INVESTMENT, GROWTH, AND INSTABILITY: THE GREAT POSTWAR BOOM, 1945-1972
The 1940-1945 expansion wiped out the effects of the Great Depression so completely that it triggered a debate in corporate circles, in Congress, and among economists over the likelihood of renewed economic stagnation once wartime spending was terminated. The debate was overtaken by events. To general surprise, postwar “ reconversion” went smoothly. Even though total government expenditures were reduced by the equivalent of 27 percent of GNP in less than a year, GNP regained its wartime peak by the end of 1946.1 Consumer expenditures rose swiftly the moment hostilities, and rationing, ended in August 1945. Investment had to keep up, so total private spending jumped $40 billion from early 1945 to early 1946, about 20 percent of the annual level of GNP at the time.