At the end of the Second World War, the United States of America emerged as the wealthiest society in human history. The contrast from the 1930s was stark; Britain, France and Germany had emerged from the great depressionGreat Depression The global economic collapse that began with the US stock market crash of October 1929 and deepened through bank failures, trade collapse, and mass unemployment to produce the worst economic crisis of the twentieth century. By 1932, a quarter of American workers were unemployed; industrial production had fallen by half. The Great Depression began not with a single event but with a series of interconnected collapses. The October 1929 stock market crash wiped out speculative fortunes but would not, alone, have produced a decade-long depression; the depression was deepened by bank failures that wiped out the savings of ordinary Americans, by the Federal Reserve’s contractionary monetary policy that reduced the money supply, by the Smoot-Hawley Tariff of 1930 that triggered retaliatory trade barriers worldwide, and by the gold standard constraints that prevented governments from expanding their monetary supplies in response to the crisis. By 1932–33, a quarter of American workers were unemployed, industrial production had fallen by fifty percent, and the banking system had effectively ceased to function. The international dimension was crucial: Germany’s reparations obligations and war debt structure, financed by American loans, made the German economy uniquely vulnerable to the credit contraction. The Depression contributed directly to Hitler’s electoral rise — the Nazi Party gained over 37% of the vote in July 1932 in conditions of mass unemployment and national humiliation. The policy responses — Roosevelt’s New Deal, Britain’s abandonment of the gold standard, the various autarkic nationalisms of the 1930s — produced partial recovery in some countries while deepening the crisis in others. Full recovery required the Second World War’s military spending to restore full employment. The Great Depression was not a natural disaster but a political-economic failure: decisions made by governments, central banks, and financial institutions that could have been made differently. Keynes’s analysis — that the depression reflected a collapse of effective demand that markets could not self-correct without government intervention — was substantially correct, but politically unacceptable to the orthodoxies of the 1930s. The lasting significance of the Depression is not economic but political: it demonstrated that sustained mass unemployment was politically uncontainable, that democracies unable to provide economic security were vulnerable to authoritarian alternatives, and that the international economic system required political management that pure market mechanisms could not supply. The post-war Bretton Woods system — managed exchange rates, capital controls, the IMF and World Bank — was designed precisely to prevent a recurrence by building the international economic management mechanisms that had been absent in the 1930s. between 1933 and 1934, whereas mass unemployment was still prevalent in America in 1939. New industries, massive government help in the guise of the GI Bill for returning servicemen and a youthful population that had been unique across the world in actually experiencing rising living standards during the war all created the conditions for an enormous post war boom. America’s competitors in Europe and Asia were either physically devastated or, like Britain, mired in debt. The fact that America also emerged as a creditor nation meant that the post war generation would be fortunate to benefit from decades of prosperity. Many who had lived through the depression did not see it that way and there were fears of a return to depression once the war had ended and government orders for armaments dried up. By 1948, when no downturn had occurred, a shift in public attitudes was recorded and consumer confidence lifted America into a consumer boom, buoyed by cheap oil and credit that eventually fell away into recession in the 1970s.

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America in 1945