Levinson - An extraordinary time: the end of the postwar boom and the return of the ordinary economy

Table of Contents

This book, I suppose, began with my own personal history. I was a student in West Germany at the time of the 1973 oil crisis, and I experienced both the euphoria of car-free Sundays and the queues of ill-tempered drivers desperate for gasoline. West Germany, in those days, had far more jobs than available workers, and in consequence many of my fellow students felt no particular urgency to enter the workforce. Tuition was free, housing was cheap, and rumors that the state government intended to cap the number of semesters for which an individual could enroll were a predictable cause of student protest. The good life in a miracle economy was the only life most of my classmates knew. They were in for a rude awakening.

The rediscovery of the 1970s as a critical period in economic history has spurred an outpouring of research around the world. Much of this, however, peers through the lens of domestic politics, losing sight of larger forces and imputing to politicians and public officials far more power to affect events than they ever possessed. This book represents an effort to correct this misperception by focusing attention on aspects of the crisis that transcended national borders. Writing history in this way can be a challenge: names that are famous in one place are often unknown elsewhere; the details of economic policy and performance inevitably vary greatly from one country to another; the statistics can overwhelm even the committed reader; and the minutiae of international negotiations over exchange rates and banking regulations can be mind-numbingly boring. Yet without an international context, our understanding of important historical events is shallow or incomplete.

I would like to extend my thanks to archivists and librarians at the Bank for International Settlements, the Bank of England, the Bundesarchiv Koblenz, Library and Archives Canada, and the Library of Congress for their assistance with my research, and to the many people who gave of their time to discuss aspects of this story with me or to comment on portions of the text over a period of many years. At the risk of omitting some, I would particularly like to thank Ralf Ahrens, Richard Baldwin, Alex Brummer, Bill Cassidy, Martin Chick, Peter Cooke, Charles Freeland, Charles Goodhart, John Heimann, Louis Hyman, Doug Irwin, Torsten Kathke, Henry Kaufman, David Lascelles, Danile Nouy, Julia K. Ott, Arturo Porzecanski, Brian Quinn, Richard Sylla, Stig Tenold, Laurent Warlouzet, and William R. White. The American Historical Association, the Business History Conference, the Centre for Contemporary History Potsdam, the Council on Foreign Relations, the German Historical Institute, and the Keizei Koho Center all offered me opportunities to present my work in progress and receive helpful comments. I am also grateful to my agent, Ted Weinstein, for his steadfast guidance. Responsibility for errors of fact or interpretation is mine alone.

Credit: KAREN SAYRE

Marc Levinson is the former finance and economics editor at The Economist and the author of five previous books, including The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. Levinson lives in Washington, DC.

O nly a real optimist would have thought that Arlington, Texas, had particular promise. Straddling the Texas & Pacific Railroad line between Dallas and Fort Worth, on the plains above the winding Trinity River, Arlington was still a dusty farm town after World War II. Its best-known landmark was a gazebo, erected in 1892, sheltering a mineral water well at the intersection of Main and Center. Its best-known business, Top O Hill Terrace, was famed far and wide for its high-class entertainment and its illegal basement casino, replete with hidden rooms and passage-ways offering escape in the event of a police raid. Arlington was not a notably poor town, but it was certainly not notably rich. A third of all adults had left school by the end of eighth grade. The men worked construction, welded metal, and clerked at the retail stores, while the women mostly kept house. One home in four lacked a private bathroom.

Save for the little airstrips where pilots in training had practiced takeoffs and landings during the war, Arlington in 1946 wasnt all that different from Arlington in the 1920s. It had grown a bit, to around five thousand people, and Franklin Roosevelts Depression-fighting programs had paved a few streets. But not even a promoter with a Texas-size imagination would have bet that by the early 1970s this dusty burg would boast an automobile plant, a vast amusement park, a four-year state university, and a major-league baseball teammuch less that pastures and pecan orchards would give way to street upon street of ranch houses with brick facades and two-car garages to accommodate a 2,000 percent increase in population.

Such transformations were not unusual in the years after the Second World War. The French called this period les trente glorieuses, the thirty glorious years. The British preferred Golden Age; the Germans, Wirtschaftswunder, or economic miracle; the Italians, simply il miracolo, the miracle. The Japanese, more modestly, named it the era of high economic growth. In any language, economic performance was stellar.

It was, in fact, the most remarkable stretch of economic advance in recorded history. In the span of a single generation, hundreds of millions of people were lifted from penury to unimagined riches. At its start, two million mules still plowed furrows on US farms, Spain lived in near-total isolation, and one in 175 Japanese households had a telephone. By its end, the purchasing power of the average French wage had quadrupled and millions of passengers were jetting across the ocean each year, some of them in supersonic jets that made the trip in less than four hours. The change in average peoples lives was simply astounding.

TO UNDERSTAND THE MAGNITUDE OF WHAT WAS TO FOLLOW, IT is worth considering the starting point. As World War II drew to a close in 1945, prospects were grim. Over vast stretches of Europe and Asia, refugees wandered the roads by the millions, seeking a future amid the rubble of shattered cities. Between widespread miners strikes and wornout machinery, just producing enough coal to provide heat through the winter was a challenge everywhere, and in the chaos that prevailed in lands torn by war, producing anything else was almost impossible. Many nations lacked the foreign currency to import food and fuel to keep people alive, much less to buy equipment and raw material for reconstruction. Frances farms could produce only 60 percent as much in 1946 as they had before the war. In Germany, many of the remaining factories were carted off to the Soviet Union as reparations. Inflation ran rampant in Europe and Japan as mobs of people competed to buy the few goods that were to be had. Even in North America, where there was no physical destruction, turning bomber plants back into automobile plants would take years, not months. As shoppers mobbed stores seeking nylons, coffee, and real cotton underwear, prices soared, decimating the buying power of workers pay and bringing yet more labor unrest. By one estimate, 4.5 million US workers were on the picket lines in 1946. And while most of the shooting had stopped, tensions between the Soviet Union and its former allies raised the specter of another conflict. The postwar world was not a hopeful place.