Strengths And Weaknesses Of The Economic Crisis

Companies that were going bankrupt months before were now literally begging for labourers and some even suffered from a shortage of workers. This was mainly due to the rapid production levels the country needed to produce military equipment including ammunition and vehicles etc. A short time after the U.S. declaration of war, the unemployment rate dropped a massive ten per cent from its previous amount. After taxes, business profits almost doubled and industrial output increased massively at 96 per cent. Government expenditure also sored dramatically to 53 per cent of GDP at its peak in 1945, in comparison to around 20 per cent of GDP previous to the war. This contributed to business recovery and gave companies the kick start they needed. Due to productivity doubling, consumer goods also expanded. The war consumed one third of industrial output and this ensured a constant supply of goods, the U.S being the only country with a significant rise in supply despite rationing. Wages also rose 50 per cent higher by 1944, this was a combination of over-time pay and wage increases etc.

The American economy thrived tremendously after World War II. During this time, more families were able to be considered middle class, thus enhancing our economy. It gave opportunities for families to move up economic classes in order to improve their wealth. The distribution of wealth evened out because of this concept. The programs and situations that concern to expanding the economy were the defeat of Japan and Germany, Baby Boom, GI Bill, Levittown, and Interstates. Furthermore, the programs and situations that concern to wealth distribution were Baby Boom, GI Bill, Levittown, Unions, and Interstates.

In 1981 Ronald Wilson Reagan was elected as the 40th president of the United States. Reagan won in a landslide over former president and democratic candidate Jimmy Carter. In his inaugural speech he made the famous statement “government is not the solution to our problems, government is the problem.” This statement would later set the tone for his two consecutive terms as president and his instrumental role in shaping the values of generations of conservatives. ‘Reaganomics’ became household slang for the economic policies sanctioned by Reagan’s administration that developed a free enterprise market, high interest rates, and hands-off social policy that benefited America’s wealthy and depleted it’s poor.

During World War II the United States began to manufacture war materials to support its allies through lucrative government defense contracts as automobile factories like Ford and General Motors put aside their usual business operations and began to produce tanks and airplanes, shipyards too expanded their operations . The demand for war equipment naturally increased the demand for labor and as a result helped pull the American economy out of the grips of the Great Depression. Then as the unthinkable happened, on December 7, 1941, Japan bombed Pearl Harbor, which drew many young American men into the battlefield.

The government began to increase spending and investment toward military landscape and bases during the World War II. This not only impacted the War itself, but also the economy and society within Western development. Federal expenditures was helped to create employment for Western residents and produced opportunity for industry. “Essentially, the federal government promoted the restructuring of a natural resource-based colonial economy into a technologically oriented and service economy stimulated by massive federal expenditures (Nash, G. 1999). The period after the War was also significant through the development of government assisted housing programs, industry, and accordingly the

“In the beginning of Pearl Harbor, the president set goals for the nation’s factories: 60,000 aircraft in 1942 and 125,000 in 1943; 120,000 tanks in the same time period and 55,000 antiaircraft guns.” During the war, 17 million new civilian jobs were created, industrial productivity increased by 96 percent, and corporate profits after taxes doubled. The government funds helped bring the business recovery that had eluded the new deal. America was the only country that saw an expansion of consumer goods despite wartime rationing. By 1944, a result of wage increases. Overtimes pay real weekly wages before taxes in manufacturing were 50 percent higher than in 1939. The war also created entire new technologies, industries, and associated human skills.

America was just exiting the Gilded Age, which was an important time of growth and prosperity. Despite this, the American economy was in a small recession when entering the war, which was reversed by a 44 month period of growth caused by production for the war (Lozada). This 44 month period helped the economy expand, and furthered the strength of the country. It also furthered the confidence of American businesses and the government which contributed to the attitude that caused overconfidence and helped to spread the Great Depression.

The United States saw a vast amount of economic expansion post-war. The war launched technological achievements that created high levels of productivity, and new fields. Businesses benefited by the availability of government buildings that were used for production during the war and then sold off for pennies to private companies. Such policies along with the advances in technology led to the production of companies that were embracing new fields, an example of this is commercial aviation. As one sector increased so did another.

This research leads to the belief that the war spending in WW2 is what brought this country out of this depression. At the time of the war, over 11 million of United States population joined the military. Once the 11 million

World War II brought the US out of this period of slow growth. The military needed tanks, planes, guns, and everything else needed for the war effort. People were either back to work or overseas fighting. Production and growth rates reached new highs.

When the citizens had bought all that they could buy, there was a decrease in demand. Suddenly, the industries had an excess of goods and no one to sell it to. At this point, the Fordney-McCumber Act began to cripple the economy of America. Other nations introduced high tariffs to boost their revenue and to spite the United States. Sadly for the United States, these high tariffs and low demand were instrumental in the depression that America experienced. When the stock market crashed on October 29th, 1929 or “Black Tuesday”, the united states, along with other nations were in economic turmoil and the widespread prosperity of the 1920s ended abruptly. The depression threatened people's jobs, savings, and even their homes and farms. During the heart of the depression, over one-quarter of the American population was out of work. For many Americans, these were extremely hard times. When Roosevelt was voted into office, he introduced the New Deal. While this plan tried to help the united states out of it’s isolationist rut, the second world war was the final solution. Mobilizing the economy for world war finally cured the depression. Millions of men and women joined the armed forces, and even larger numbers went to work in well-paying defence jobs.

Thanks to the economic growth during WWII, America finally concluded the Great Depression. The federal government rose out of the war as a powerful economic player, being able to control the economy through consumption and spending. Just about every industry in America was saved by World War II. The war’s quick technological and scientific changes kept continuing and concentrated trends began during the depression and gave hope for further innovation in the U.S. Likewise, the increases in individual income in America led many Americans to force constant improvements to their materialistic lifestyles, increasing the consumption of the average American families spending on goods, while also increasing the production rate in America.

Taking into consideration the adverse impact of the 2008-2009 financial crisis we have examined main governmental policies used to prevent future economic fluctuations and its instruments for reducing crisis ramifications. Although methods are numerous, most of them proved their deficiency and ineffectiveness. In particular, traditional monetary policy cannot be a sufficient incentive for economic recovery anymore. Unconventional monetary policy, in its turn, is a two-edged tool with unpredictable after-effects. The third branch called macroprudential approach has the most favorable prospects in the future as it ensures the policy is consistent and draws attention to the microeconomic level.

As far as Greece’s role in creating this crisis in the first place, it can be said that Greece is at fault for a variety of reasons. The media has been focusing on the corrupt political system and infrastructure, the lack of competition in the private sector, the wastefulness and inefficiency of the public sector and a flawed tax system as causation for this mess. When the public sector was expanded in the 1980’s, Andreas Papandreou was given various agricultural subsidies and grants to do with what he pleased. This enabled the funding of certain post-World War II groups to heal political wounds and fund unions and other special interest groups to aid his political capital and strength. The policies enacted in this decade allowed for the increase in power and funding of the middle class by creating a vast amount of inefficient public sector government jobs for citizens. This resulted in an increase in the levels of inefficiency, bureaucracy, corruption and wasteful spending coupled with the increase in wages, pensions and benefits. This proceeded to drain through government money and resources, and did not breed a culture of highly motivated, efficient and effective government employees. A high amount of debts accumulated as the nation continued to proceed in this way, using state money to subsidize failing businesses

The global financial crisis had a profound on the financial markets leading to recession in a majority of advanced economies and massive growth declines emerging and developing economies. A financial crisis occurs when disruption increases asymmetric information in the financial system affecting efficient channeling of funds (Mishkin & Eakins, 2012).