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Why did the FEARED post-war economic depression never materialize?History  

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ninjaprodigy | Student, Grade 11 | (Level 2) eNoter

Posted September 7, 2010 at 9:36 PM via web

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Why did the FEARED post-war economic depression never materialize?

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brettd | High School Teacher | (Level 2) Educator Emeritus

Posted September 7, 2010 at 9:58 PM (Answer #2)

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I'll assume in this question you are referring to World War II, as the fear of a depression was greatest after that conflict.  Since it was the war itself, and all the industrial spending on war material, and the massive employment in the military itself that brought us out of the Depression at last, fear that we would slide backwards after it was normal.

But during the war, almost everyone who wanted to work did work, and long hours at that.  There was a shortage of labor so wages rose, at the same time as there was widespread rationing of consumer goods.  So people were earning much more money, but had much less to spend it on.  So people saved it.  They built nice little nest eggs.

Then, once the war ended, so did the rationing, and people began to spend their savings accounts on houses, cars and new consumer goods.  This kept the factories humming along producing domestic products instead of war material.  Inflation came back as demand was greater than  supply.  The feared depression never materialized.

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martinjmurphy | Middle School Teacher | (Level 1) Associate Educator

Posted September 8, 2010 at 11:58 AM (Answer #3)

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In addition to the previous post, there were several other reasons why there was no economic depression after WWII.  First of all, the federal government had taken several steps in the 1930’s and 1940’s to keep another depression from happening.  For example, The Federal Deposit Insurance Corporation was established which insured deposits in bank.  This would hopefully stop the type of bank failures that fueled the Great Depression.  Social Security was established which meant the elderly would have money to spend to fuel the economy.  The idea of unemployment insurance began which again meant people, even if unemployed, would have money to spend to spur the economy.  The Securities and Exchange Commission was also established to regulate the stock market and stop the abuses of the market that helped it crash in 1929 setting off the Great Depression.

It was the massive war spending that really pulled the U.S. out of the depression in the 1940’s.  This defense spending did not end with the end of WWII.  With the end of WWII came the beginning of the cold war, which eventually turned hot in Korea in the late 1940’s.  This kept defense spending high even after WWII helping to keep the U.S. economy growing.

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Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

Posted September 9, 2010 at 1:09 AM (Answer #4)

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I think that one major reason why there was a lack of post- war economic depression was because production was at an all time high leading up to the period of prosperity.  It seemed that war became the ultimate cure for the Great Depression.  The wartime needs and production from industry that accompanied it were one of levels that continued after the war.  One cannot underestimate the importance of how the world had been so dramatically altered by the Second World War.  The unprecedented authority of the United States enabled it to wield its influence to make sure that nations relied on it for building their own economies back to stability.  Due to this, economic depression seemed unlikely because there was always going to be a market for American industry and products given the decimated state of Europe as well as with emerging markets all over the world with newly declared independent nations.  For both of these reasons, I would think that the feared economic depression was not going to be experienced.

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litteacher8 | Middle School Teacher | (Level 1) Distinguished Educator

Posted August 16, 2011 at 6:33 AM (Answer #5)

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World War II really spurred the economy. After the war, there was still a lot of money floating around. Reconstruction in Europe required jobs and resources, and more government money. Then the Cold War still drove the economy, espeically technological advances.

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