Figure 1.--America was already the leading industrial natiom in the world when the automobile appeared at the beginning of the 20th century. This is an early Olds. The family here had to have money to affird it. It would be the low-cost Model-T Ford (1909) that would drive the American economy beyond that of evey other country and comparable to the economy of all of Europe.

Germany in Europe exceedded the industrial power of Britain. This could have changed the whole arc of world history. But something even more important was occuring outside of Europe. The United States by the turn of the 20th century had become the greatest industrial power and the largest econmy in the world. Most Americans still lived on the farm, but the United States was bcoming an economic powerhouse beyond the dimnsions of the European powers. The United States was developin an exceedingly complex modern economy. And the issue of goverment regulation became increasinly discussed. Congress which still dominated Federal policy had passed the Interstate Commerce Act, a law regulating railroads (1887). This was followed by the Sherman Antitrust Act, a law preventing large firms from controlling a single industry through monopolies (1890). These laws were not enforced with any vigor in the 19th century. And economic theory had not yet develoed to match economiv growth. The Depression of 1893 and now the Panic of 1907, shook American decision makers. J.P. Morgan helped prevebt an economic disaster. It would be the last time an individual could do this. Republican President Theodore Roosevelt (1901-09), William Howard Taft (1909-14), and Democratic President Woodrow Wilson (1913-21) significantly expanded the previously limited Government involvement in the economy. America was not only surpassing Europe in industrial power, it was also expanding agricultural production and unlike the European powes was not only self suficient in food production, but exported food. And even more significant, the United States was evloping vast oil fields just at the time that industrial economies were making a transition from coal which had domimated the 19th century to oil which would dominate the 20th century. Part of this was the dvelopment of the internal combustion engine which would lead to whole new industries--especially cars and trucks. And America led the way. The United States did not have an imprtant arms industry when it entered World War I and no time to build one. It did have trucks which would play a major role in adding mobility to The Allies. Along with the American infantry, it playd a major role in defeating the Germans. America not only helped the Allies win thewar, but also to prevent Europe from starving after the war. The Roaring Twenties were a time of unparalleded economic expansion in America, leaving Europe behind. The American population for the first time became a majority urban population. America by the end of the 1920s not only had surpased every European country, but had an economy comparable to all of Europe combined. The stock market crash and ensuing Great Depression shocked Americans (1929). It was the most serious economic dislocation in American history. The result was massive Governent intervention in the economy--the New Deal. The New Deal had many positive accomplishments, but one of them was not ending the Depression. Contrary to popular belief, the Crash was not the true cause if the Depression. of 1929 was not a substantial cause of the Great Depression and President Roosevelt's New Deal may have actually slowed economic recovery. World War II only deepened government economy only deepened Government involvement in the economy. The American economy was damaged by the Depression, but proved to be the Aesenal of Democracy that saved democracy and Western Civilization from the nightmare Totalitarain states that emerged from socialism (Soviets, Fascists, and NAZIs). The United States borrowed the greatest amount of money in history to defeat the Axis. It was unclear that it could ever be paid back but the economic boom of the 1950s and economic growth did just that. Many including some Americans began to see socialism as a superior system to capitalism. The newly independent countries emerging from the Euroean colonial empires adopted socialist polices and failed miserably. The NKVD/KGB managed to disguise Soviet economic failure until the 1980s. The Asian Tigers first demonstarted what market reforms (capitalism) could do in developimg countries. Even the Chinese were concinced. These countries achieved the graetest outburst of human well-being in human history, thrusting some ONE BILLION people from abject poverty to the prosperous middle-class in only none generation. Despite this Americans began moving in the oppoosite direction with more Government involvement in the economy and movenent toward a European-style welfare state. The Government gave less attention to the economy, pursuing trade policies thatked to the destruction of American manufacturing exposing American industry to unfair competition from Europe, Japan, and China. The econmy was furher traumatized by the Arab oil embargo mand increased oil prices. The entreprenurial American sprit led to a leadership in the new insusties of the digital age.

Early-20th Century

Germany in Europe exceedded the industrial power of Britain. This could have changed the whole arc of world history. But something even more important was occuring outside of Europe. The United States by the turn of the 20th century had become the greatest industrial power and the largest econmy in the world. Most Americans still lived on the farm, but the United States was bcoming an economic powerhouse beyond the dimnsions of the European powers. The United States was developing an exceedingly complex modern economy. And the issue of goverment regulation became increasinly discussed. Congress which still dominated Federal policy had passed the Interstate Commerce Act, a law regulating railroads (1887). This was followed by the Sherman Antitrust Act, a law preventing large firms from controlling a single industry through monopolies (1890). These laws were not enforced with any vigor in the 19th century. And economic theory had not yet develoed to match economiv growth. The Depression of 1893 and now the Panic of 1907, shook American decision makers. J.P. Morgan helped prevebt an economic disaster. It would be the last time a an individual could do this. Republican President Theodore Roosevelt (1901-09), William Howard Taft (1909-14), and Democratic President Woodrow Wilson (1913-21) significantly expanded the previously limited Government involvement in the economy. The Progressive Movement significantly impacted both parties anf government policy. Many of today's U.S. regulatory agencies were created during these years, including the Interstate Commerce Commission, the Food and Drug Administration, and the Federal Trade Commission. And even more significant, the United States was dvloping vast oil fields just at the time that industrial economies were making a transition from coal which had domimated the 19th century to oil which would dominate the 20th century. Part of this was the dvelopment of the internal combustion engine which would lead to whole new industries--especially cars and trucks. And America led the way. America was not only surpassing individual European countries in industrial power, but beginning to approach the productive power of major powers combined. This was due in no smll degree to the Model-T Fotds tht begn appearing in every corner of America. The huge expansion is being propelled by the autmobile industry in which Europe lagged because of the failure to adopt mass ptoduction assembly line tchniques. America was also mechanizing and expanding agricultural production and unlike the European powers was not only self suficient in food production, but exported food.

World War I (1914-18)

European powers embarked on World War thinking it was going to be a great adventure, short and glorious. The Europeans began the War thinking that the War woiuld be short and no major indertaking, both the Allies and Cebtral Powers. A young Winston Churchill wrote a few years before the War, "I have frequently been astonished to hear with what composure and how glibly Members, and even Ministers, talk of a European War." Earlier European wars were fought by small professional armies. He foresaw that a major European war would be more like the American Civil War with huge populations involved. He foresaw that a European war would end 'in the ruin of the vanquished and the scarcely less fatal commercial dislocation and exhaustion of the conquerors." [Churchill] And when the War came, Americans for the most oart wanted nothing to ndo with it. The War as Churchill predicted proved to be anything but short and glorious. Germany was center stage in the War, invading neutral Belgium. The German way of war was short, sharp conlicts. [Citino] When the French stoped the Germans on the Marne, Germany found itself locked into a war of attrition that even with its powerful Army, it could not win. World War I became the world'd first truly industrial war. Every country sought to purchase supoplies and equipoment to supplement its domestic economy. Thus from the very beginning, the American economy became a factor in the War, even though America tried to remain neutral. The British unlike the Germans understood the vital importance of America. The United States was importannt because it was both the largest indudtrial power as well as the largest agricultural power. In addition, America was becomning a financial powerhouse able to finance war economies. This was vital for British war finances. The United States Government did not play a role in financing the Allies at first. Anerican companies were legally able to deal with both the Allies and Central Powers. The Allied (primaily British) naval blockade, however, meant that Americans commerce with Germany was impossible. This was violation of fredom of the seas, but the British unlike the Germans did not sink American ships and there were plenty of war orders from the British and French. This created a booming economy. America did not have a large arms industry, but there was plenty of materails besinds arms that a war economy needed. American farmers in particular benefitted. The Allies were limited by their ability to pay for purchases, but American banks provided finanacing for the Allies. Once America entered the War (1917), Government backed loans enabling the Allies to buy vast amounts of war supplies and most of these loans were never paid back. The United States did not have an important arms industry when it entered World War I and no time to build one in time to equip the American Expeditionary Force (AEF) sent to France. Over 4 million Americans seeved in the military. It did have trucks which would play a major role in adding mobility to The Allies. President Wilson appointed fianceer Bernard Baruch to organize the conversion of Ameriucan industry for war. And the United States by mid-1918 had begun producing sizeable quantities of arms and military equiment. There was no preliminary mobilixzatiin before the War, but after the declaratiomn War, industrial mobilization was extraordinary. he U.S. economy turned out a vast supply of raw materials and munitions and by mid-1918, arms production was reached substantial quantities. But before American arms mamufactiring tuened the tide, the Allied reunforced by the AEF (a little over a million Dougboys at athe Front) and powered by British and French tanks broke through the Siefried Line and cracked the Western Front wide open. The AEF helped do this fighting with mostly British and Frenvch weapons. America not only helped the Allies win the war, but also American food relief efforts prevented Europe from starving after the war. American agriculture boomed to meet food requirements during the War nd to help prevent Europeans from starving. European food production plummeted during the War.

The Roaring Twenties

The Roaring Twenties is perhaps the most storied decade in American history--for all the wrong reasoins. Young people who know nothing about American history, know about the Roaring Twenties. The decade had it all: Scarface Al, Pert Boy Floys, Machine Gun Kelly, Ma Barker, Bonny and Clyde, John Dillinger, and many more stone cold killers. Ther was prohibition, gun malls, bath tub gin, speakeasies, the Valetnine Day Massacre, Tommy Guns, G-men, flappers, bobbed hair, short skirts, fast cars, barn storming, Hollywood, the Charleston, the Big Bambino, and so much more that Hollywood is still making movies about the decade. But what Hollywood ignorexs is the prosperity American industry brought to the average American. The American role in World War I marked its arrival as global powerhouse. This was not totally recognized in Europe, especially by the Germans. They mostly saw American fightimg mem. What they did not see was Americn industry converying to war production. The Germns asked for an armistic before the industrial output from American factories had begun to reach the front. (This would be a factor in German assessments about America when they launched in World War II.) The Doughboy returning home from France were changed forever. Young men who had never before had eperiences beyond the farm or home town returned home with entirely new outlooks, views, and skills. Every a short recession (1920), it was straight up. The Roaring Twenties is perhaps most storied decade in American history. Fueling it all was the power of unparalleded economic expansion. Tge stock market roared. There were major demographic changes. The majority of Americans now lived in urban areas, although the economic ballance had long since changed. The other major demographic shift was African Americans conunuing to move deom the rural South to Northrn cities. America was already the world's principal industrial poweer, but in the 1920s America left Europe behind. The American population for the first time became a majority urban population. America by the end of the 1920s not only had surpased every European country, but had an economy comparable to all of Europe combined. The economic date is astounding. The American economy grew over 40 percent duruing the decade. The United States may have produced almost half the world's ecomomic output because World War I danmage and Anerican economic expamsion. New construction nearly doubled. New buildings were going up everwhere. Expanding American industry not only producerd cars, but put new consumer goods into American homes, including radios, washing machines, and refrigerators. Much more was involved than fulfilling comsumer demand. It was in the 1920 that the industrial behemoth came into existence that would become the Arsenal of Democracy. Modern aviation was born, highligted by Lucky Lindy flying the Atalantic. One economic sector did not benefit--American agriculture. As European agriculture recovered from the War, overseas orders declined leading to a depression in the Farm Belt. Farm income fell over 20 percent. The Roaring Twenties ended with the Wall Street Crash (September 1929). Not understood at the time and still onsured by left-wing politicans is that it was not industry that would cause the resulting depression, but Govrnment mismangement of the economy. This was understabdvle in the 1920s and 30s, but tagically even in the 21st century, politicians and ideologically motivated ecinomists continue to advocate flawed economic policies.

The Great Depression (1930s)

The stock market crash and ensuing Great Depression shocked Americans (1929). It was the most serious economic dislocation in American history. The result was massive Governent intervention in the economy--the New Deal. The New Deal had many positive accomplishments, but one of them was not ending the Depression. Contrary to popular belief, the Crash was not the true cause if the Depression. of 1929 was not a substantial cause of the Great Depression and President Roosevelt's New Deal may have actually slowed economic recovery. he Great Depression of the 1930s was the worst economic slump ever to affect the United States. It was not just a national economic crisis, but one which spread to virtually every country. The greatest calamity to befall Americans in the 20th century was the Great Depression--a worse calamity than even two world wars. The Depression began with the Wall Street stock market crash in October 1929. Soon business were going under and Americans were losing their jobs. All Americans were affected. Eventually about one-third of all wage earners were unemployed and many who kept their jobs saw their earnings fall. President Hoover who had engineered a humanitarian miracle in Europe during World War was unable to break away from the mindset that the Government should not intervene in the economy. President Roosevelt was elected by a landslide in 1932. He brought energy and new ideas to Washington and the Federal Government initiated programs that would have been rejected out of hand only a few years ago. Roosevelt was willing to use the Government to solve economic and social problems besetting Americans. The people loved him, electing him to an unprecedented third and fourth term. The propertied class or "economic royalists" as he called them, hated him. Roosevelt's program was called the New Deal and the many programs initiated help change the face of the United States: Social Security, the Tennessee Valley Authority, rural electrification, the Works Progress Administration (WPA), protection for union organizers, and many others. The conservative-dominated Federal Courts struck down WPA, but many New Deal programs endure to this day. The great novel to emerge from the Depression was John Steinbeck's The Grapes of Wrath which addressed to problems of rural Americans and the dust bowl. Urban Americans of course also suffered. While the New Deal brought relief to many desperate Americans, the Depression lingered until orders for war material from Europe began to flood into America in the late 1930s. The rest of the world was also affected by the Depression. Britain and France also struggled with the economic down turn. The response in Germany and Japan was totalitarian, militarism, and finally war.

World War II (1941-45)

World War II only deepened government economy only deepened Government involvement in the economy. The American economy was damaged by the Depression, but proved to be the Aesenal of Democracy that saved democracy and Western Civilization from the nightmare Totalitarain states that emerged from socialism (Soviets, Fascists, and NAZIs). The United States by an enormous margin had the world's largest and most efficent economu. The United States ($66 billion annual output) included a massive industrial output as well as agriculture and raw materials. Especially important was America's oil production. The United Stayes thus at the time of World War II was the only country with the economic capacity to wage war on a global scale. It was also the country least willing to wage war. Large numbers of American had pacifist geelings, esoecially the large German population in the Midwest, or opposed to getting involved in another European war fo a range of reasons. As a result, when war broke out in Europe the United States did not have a substantial army, let alone producing weapms in large quantities. The United States had engaged in limited naval construction and some development of planes. Even in 1941, however, American factories were turning out mostly car using large quantiires of steel, copper, and cromium rather than tanks and other military vehicles. The United States did not bgin to significantly increase military spending until the fall of France (June 1940), and even then the increases were still relatively modest. Hitler reached the same conclusion as the German High Command in World War I, he could complete his conquest of Europe before the United States could mobilize its substantial industial potential for war. After Pearl Harbor, the samne indutrialists that had been accused of war profiteering during World War II stepped forward to turn the Arsenal of Democracy into the most formibable war engine in human history. Within a very short period of time, America emerged from ddepression and unemployment to booming factories and alabor shortage. Presidebnt Roosevelt who had been accusing these men of being 'econimic royalists' personally recruited them to transform the American economy. The United States not only had a vast industrial establishment, but copious natural resources, including oil, and a huge agricultural potential. The United States financed the war effort by borrowing. There were a series of well-publicized bond drives. This not only generated money for the war effort, but helped to tampen down inflation.

Post War Era (1945-60)

There was concern that with the end of World War II reduced war orders and demobilizationm would result in unemployment and the hard times and Depression would resume. It was unclear how dependent the American economy was on military orders and defecit spending. The United States borrowed the greatest amount of money in history to defeat the Axis. It was unclear that it could ever be paid back but the economic boom of the 1950s and economic growth did just that. Defense cut backs began even before the War was over. There was a fairly sharp, but brief recession (1945). Pent up demand fueled exceptionally strong economic growth in the postwar period. With much of European industry destoyed, American companies had few compertiors, but European countries did not have the dollars needed to buy American products. The American Marshall Palan and security shiled played a major role in European and Japanese recovery recreatung ba robust internatioinal econmuy, The imprtant automobile industry quickly converted back to producing civilian cars and trucks. It was still not fully apprecauted that the primary cause of the Drepressioin was Federal Reserve policy--tightening the money supply during a recession. Technological advances during the War help to expand exidtuing industries anbd create while new ones. Government supoport science and technology help promote these advances. American became the workd leader iun technology which acan be measured in Nobel Prize Awards. Television was especially imprtant. As was aviatiin. The Baby Boom resulted in a housing boom, stimulated in part by Goverment policy and affordable mortgages. War productioin has=d brought many people into the economy that had previously been marginal partiovipant in the economy--especially women and AZfrucan Americans. The GI Bill opened up college educations and middler-class job to a broad sway of the population. The GDP grew steadily from $200 billion (1940), $300 billionm (1950), and to more than $500 Billion (1960). Countless Americans families entered the middleclass. Many including some Americans began to see socialism as a superior system to capitalism. The newly independent countries emerging from the Euroean colonial empires adopted socialist polices and failed miserably.

Late-20th Century

The NKVD/KGB managed to disguise Soviet economic failure until the 1980s. The Asian Tigers first demonstarted what market reforms (capitalism) could do in developimg countries. Even the Chinese were concinced. These countries achieved the fraetest outburst of human well-being in humant history, thrusting some ONE BILLION people from abject poverty to the prosperous middle-class in only none generation. Despite this Ameicans began moving in the oppoosite direction with more Government involvement in the economy and movenent toward a European-style welfare state. The Government gave less attention to the economy, pursuing trade policies thatked to the destruction of American manufacturing exposing American industry to unfair competition from Europe, Japan, and China. The econmy was furher traumatized by the Arab oil embargo mand increased oil prices. The entreprenurial American sprit led to a leadership in the new insusties of the digital age.

Sources

Churchill, Winston in Martin Gilbert, The First World War: A Complete History (New York: Henry Holt, 1994).

Citino, Robert M. The German Way of War.

Created: 2:46 AM 4/10/2019
Last updated: 5:51 AM 6/23/2022