Years of Kennedy and JohnsonThe Soaring Sixties: The Years of Kennedy and Johnson (Continued)The Sagging Seventies: The Stagflation DecadeThe Sagging Seventies: The Stagflation Decade (Continued)Slide 18The1980s: The Age of ReaganThe1980s: The Age of Reagan (Continued)The “New Economy” of the NinetiesThe “New Economy” of the Nineties (Continued)The “American Economy” in the New MillenniumChapter 1A Brief Economic History of the United StatesThe National Railroad Network •The completion of the transcontinental railroads–1850 The United States had 10,000 miles of track–1890 The United States had 164,000 miles of track•This made possible mass production, mass marketing, and mass consumption, which brought the country together into a huge social and economic unit •This made it possible to go almost anywhere in the U.S. by train except in the south (i.e., transcontinental lines by-passed the south–This severely retarded its economic development well into the 20th centuryThe Age of the Industrial Capitalist•The last quarter of the 19th century was the age of the industrial capitalist–Carnegie (steel)–Du Pont (chemicals)–McCormick (farm equipment)–Rockefeller (oil)–Swift (meat packing)Industrial Development•By the turn of the 20th century–America was primarily an industrial economy•Fewer than 4 of 10 people lived on farms•The U.S. was among the world leaders in production of steel, coal, steamships, textiles, apparel, chemicals, and agricultural machineryThe Great Depression•Started with the August 1929 recession–Had the stock market not crashed and had the federal government acted more quickly, this could have been a fairly short recession•The economy hit bottom in March, 1933–National output was one third what it was in 1929–Official unemployment was 25 percent–16 million Americans were out of work•The population was less than ½ its present sizeThe Recession of 1937-38•A lot of credit goes to Franklin D. Roosevelt’s “New Deal” administration for the 1933 – 1937 expansion–Banks were reopened–The Government confiscated America’s gold–The Securities and Exchange Commission (SEC) came into being–The Federal Deposit Insurance Commission (FDIC) was set up–An unemployment insurance benefit program was started–The Social Security System was started•This was the most significant reformWhat Went Wrong?•The Federal Reserve greatly tightened credit–This reduced the money supply•The Roosevelt administration suddenly got the urge to balance the budget–This would have made sense during an economic boom but not when the unemployment rate was 12%–This caused•Industrial production to fall by 30%•Five million more people to be put out of workWhat Went Wrong?(Continued)•In April, 1938 the Federal Reserve and the Roosevelt Administration reversed course•War broke out in Europe•America mobilized in 1940 – 41 and then entered the war on December 7, 1941•America was back on the road to recoveryWhat Finally Brought the United States Out of the Great Depression?•The massive federal government spending that was needed to prepare for and fight World War II?–This was deficit spending (borrowed money)–In other words the federal budget ran a deficitThe End World War II •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 ½ of the world’s manufacturing output•With just 7 percent of the world’s population–The U.S. and the Soviet Union were the only superpowers left standingThe Suburbanization of America After WW II•Twelve million men and several hundred thousand women returned to civilian lives•There was a tremendous shortage of housing•The V.A. offered affordable mortgages –One percent interest and nothing down–The FHA supplemented this need•The only place to build was outside cities–This required roads and cars–The Federal Government subsidized an interstate highway network along with state freeways, state highways, roads, and local streets1940s and 1950s•One big construction boom•The automobile industry prospered–Supplied America’s pent up demand and became the world’s leading exporter of cars•Birth rates shot up•Congress passed the G.I. Bill of Rights (1944)–Provided loans for home mortgages, business, and educationThe 1950s: The Eisenhower Years•The advent of television and the Korean War stimulated the economy•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 oneThe Soaring Sixties: The Years of Kennedy and Johnson•The country was in recession when Kennedy was elected–He was assassinated and replaced by Johnson in 1963•Johnson enacted a tax cut planned by Kennedy–The tax cut and the spending on the Vietnam war ended the recession•The federal budget deficit and the money supply grew•Inflation began and lasted until the mid-80sThe Soaring Sixties: The Years of Kennedy and Johnson(Continued)•Johnson enacted three programs in 1965 that would have profound long-term effects–Medicare–Medicaid–Food stampsThe Sagging Seventies: The Stagflation Decade•Nixon became President in 1968•The decade began with the problems of inflation and ending the Vietnam war–Wage and price controls were initiated–Ford became President when Nixon resignedThe Sagging Seventies: The Stagflation Decade(Continued)•1973 Economic disaster began–OPEC quadrupled oil prices–The U.S. was hit by the worst recession since the 1930s–The U.S. faced double digit inflation•The U.S. experienced stagflation–Economic stagnation + inflationThe Sagging Seventies: The Stagflation Decade(Continued)•Jimmy Carter was President in 1976–He presided over mounting budget deficits–The money supply grew rapidly–Inflation rose almost to double digit levels–He faced the Iranian
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