The New Deal's Shortcomings
The New Deal brought some relief to problems of unemployment, inflation, and scarcity, altough other government activities—federal spending, price regulations, job placement, union expansion, greater access to home loans, and social security—had more debatable effects.
By the end of the 1930s, 17% of the work force remained unemployed, 30% lived in poverty, and the most needy citizens did not benefit from the New Deal.
Revving Up a Wartime Economy
President Roosevelt promised to keep the United State out of the overseas conflicts, but he prepared the country for war just in case. By 1940, Congress increased defense spending and expanded the U.S. military. The government spent billions of dollars on a peacetime draft, increased wages for military personnel, offered subsidies for defense manufacturing, and granted loans to aid Great Britain and the Soviet Union.
When Japanese bombers attacked Pearl Harbor in December 1941, the United States was ready to enter the war.
By 1942, wartime factories had been set up across the nation, creating a tremendous demand for workers. Within months of the U.S. declaration of war, the national unemployment rate fell by 10%.
War mobilization—that is, the rapid production of military equipment, vehicles, weapons, and ammunition, along with the fortification of American borders and military bases abroad—together with the military draft caused a labor shortage.
Employers hired women and non-whites, whom they had long excluded from many skilled and high-paying industries.
Businesses had to offer high wages and fringe benefits to attract workers away from competitors. These benefits included medical care, exemption from the military draft, daycare facilities, and even paid maternity leave.
The federal government built new defense manufacturing plants, shipyards, aircraft factories, and military bases in California, and existing military industries there were greatly expanded. This attracted millions of Americans to California in search of job opportunities.
City governments were largely unprepared for the huge number of new residents, who required housing, schools, medical care, running water, and sanitation services.
Some California cities provided temporary housing and public services, but the poorest wartime migrants—African Americans and Mexican immigrants—filled the tenement-like housing projects.
Following the war, housing discrimination and loan restrictions prevented many non-white wartime migrants from moving out of these projects and into middle-class suburban developments.
A Penny Saved Is a Penny Earned
In order to maintain the military, the federal government required most manufacturers to move from production of consumer items to war necessities. For example, car manufacturers began to assemble armored vehicles for the battlefield.
Americans received "ration stamps" to purchase a limited quantity of many consumer products, like gasoline, steel, rubber, and oil.
Americans were earning higher wages, but there were fewer consumer items to spend on. As a result, families saved money throughout the war. After the war, manufacturers resumed making consumer products. The nation had full employment and rising wages, so Americans began to spend, sparking a period of economic prosperity after the war.
Source: Economy in World War II: Home Front
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