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 American Dream
 Baby Boom
 “Camelot”
 Company man
 Stagflation
80s – 90s
 Corporate raiders
 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
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
 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
“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
 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
 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
 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
Reagan’s Solution – Supply Side Economics
•Tax cuts, rather than government spending, will create economic
•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
•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
 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
 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
 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
Unemployment in USA between 1992-2000
CPI in USA between 1992-2000
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
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
 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