 American Dream  Baby Boom  “Camelot”  Company man  Stagflation  ARPANET

60s-70s

 Corporate raiders

80s – 90s

 Evil empire  Arthur Laffer  Dot-com bubble  Black Monday

Ing. Tomáš Dudáš, PhD.

1945 – Starting point

 The country that emerged from WW II was very different from what it had been four years earlier  Prosperity had replaced depression   Inflation was now the number one economic problem The 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 prosperity

    Many 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.” Bill

  The 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 boom The 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 economy   1946 – 7000 TV sets 1950 – 50 000 000 TV sets The Eisenhower administration    Ended the Korean War and inflation Made no attempt to undo the legacies of the New Deal The role of the federal government as a major economic player became a permanent one

Changing labor force

Changing workplace

 Less “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 prosperity

 Keynesianism – 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

1960s – Years of Change

 The U.S. underwent a kind of golden age of economic growth  The middle class swelled, as did GDP and productivity  Youngest president ever elected in 1960 – John Fitzgerald Kennedy   As 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 Change

 Lyndon Baines Johnson (1963-1969)  Wanted to build a “Great Society”  Started major social programs  Medicare   Medicaid Food stamps  Vietnam War  What 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 Culture

 Rapid rise in new car registrations  1945 – 25 million cars  1960 – 65 million cars  The number of 2 car families doubles between 1951 and 1958  1956 – Interstate Highway Act  26 billion USD to build highways  65 000 km of new highways was built

You can do almost everything in your car

1970s – The stagflation decade

 Stagflation - an economic condition of both continuing inflation and stagnant business activity, together with an increasing unemployment rate  Increasing dependence on oil imports from OPEC countries   Oil shocks - OPEC quadrupled oil prices The U.S. was hit by the worst recession since the 1930s  Collapse of the Bretton Wood system

1970s – The stagflation decade

 Jimmy Carter became President in 1976  Rising budget deficits   The money supply grew rapidly Inflation rose almost to double digit levels  He 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.

Reaganomics

•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

Reagan’s Solution – Supply Side Economics

•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 - Results

 Income 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 - Results

  Despite 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 - Results

    More 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 Monday

 Black 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

Clintonomics

    Between 1980-1992 America had undergone twelve years of conservative policies implemented by Ronald Reagan and George Herbert Walker Bush Economic recession in 1991-1992 Bill 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

Clintonomics

 Clinton failed to push through an ambitious proposal to expand health-insurance coverage  Clintons 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 2000  Continuing deregulation of the economy  Strong economic performance in the USA – 8 years of strong economic growth between 1992-2000

GDP growth in USA between 1992-2000

2 1,5 1 0,5 0 5 4,5 4 3,5 3 2,5 1992 1993 1994 1995 1996 1997 1998 1999 2000

Unemployment in USA between 1992-2000

0 1 3 2 8 5 4 7 6 1992 1993 1994 1995 1996 1997 1998 1999 2000

CPI in USA between 1992-2000

3,5 3 2,5 2 1,5 1 0,5 0 1992 1993 1994 1995 1996 1997 1998 1999 2000

Dot-com bubble

Creation of the Bubble

   The "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 Bubble

 The 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 Bubble

 The 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 money  Citigroup and Merrill Lynch fined millions by SEC for misleading investors  Huge layoffs of technology experts