60s-70s
American DreamBaby Boom“Camelot”Company manStagflationARPANET
80s – 90sCorporate raiders
Evil empire
Arthur Laffer
Dot-com bubble
Black Monday
Ing. Tomáš Dudáš, PhD.
1945 – Starting pointThe country that emerged from WW II
was very different from what it had been four years earlierProsperity had replaced depressionInflation was now the number one economic
problemThe U.S. accounted for ½ of the world’s
manufacturing output With just 7 percent of the world’s population
The U.S. and the Soviet Union were the only superpowers left standing
New international economic order
1950s – decade of prosperityMany Americans feared that the end of
World War II and the subsequent drop in military spending might bring back the hard times of the Great Depression
But instead, pent-up consumer demand fueled exceptionally strong economic growth in the postwar period
The nation's gross national product rose from about $200,000 million in 1940 to $300,000 million in 1950 and to more than $500,000 million in 1960
At the same time, the jump in postwar births, known as the "baby boom," increased the number of consumers
Number of births in the United States, 1934 to present
“G.I.” BillThe G.I. Bill was an omnibus bill that
provided college or vocational education for returning World War II veterans as well as one year of unemployment compensation. It also provided many different types of loans for returning veterans to buy homes and start businesses
By the time the original GI Bill ended in July 1956, 7.8 million World War II veterans had participated in an education or training program and 2.4 million veterans had home loans backed by the Veterans' Administration (VA)
The 1950s: The Eisenhower Years
One big construction boomThe automobile industry prospered
Supplied America’s pent up demand and became the world’s leading exporter of cars
The advent of television and the Korean War stimulated the economy1946 – 7000 TV sets 1950 – 50 000 000 TV sets
The Eisenhower administrationEnded the Korean War and inflationMade no attempt to undo the legacies of the New DealThe role of the federal government as a major economic
player became a permanent one
Changing labor force
Changing workplaceLess “blue collar” jobs – more “white collar”
jobs
• 1947-1957 factory workers decreased by 4.3%, eliminating 1.5 million blue-collar jobs
Greater participation of women in the workplace – especially in the tertiary sector
New corporate culture – “The Company man”
1950s – decade of prosperityKeynesianism – Employment Act 1946
Is a definitive attempt by the federal government to develop macroeconomic policy
The act creates the Council of Economic Advisers, an appointed advisory board that will advise and assist the President in formulating economic policy
Goal - to promote maximum employment, production, and purchasing power
50s – Rise of the suburbs
Rising consumerism Rising consumerism
1960s – Years of ChangeThe U.S. underwent a kind of golden age of
economic growthThe middle class swelled, as did GDP and
productivityYoungest president ever elected in 1960 –
John Fitzgerald KennedyAs president, he sought to accelerate economic
growth by increasing government spending and cutting taxes, and he pressed for medical help for the elderly, aid for inner cities, and increased funds for education
Great admirer of FDR“Camelot”
1960s – Years of ChangeLyndon Baines Johnson (1963-1969)
Wanted to build a “Great Society”Started major social programs
MedicareMedicaidFood stamps
Vietnam WarWhat had started as a small military action
under Kennedy mushroomed into a major military initiative during Johnson's presidency
Advertising became major industry
Rising Car CultureRapid rise in new car registrations
1945 – 25 million cars1960 – 65 million cars
The number of 2 car families doubles between 1951 and 1958
1956 – Interstate Highway Act26 billion USD to build highways65 000 km of new highways was built
You can do almost everything in your car
1970s – The stagflation decadeStagflation - an economic condition of
both continuing inflation and stagnant business activity, together with an increasing unemployment rate
Increasing dependence on oil imports from OPEC countriesOil shocks - OPEC quadrupled oil pricesThe U.S. was hit by the worst recession since
the 1930s
Collapse of the Bretton Wood system
1970s – The stagflation decadeJimmy Carter became President in 1976
Rising budget deficitsThe money supply grew rapidlyInflation rose almost to double digit levelsHe faced the Iranian revolution in 1979
Gasoline prices went through the ceiling In October, 1979 the Fed stopped the growth of the money
supply
By January, 1980 the country was in recession
The inflation rate was declining The nation’s productivity growth was at one percent, one
third the postwar rate
Economic situation in 1980
The rise of inflation of the 1970s had resulted in an enormous increase in tax burden
Social security tax and Medicare had also increased the personal tax burden.
31 million jobs had been destroyed between 1978 and 1982.
Fully one-third of all private sector jobs that existed in 1978 had disappeared by 1982.
•Attempts to solve the economic malaise that was continuing in the late 1970’s were largely unsuccessful
•Reagan proposed a new idea to address the economic stagflation (lack of growth)
•Reagan believed that the root of the problem for the economy was:
•Intrusive government regulations of business and industry
•Expensive government social programs that offered “handouts” to non-productive citizens
•High taxes
•Deficit spending
•Tax cuts, rather than government spending, will create economic growth
•Arthur Laffer suggested that at some point rising tax rates discourage people from participating in taxable activities such as investing
•This is known as the point of diminishing returns – where a policy provides benefits only to a certain point – the effort/expense no longer produces a sufficient amount of desired outcome to be worthwhile
•If profits from investing are taken away by taxes, what is the point of investing?
Reagonomics - ResultsIncome tax rates of the top personal tax
bracket dropped from 70% to 28% in 7 years, while social security and Medicare taxes increased
GDP growth recovered strongly after the 1982 recession and produced five straight quarters of growth averaging 8.4%
The GDP grew during Reagan's remaining years in office at an annual rate of 3.4% per year, slightly lower than the post-World War II average of 3.6%
Reagonomics - ResultsDespite the tax cuts of 1981, federal tax
revenues nearly doubled in the Reagan years. Real inflation-adjusted manufacturing output
rose to its highest point of the post-WWII period.
Domestic-based manufacturing employment fell from 20.3 million in 1980 to 19.2 million in 1990, a decline of 6%, probably as a result of productivity gains.
U.S. exports of manufacturing goods grew by 90% between 1986 and 1992, compared with 25% for the rest of the OECD countries.
Reagonomics - ResultsMore than 18 million new jobs were created in
the 1980s in the U.S.—this was more than Japan, Britain, and Germany combined.
82% of the jobs created were high-pay, high-skill managerial and technical positions. 12% were low-skill service jobs.
While real wages declined from $11.41 per hour in 1978 to $10.02 per hour in 1990, workers’ total compensation increased as workers demanded increased benefits.
Reaganomics did not gut social welfare programs. In fact, social welfare spending was the largest cause of the budget deficits of the Reagan administration.
Black MondayBlack Monday refers to Monday, October 19,
1987, when stock markets around the world crashed, shedding a huge value in a very short time
The crash began in Hong Kong, spread west through international time zones to Europe, hitting the United States after other markets had already declined by a significant margin. The Dow Jones Industrial Average (DJIA) dropped by 508 points to 1738.74 (22.61%)
The Black Monday decline was the largest one-day percentage decline in stock market history
It caused no great recession
ClintonomicsBetween 1980-1992 America had undergone twelve
years of conservative policies implemented by Ronald Reagan and George Herbert Walker Bush
Economic recession in 1991-1992Bill Clinton ran on the economic platform of
balancing the budget, lowering inflation, lowering unemployment, and continuing the traditionally conservative policies of free trade
In 1992, Bill Clinton was elected president of the United States of America. During Clinton’s presidency (1993 to 2001), the economic policies he put into place for the U.S. were termed Clintonomics
ClintonomicsClinton failed to push through an ambitious
proposal to expand health-insurance coverageClintons main goal – balanced budget
In 1998, the government posted its first surplus in 30 years, although a huge remained
Record surplus of the budget in 2000Continuing deregulation of the economyStrong economic performance in the USA – 8
years of strong economic growth between 1992-2000
GDP growth in USA between 1992-2000
Unemployment in USA between 1992-2000
CPI in USA between 1992-2000
Dot-com bubble
Creation of the BubbleThe "dot-com bubble“ was a speculative bubble covering
roughly 1998–2001 (with a climax on March 10, 2000 with the NASDAQ peaking at 5132.52) during which stock markets in Western nations saw their equity value rise rapidly from growth in the more recent Internet sector and related fields
The period was marked by the founding (and, in many cases, spectacular failure) of a group of new Internet-based companies commonly referred to as dot-coms
The venture capitalists saw record-setting rises in stock valuations of dot-com companies, and therefore moved faster and with less caution than usual, choosing to mitigate the risk by starting many contenders and letting the market decide which would succeed.
Creation of the BubbleThe low interest rates in 1998–99 helped
increase the start-up capital amounts. Although a number of these new
entrepreneurs had realistic plans and administrative ability, many more of them lacked these characteristics but were able to sell their ideas to investors because of the novelty of the dot-com companies
According to dot-com theory, an Internet company's survival depended on expanding its customer base as rapidly as possible, even if it produced large annual losses
Aftermath of the Dot-Com BubbleThe dot-com bubble crash wiped out $5 trillion
in market value of technology companies from March 2000 to October 2002.
Many dot-coms ran out of capital and were acquired or liquidated
Several companies and executives accused or convicted of fraud for misuse of shareholders moneyCitigroup and Merrill Lynch fined millions by SEC for
misleading investors
Huge layoffs of technology experts