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Economy in the 1950s

Overview

During the Eisenhower era, Americans achieved a level of prosperity they'd never known before. While other parts of the world struggled to rebuild from the devastation of World War II, citizens of the United States saw their standard of living surpass what previous generations had only dreamed about.

Eisenhower himself deserves a good deal of credit for this economic growth. He found the right combination of low taxes, balanced budgets, and public spending that allowed the economy to prosper. 

The economy also benefitted from steady growth in spending on new homes and consumer goods as citizens began to buy on credit.

The Decade of Prosperity

The economy overall grew by 37% during the 1950s. At the end of the decade, the median American family had 30% more purchasing power than at the beginning. Inflation was minimal, in part because of Eisenhower's efforts to balance the federal budget. 

Unemployment remained low, about 4.5%.

Many factors came together to produce the '50s boom. The GI Bill gave veterans an affordable college education, providing a pool of highly-educated employees to the work force. Cheap oil from U.S. wells fueled industry. Advances in science and technology improved productivity, while competitors in Europe and Asia were still recovering from World War II.

Eisenhower's Middle Way

Eisenhower steered a balanced course economically. He realized that many of the New Deal's social programs were both popular and effective. For example, he expanded Social Security to cover another ten million people who were not covered by the original program. 

He invested federal money in the Interstate Highway System, one of the largest public spending projects in the country's history.

Eisenhower’s main economic goal through both his terms in office was to achieve a balanced federal budget. As the nation went into a recession in 1958–59, Eisenhower allowed the federal deficit to grow in order to stimulate the economy. By 1960, he managed to return the budget to a surplus.

Democrats were demanding increases in defense spending in order to counter the Soviet threat. Eisenhower used his background as an experienced military leader to reassure the nation that the defense budget did not need to be increased. He also fought tax cuts if they threatened to grow a government debt.

The Rise of Consumerism

One of the factors that fueled the prosperity of the '50s was the increase in consumer spending. Americans enjoyed a standard of living that no other country could approach.

The adults of the '50s had grown up in general poverty during the Great Depression and then rationing during World War II. When consumer goods became available in the post-war era, people wanted to spend. By the 1950s, Americans made up just 6% of the world's population, but they consumed 30% of all the world's goods and services.

America shifted from a production society, which focused on meeting basic needs, to a consumption society, which emphasized customers' wants. Blessed with abundant resources, America could afford to turn part of its productive capacity to creating unnecessary goods and waste. The older generation had been careful to save and reuse, while Americans in the '50s began to use and throw away. They became "consumers."

This consumerism was driven by advertising, designed to make people want more things, better things, and newer things. Americans achieved a high standard of living, while the economy relied on consumers to drive its growth. 

A Nation in Debt

The '50s gave rise to the "buy now, pay later" mentality. The Federal Housing Administration and the Veteran's Administration both offered low-interest loans to allow families to buy new homes.

The first credit card—the Diner's Club card—appeared in 1950, touching off a dramatic growth in borrowing. People borrowed to buy houses, cars, appliances, and even swimming pools.

Left Out of Prosperity

Even as the nation prospered and the middle class did well, about 25% of citizens lived in poverty. 

Much of this poverty was said to be "invisible." It affected Blacks in urban neighborhoods and whites in depressed rural areas like the Appalachian Mountains. Middle-class Americans never saw the misery in other sectors of American society. Poverty amid plenty was another paradox of the '50s, but most people were able to ignore it.

In general, Eisenhower’s middle way proved highly successful, even though it failed to reach everyone.


Source: Economy in the 1950s
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