1950 - 1975
economy of the 1950's was a relatively stale period of time. Because it
was much of an uneventful era, the economy did not experience any major
problems or breakthroughs. However, the gradual growth of the U.S.
during this time led the economy to its peak in the 60's.
One of the major issues during this time period was inflation. Two major waves of inflationary conditions swept the country at this time. The first followed the end of WW2 and the second at the onset of the Korean War in 1950. The causes of this inflation are not yet fully understood. Slow economic growth and slow increases may very likely be the cause. Consumer prices increased significantly over this decade due to a number of reasons. The first of which was the slow growth of productivity in the U.S. economy, especially in the service sector. The service sector experienced the biggest price increases due to lapses following the removal of price controls following WW2. The Federal Reserve Bank set policies that were used to try to regulate the economy and from prevention of diving into large economic declines. The Federal Reserve Board played an important role on the inflationary conditions of the 1950's. The policy the board relied on was quantitative devices of credit control-the discount rate, open market operations and changes in the reserve ratios. These devices were used at a vigorous pace in response to a number of economic downturns as an effort to maintain stable prices in the economy. After the Korean War, the board feared not only inflation, but feared using too much control as well. Large increases in consumer demand and credit were also factors in the increase of consumer prices due to corresponding poor productivity. Huge increases in indirect business taxes and social security taxes also played a role as they both nearly doubled throughout the decade.
Eisenhower's views insisted that the government attempt to promote economic growth. The basic principal of his administration was fiscal responsibility; that is, the government has a duty to stimulate economic growth and raise productivity without benefiting any one special interest. By the end of 1953, Eisenhower faced a lagging economy as a result of the Korean armistice's sharp military cutbacks. A mild recession reached its peak in January 1954 with unemployment rates topping out over 6 percent. His first order of business was to ask Congress to curb the growth of federal spending. He insisted that the real issue at hand was the long-term security of the U.S.
There were a number of developments in the business sector in the capital markets and other financial intermediaries during the 1950's. Over the decade the housing supply increased 27 percent and overall quality level of U.S. housing increased dramatically. A move from urban areas to the suburbs was the predominate characteristic of the new construction and increasing health and living conditions characterized the urban growth.
Growth in the economy also led to increasing popularity of other financial intermediaries. Life insurance companies flourished for the first half of the decade and a large number of private firms entered the market to absorb the excesses of personal savings. With surges in the economy, the 1950's are often recognized as the decade that eliminated poverty for the great majority of Americans. By 1955, the country had pulled out of the previous year's recession and gross national product (GNP) was growing at a rate of 7.6 percent. The boom was so great that the budget for 1956 predicted a surplus of 4.1 million.
The economy turned sharply downward in the summer of 1957 and reached its low point in the spring of 1958. Industrial production fell 14 percent, corporate profits plummeted 25 percent and unemployment rose to 7.5 percent. President Eisenhower did little to stimulate the economy because he worried more about inflation and not unemployment. Subsequently, in 1959 the economy realized $12 billion deficit, a new record for a budget shortfall during peacetime.
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