The relentless revolution: a history of capitalism (48 page)

With the increase in war production, many companies settled with their laborers in order to win military contracts, swelling the ranks of union members. When after the war those companies tried to scale back wages, unions fought successfully to hold on to or increase their gains. During the decade and a half of citizen solidarity, forged through the shared pain of the Depression and war, labor succeeded in convincing most Americans that wages should not be set by the impersonal workings of some “law” of supply and demand. Rather they put forward the twin goals of achieving a living wage and fully incorporating blue-collar workers into the prosperity beckoning when peace finally came. Disputes continued; big labor, big industry, and big government found a balance they could work with.

It was a magical combination for the American economy. Where war made most of Europe and part of Asia destitute, the American economy had actually grown 50 percent between 1939 and 1945! Canada and Argentina had grown even faster. People who’d lived in apartments all their lives bought houses; returning service personnel got married and began having those children destined to compose the baby boom of 1946 to 1960. Small businesses flourished, many of them serving families in the proliferating suburbs with bicycle shops, cleaners, and the like. The American peacetime economy, stalled since 1930, moved into high gear, where it stayed for a quarter of a century.

If one of the signs of a healthy economy is its capacity to recover from disruption, the speedy return to peacetime production indicated a strong constitution. The resiliency of the American economy astounds. Between 1945 and 1947, it found work for the nine million veterans who did not take up the GI Bill and it absorbed the twenty-two million employees formerly holding military-related jobs. Pent-up demand and all those savings in war bonds helped, but not as much as the restoration of confidence in a free market.
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Before the war the United States economy had been half the size of the combined economies of Europe, Japan, and the Soviet Union. Seven years later it surpassed all of them together.

A Chilly New Peace

Americans interpreted the Soviet Union’s suppression of its neighbors as part of a plan for world domination. In 1947 President Harry Truman announced his intention to contain communism by sending military and economic support to Greece and Turkey, both fighting Communist insurgencies. The Truman Doctrine advanced the notion that Soviet pressure through surrogate rebel groups, if successful, would produce a domino effect, with one country lost to communism bringing down its neighbors. The increasing mutual hostility between Russia and America inspired a full-scale propaganda battle, backed up by aid like that which Truman sent to Turkey and Greece. Winston Churchill coined a memorable metaphor when he announced in a speech in the United States that an “iron curtain” had dropped down between Eastern and Western Europe. A cold war between the former Allies took over from the hot one that they had fought together. Capitalism became the signature economic system for the West, its wealth-producing capacity carrying new moral overtones.

Russian paranoia and the near hysteria about socialism in the United States worked effectively to build mutual distrust and animosity. Every event became grist for propaganda; every foreign country’s allegiance became a trophy to be won by one side or the other. A realist might add that the two systems of belief and governance were too divergent to make any other outcome likely. Free enterprise, free elections, and the personal freedoms of movement, speech, religion, and political participation came to epitomize the West’s cherished values; the Soviets extolled their full employment, public ownership of the nation’s goods, and equality of treatment for its people. Anticommunism united the nations of Western Europe and the New World. It also limited the range of acceptable political thought in the United States, which threatened to stifle the robust public debates that an economy based on innovation and initiative needed.

The East-West rivalry became more intense than those preceding the First and Second World Wars, but there was a crucial diffference that prevented the Cold War from heating up. As World War II ended, the atomic age began. In 1949, after a crash program, Soviet scientists produced an atomic bomb like the ones that the United States had dropped on Japan. Closely following the U.S. program, the Russians then followed up with development of the more powerful hydrogen bomb and an intercontinental ballistic missile system for delivering the bombs. Now both countries, appropriately called superpowers, were capable of obliterating each other. Mutual annihilation became a clear and present danger. In the years that followed, seven other countries acquired the secrets of the Manhattan Project through a handoff from their allies. Perhaps four more are moving in that direction today.

Countries that had just come out of World War II now faced the aggressive policies of the Soviet Union. No one had a very good idea of how well the Soviet economy was doing, but everyone did know that the Red Army was a formidable fighting force. During an August night in 1961, when the East German government erected a wall in East Berlin to stop the flow of defectors to the West, Churchill’s iron curtain no longer seemed like a metaphor. Western Europe remained dependent upon the military strength of the United States, which began ringing the Soviet bloc with army bases and missile sites.

Despite several very scary episodes in the 1950s and 1960s, the United States and the USSR managed to curb their extremists and avoid mutual destruction. In this they were helped by the United Nations, formed in San Francisco by fifty participating countries in 1945. Given powers denied the defunct League of Nations, the UN Security Council and General Assembly kept alive the forms of deliberation, if not always their spirit. It remained more under the control of the United States than the Soviet Union, but Russia’s veto power in the Security Council acted as a balancing, if annoying, mechanism.

New Institutions for International Trade

Some farsighted people after the war saw the chance to achieve a relatively free world market, a goal that had eluded the best of intentions earlier. One of the seventeenth-century developments that had given England an economic boost had been the dismantling of local obstacles to trade within the kingdom. In France at the same time you couldn’t drive a car twenty-five miles without having to pay someone to cross a bridge or pass through a shortcut. The privilege of collecting such fees were highly prized and protected. In England goods and people moved within a single unified market, instead of the local and regional ones that dominated elsewhere. This had been a widely recognized stimulant to development, but national rivalries had nixed any effort to apply it to international trade. Instead countries erected tariffs or filled trade treaties with picayune demands for special treatment for a favored product or interest group.

World War II provided a new opening for international cooperation. The United States supplied its European allies with armament before its entrance into the war, through lend-lease treaties. In these, the American government demanded that after the war, recipients pitch in and help create a multilateral trade world that would speed recovery and promote growth, much as England’s internal market had done three centuries earlier. Despite its history of protecting so-called infant industry, the United States became the strongest advocate of free trade. Particularly offensive to American producers were the favored terms of trade within the British Commonwealth. Like the British powerhouse of the nineteenth century, the United States promoted free trade as a virtue rather than as the advantageous policy of the strong. The United States sometimes acted like a wealthy, but grouchy, uncle as in the final settling of the lend-lease agreements.
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Such behavior is not surprising. Rising above obnoxious national postures was the novelty.

The institutions established after the war created a propitious environment for economic development among the countries that participated. The dollar anchored international trade. By 1956 all Western European currencies could be converted easily, helped along by the European Payment Union. Beginning with a grant from the United States, the union promoted multilateral commerce by easing the means of payment. The dollars each country received from the Marshall Plan not only bought necessary goods but enabled it to buy from one another. Accounts for every country were settled at the end of each month, with only large debits or credits settled in gold or dollars.

Already geared toward consumption, the American economy boomed when millions of families bought big-ticket items like cars, refrigerators, washing machines, and dryers. A change in lending and borrowing made this great spending spree possible. Earlier, department stores and upscale groceries had created charge accounts. One of the conspicuous features of department store interiors was the pneumatic tubing that carried charge slips from every department up to the credit office, where they were sorted for monthly bills. So credit was not new to Americans, but it had never before been crafted into one of the pillars of prosperity. After the war, banks, retailers, manufacturers, lenders, collection agencies, and state and federal officials took the haphazard local lending industry of America and turned it into a coherent national system.

Americans now had enough purchasing power to pull the incredible flow of goods coming out of the postwar factories right into their houses and garages. From the borrowers’ point of view, buying cars, houses, and major appliances on an installment plan made lots of sense in a period of inflation. With steady and well-paying jobs as abundant as goods, the default rate was minimal. Buying on credit no longer seemed like an indulgence, but rather like prudent spending. By the 1960s national credit cards had begun to take over from individual charge accounts. That same decade saw the beginning of the malling of America as developers began creating entirely new shopping areas, often enclosed within walls with air conditioning against inclement weather. Usually anchored by a major department store, the malls that mushroomed across the country signaled the early obsolescence of downtown retailing. Even in this era of conspicuous consumption, though, creditors continued to discriminate against blacks and women.
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Assumptions based on the separation of a man’s world of work and a woman’s world at home dissolved slowly. Still, female employment began hitting new highs in the 1950s, despite the return to the home of women who had been wartime workers.

Technology’s Social Impact

Into the American living room in the 1950s came the biggest novelty of all, television. The inventor of television, Philo Farnsworth, proves the randomness of mechanical genius. Growing up in Beaver County, Utah, Farnsworth tinkered with electricity from the time he was twelve. The first person to transmit a television picture, as he did in 1927, Farnsworth appropriately chose the dollar sign to send in an image with sixty horizontal lines. Although he lost a patent battle to the Radio Corporation of America, Farnsworth went on to invent 165 other devices, including vacuum tubes, electrical scanners, and the cathode ray. Farnsworth beautifully exemplifies one of the strengths of capitalism’s dependence upon innovation: It can’t ignore outsiders.

World War II gave a tremendous boost to the electronics industry with its developments in radar, sonar, radio navigation systems, and proximity fuses.
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Large orders for these radio-related products left American firms like RCA with expensive laboratories that at last could be devoted to long-delayed television projects. Far from representing a luxury for the very rich, television struck people of modest means as a lifetime entertainment investment, and besides, it could be paid for in installments. RCA, which represented a merger of U.S. and German companies, took the lead in commercializing television. It introduced color TV in the 1950s. By 1960 forty-five million homes had TV sets. Movie attendance took a dive, and radios found their best audiences in cars.

Widespread ownership of TV sets promoted one of the most intrusive novelties of the 1950s, the television commercial. A natural extension of newspaper, magazine, and radio advertising, the TV commercial seemed particularly impertinent. Television stations timed them for maximum viewing, interrupting plays, football games, and the news. The picture that is worth a thousand words became the thirty-second sequence of pictures that informed, persuaded, and irritated. Roundly criticized, TV commercials succeeded in selling everything from deodorants to life insurance. Soon political candidates saw the promise of television commercials for generating support. More effective than door-to-door canvassing, commercials soon took the lion’s share of campaign budgets. Fund raising acquired a new importance in American politics. Once again, commerce showed its power to shape institutions in unexpected ways.

Another newcomer to postwar American consumers was air travel. The U.S. government had promoted aeronautic research after the Wright brothers’ successful flight in 1903 but ceased to do so after World War I. The original airlines like American and United emerged from aircraft companies. Charles Lindbergh drew world attention in 1927, when he flew from New York to Paris in a single-engine monoplane. Lindbergh then became a pilot for Pan American, which, like the other pioneering, commercial airlines, relied on income from carrying the mail, especially to the countries of Latin America. During the 1930s fear and expense curbed commercial flying. One marketing effort to confront these obstacles boomeranged. An airlines company discovered that wives worried enough about their husbands’ safety to keep them from flying. To address this problem, the company extended free tickets to women who accompanied their husbands on business trips. Following up with questionnaires to the participating spouses, the advertisers discovered—from the angry replies they received—that not all the husbands had taken their wives!