60s-70s

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60s-70s

• American Dream
• Baby Boom
• Camelot
• Company man
• Stagflation
• ARPANET

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80s 90s

• Corporate raiders
• Evil empire
• Arthur Laffer
• Dot-com bubble
• Black Monday

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From the 50s to 2000 the changing face of the
US economy

• Ing. Tomáš Dudáš, PhD.

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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 ½ 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

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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

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Number of births in the United States, 1934 to
present
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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)

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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

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Changing labor force
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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

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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

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50s Rise of the suburbs
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• Rising consumerism

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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

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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

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• Advertising became major industry

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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

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You can do almost everything in your car
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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

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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

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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.

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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

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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?

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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

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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.

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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.

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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

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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
  Clintonomics

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Clintonomics

• Clinton failed to push through an ambitious
  proposal to expand health-insurance coverage
• Clintons main goal balanced budget
• In 1998, the government posted its first surplus
  in 30 years, although a huge remained
• Record surplus of the budget in 2000
• Continuing deregulation of the economy
• Strong economic performance in the USA 8 years
  of strong economic growth between 1992-2000

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GDP growth in USA between 1992-2000
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Unemployment in USA between 1992-2000
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CPI in USA between 1992-2000
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Dot-com bubble
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Creation of the Bubble

• The "dot-com bubble was a speculative bubble
  covering roughly 19982001 (with a climax on
  March 10, 2000 with the NASDAQ peaking at
  5132.52) during which stock markets in Western
  nations saw their equity value rise rapidly from
  growth in the more recent Internet sector and
  related fields
• The period was marked by the founding (and, in
  many cases, spectacular failure) of a group of
  new Internet-based companies commonly referred to
  as dot-coms
• The venture capitalists saw record-setting rises
  in stock valuations of dot-com companies, and
  therefore moved faster and with less caution than
  usual, choosing to mitigate the risk by starting
  many contenders and letting the market decide
  which would succeed.

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Creation of the Bubble

• The low interest rates in 199899 helped increase
  the start-up capital amounts.
• Although a number of these new entrepreneurs had
  realistic plans and administrative ability, many
  more of them lacked these characteristics but
  were able to sell their ideas to investors
  because of the novelty of the dot-com companies
• According to dot-com theory, an Internet
  company's survival depended on expanding its
  customer base as rapidly as possible, even if it
  produced large annual losses

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Aftermath of the Dot-Com Bubble

• The dot-com bubble crash wiped out 5 trillion in
  market value of technology companies from March
  2000 to October 2002.
• Many dot-coms ran out of capital and were
  acquired or liquidated
• Several companies and executives accused or
  convicted of fraud for misuse of shareholders
  money
• Citigroup and Merrill Lynch fined millions by SEC
  for misleading investors
• Huge layoffs of technology experts