World War II

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Who benefited most from World War II's economy and what financial limitations did others face?

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The American economy prior to WWII was still heavily weighted down by the Great Depression. Despite the hope inspired by FDR's New Deal, the raft of reform legislation was not able to provide relief to everyone or bring about full recovery. Unemployment in 1939 still stood at 17% (though down...

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from 25%, which was the depths of the Depression). The standard of living was still60% lower than it had been before the stock market crash of 1929. Lack of central banking had led to a catastrophic run of bank failures throughout the 1930s that wipe out savings (which were not insured) and tightened credit needed for investment.

Naturally, with erstwhile customers out of work, spending on durable goods like automobiles and vacuum cleaners flatlined, and factory workers joined the bread lines. Farmers, though, had it worse. The agricultural sector suffered a major crash after WWI that not even the 1920s had alleviated. The demand for foodstuffs during the Great War cut off with the Armistice, and the resulting glut of food led to a collapse in prices. During the 1930s, unsustainable agricultural practices also came to a head in the form of the Dust Bowl, when top soil simply blew away and many farms became unworkable.

From an economic standpoint, WWII materially benefited nearly every American on the home front and ended the underlying dynamics of the Great Depression almost instantly, though the positive effects were deferred until the end of the war. The increased authority granted to the President and the patriotism of Americans willing to make sacrifices to defeat Germany and Japan made this recovery possible. Additionally, the Great Depression had actually conditioned Americans to accept the privations of war more or less philosophically.

In broad terms, WWII instantly solved the problem of unemployment. First, most unemployed men in the workforce now had jobs as soldiers, so competition for jobs naturally declined quickly. Second, the lagging demand for manufactured durable products like automobiles was replaced by infinite demand for the munitions, vehicles, and the supplies necessary for the war.

This demand was met by industrialists, who retooled their factories to produce goods for the most reliable customer they could ask for—Uncle Sam. Despite high taxes and price controls, factory owners materially benefited from increased demand. Factory workers also benefited as opportunities opened up everywhere and pay was higher than ever. The labor shortage brought on by the war meant that women became a vital part of the workforce, including, for the first time in American history, large numbers of married women. Labor unions also found themselves with increased bargaining power.

Farmers benefited from the war, as the return of wartime demand for food to feed the soldiers and fixed prices guaranteed a good return for crops. Farmers were even exempted from the draft, so critical was their contribution.

Banks and financial institutions also faced brightened prospects because of the war. While the end of unemployment meant that those working in field or factory had good money coming in, WWII both forced and encouraged savings. Rationing meant there was little on which one could spend disposable income. This did not lead to inflation (as was common in the planned economy of the Soviet Union), however, as Americans were encouraged to reduce their consumption and to save their money or purchase war bonds. Bonds were bought at 3/4 of their face value but would pay the full amount once the war was over. So Americans saved like never before. This meant an end to the banking and credit crises. Additionally, the saved money would power the economic boom that followed the war.

Finally, the American South benefited from the war. After the Civil War, the rural South had been ruined, its savings, industrial capacity, and infrastructure destroyed. The ensuing 60 years were not kind, as the southern economy failed to diversify away from agriculture. WWII finally brought about a revitalization, as the armed services created nearly 40% of new bases in the south. Additionally, cities like Mobile, Alabama became major manufacturing hubs for armaments.

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The answer to this would be substantially different if you are asking about the impact of World War II as a whole than if you are asking about the economy during the years 1941 to 1945.  In other words, WWII certainly brought new prosperity to many Americans, but it brought that prosperity to different Americans in the actual war years than it did in the years after the war.

After the war, prosperity came to many Americans as a result of the war.  This came about in large part through the GI Bill.  The GI Bill allowed many Americans from all classes of society to go to college.  This allowed them to become part of the middle class.  It also allowed many Americans to buy their own homes for the first time.  This helped them and it helped people like those who got work building the homes in the new suburbs.

But your question asks about the war years themselves.  So let me turn my attention to that time.  I would argue that the war years did not enrich as many Americans.  Those who benefited most from the wartime economy fit into two main groups.  Perhaps the group that benefited the most was the group that owned the big companies.  Big industrial companies made huge amounts of money making the things that were needed for the war effort.  However, the benefits did trickle down.  Everyone who was able to work during the war (rather than having to go off to fight) tended to make much more money than they previously had.  Wages increased as there was a very tight labor market.  Income for farmers and farm workers increased because the need for agricultural products was so high.  Essentially everyone realized some economic benefits.

The main “financial limitation” that most people faced during the war was a lack of things on which to spend their money.  Very many kinds of goods were rationed during the war.  This meant that, even though people had money, they could not spend it because there was not that much that was available for sale. 

Thus, the war did bring about prosperity, but that prosperity was mainly felt after the war when there were more consumer goods available and when the men who had been fighting returned and reaped the benefits of the GI Bill.

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