Government and Economies in the Postwar World: Economic Policies and Comparative Performance, 1945-85

By Andrew Graham; Anthony Seldon | Go to book overview
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Chapter eleven

The United States

Joseph Hogan and Andrew Graham

Introduction

The United States ended the Second World War as the undoubted leader of the western world. It had, in fact, become the richest country in the world much earlier, surpassing the UK in terms of income per head about 1890, and by 1939 it was the largest economic power and much the wealthiest nation on earth. But it was the Second World War which dramatically reinforced this situation and which brought full realization of US dominance. Unlike the UK, the US had not run down its external assets to pay for the war and unlike the Japanese and continental European economies which suffered massive physical and social disruption, US territory had not been touched, its fixed capital assets had not been damaged and, under the pressure of war-time demand, its output had grown faster than at any other time this century.

Looked at just in terms of GDP per head, by 1947 the US was more than one and a half times richer than the UK, three times richer than West Germany and no less than six times richer than Japan. Moreover, with a population approaching 150 million (at least two to three times that of any other industrial nation), the US had a command over resources several multiples of that of any other country. Yet even these numbers understate the overall disparities in power and influence at the end of the Second World War. One noted US economic commentator describes the situation as follows:

The United States emerged into the postwar period in a near vacuum of international competition, equipped with the world's only industrial base. Its currency-the only reserve currency-commanded such immense respect that for twenty-five years it was preferred to gold… [the result was that]…the United States ran a trade surplus in every postwar year until 1971; its first significant deficit on current account was in 1977; its net investment income reached a peak in 1981. (Sommers and Blau, 1988:6)

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