World War I (1914 and 1918) first impacted the economy by creating a shortage in the labor force. This led African Americans north toward industrial jobs. The demand for labor provided more jobs for women and was a major stepping stone for women in the labor force.

Industries were encouraged to be efficient to increase productivity. New techniques of mass-production were used to meet this goal. The duties of the federal government increased during wartime. The government encouraged the frugal consumer use of scare resources, and in some cases regulated this use. This was often referred to as "contributing to the war effort". The government also established new revenue sources. Taxes were increased and war bonds were sold.

CS Question #1: How did World War I change the labor force?

The end of World War I brought on the beginning of the roaring '20s--a great economic peak. The United States had proved itself as a major world power and successful industrial nation. The end of the war created access to foreign markets. It also created new territories and new resources for the United States.

Assembly line mass production, developed during the war, became widely used. It was especially used in the growing automotive industry. Mass production reduced the price of automobiles, leading to an increase in sales. The new form of transportation radically changed how goods and services were distributed. It increased consumer access to different markets. Additionally, the car created installment credit plans for consumers. Credit, increased consumerism, increased production and higher wages all fueled rapid economic growth.

The side effects of the economic boom were an unequal distribution of wealth and overuse of credit. This coupled with the stock market crash of 1929 led the nation into the Great Depression. Various government programs, notably the New Deal, helped alleviate the burden of the Great Depression. However, the United States economy did not completely recover until World War II.

CS Question #2: How did World War I influence the roaring 20's economic peak?

World War II (1939-1945) demand brought the United States economy out of the Great Depression. Although the United States did not enter the war until 1941, they began selling arms to Britain and France at the very beginning of the war. Industries began producing equipment for the war such as tanks, planes, ammunition and weapons. Japan took control of the Indonesia and Malaysia, the world's main rubber suppliers. In response, synthetic rubber production was introduced into the U.S. economy. Again the labor shortage brought women and minorities into the workforce. Citizens rationed goods and services, making the most efficient used of all resources. All of this led to increased production and economic growth.

Technology developed during the war was turned into post-war industries. Notably: penicillin, more efficient fuel, radar, infrared, semiconductors and freeze-dried foods. The atomic bomb used in the war paved the way for nuclear power and new sources of energy. These new industries brought on an economic peak.

Following World War II, the United States and the Soviet Union became the major world powers and entered into the Cold War. The main conflict was often simplified as a war between capitalism of the U.S. and the communism of the Soviet Union. It was marked by international policies including economic trade barriers and the stockpiling of nuclear weapons. It did not end until the breakup of the Soviet Union in 1991. The prolonged high military spending helped fuel the U.S. economy.

CS Question #3: Why did the new industries created as a result of World War II lead to an economic peak?

As a result of Japanese occupation in World War II, Korea was divided into communist North Korea and republic South Korea. The U.S. entered the Korean War (1950-1953) on behalf of South Korea. The United States also went to war in Vietnam (1955-75) trying to end the spread of communism. Communist North Vietnam's aim was to merge with South Vietnam under the North's leadership. During the Persian Gulf War (1990-1991) the United States, as a part of the United Nations, restored Kuwait's independence. Iraq had taken over Kuwait for its oil reserves. As in World War I and World War II, these wars led the United States economy to high points or peaks.

Economic growth is directly related to an increase in production. It can also be caused by increased productivity--the efficient use a resource. During wartime, both things occur. A nation in a war must produce supplies for the war. Likewise, consumers must limit their waste of scare resources to aid the war effort. War also poses new challenges that lead to new technology. New technology leads to new industry.
There is often a post-war economic boom. Trade that was halted or limited is often re-opened. The war may have also opened up new trade possibilities. The return of family members from the war, lead to baby booms. Prosperity leads to further consumption. As the GDP per capita increases, the service industry flourishes.

The 1990s brought on the first big economic boom that was not created from war. The rapid increase and accessibility of technology led to economic growth. Technology is grows rapidly and changes rapidly. These constant changes avoid economic stagnation within the industry. Technology provides job opportunities at a higher skill level. In turn, this causes income levels to increase and the unemployment rate to decrease. The Internet opened up a whole new business market, creating investment opportunities and expansion. Technology has also led us to a world infrastructure and a world market for the exchange of goods and services. The increase in trade has had a tremendous effect on the economy.

CS Question #4: Why did technology achieve the kind of economic peak that previously only a war could achieve?

Further Thought:

1. If a nation's economy is in trouble, should it wage a war? Why or why not?
2. What do you think might cause the next economic trough?
3. What do you think might cause the next economic peak?