After the end of the Second World War businessmen and economists throughout the world feared that the American postwar inflationary boom would end in a serious slump. The slump took a long time to come, and when it did appear in 1949 it was both mild and short lived. In its mildness and brevity it foreshadowed the American business recessions since that time and, indeed, may foreshadow the end of the business cycle as it has been known in the past. This book presents the first full-scale study of the 1948–49 recession in the United States, making it the focal point of a detailed, analytical account of American business fluctuations from the end of the Second World War until the beginning of the Korean War. The main part of the book is prefaced by a review of fluctuations from 1945 to 1967 and of the business cycle theory, which places the postwar events in perspective. Of special importance are the studies of the ending, in early 1948, of the period of re-stocking and re-equipment; of the impact of the changed farm situation in this deflationary atmosphere, and use of modern consumption theory to explain the changes in household spending after the war and during the recession.
Dr. Blyth has drawn extensively upon the results of modern economic research, and has woven the econometric findings and the historical narrative together with a theoretical analysis. He conclusively rejects the theory that recent U.S. business cycles are the result of any largely self-perpetuating fluctuation in investment in stocks. Instead he draws attention to the persistent destabilizing roles of changes in defense expenditure and of changes in monetary policy-inventory investment performs the largely passive role of aggravating these changes.
The book, first published in 1969, will be of value not only to specialists in business cycle studies, but to economists and others concerned with the problems of stability and growth in the international economy, as well as to economic historians.
contents
preface 7
note on references, abbreviations and statistical sources and conventions 11
1 THE AMERICAN BUSINESS CYCLE 1945 TO 1967 19
Reconstruction cycle 1945–50 22
Korean cycle 1950–54 27
Peaceful cycle 1955–58 32
Disappointing cycle 1959–61 34
The expansion since 1961 38
The theory of U.S. fluctuations 41
Regular and irregular factors in private spending 48
Government expenditures and fiscal and monetary policy 54
2 LEGACIES OF DEPRESSION AND WAR 60
The depression of the 1930s 60
War 61
The end of the war 62
The sources of household demand 68
The sources of business demand 73
3 RECONSTRUCTION, 1945 TO 1947 78
Inflation 78
Personal income and consumer expenditures 82
Investment 90
The return to equilibrium 97
4 SOURCES OF GROWTH AND CHANGE, 1947 TO 1950 105
Household spending 105
A model of consumption expenditures 114
Business fixed investment 118
Housing 124
The farm situation 127
Trade and the balance of payments 133
5 INFLATION, DEFLATION AND THE IMPACT OF GOVERNMENT 142
Government expenditures and receipts 142
Monetary and credit policies 151
The total impact 158
Prices and wages 160
6 OUTPUT AND INVENTORY INVESTMENT, 1947 TO 1950 165
Durable goods 171
Nondurable goods 183
Employment 190
7 A MODEL OF THE 1948–49 RECESSION AND REVIVAL 193
Sectors of a simplified model 193
The equilibrium output model 198
The downturn 201
The upturn 205
epilogue
the situation in the middle of 1950 208
notes
A GNP in 1945 and 1946 at 1958 prices 211
B Recent theories of consumption 218
C Consumption expenditures and savings during the war 230
D Demand for automobiles and housing at the end of the war 235
E The stock of business plant and equipment 241
F Inventory investment in durable and nondurable goods, 1945 and 1946 245
G A quarterly consumption function, 1948-50 248
H The automobile market, 1945–50 253
I Determinants of quarterly business fixed investment 258
J Short run determinants of housing starts 268
K Foreign trade elasticities 272
L Inventories, sales and unfilled orders 274 bibliographical note 285
list of references 289
index 297
Biography
Dr. Blyth held the post of Director of the New Zealand Institute of Economic Research and as author of The Use of Economic Statistics and Deputy Director of the National Institute of Economic and Social Research in London. Previously he lectured at Cambridge. He has devoted, several years to the study of the American economy, and this book was completed while he was a Professorial Fellow of the Institute of Advanced Studies, Australian National University.
