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The year 1950 can be seen as the zenith of the USA's dominance of the global economy: in that year its exports accounted for 32% of industrial countries' total [1], its GDP per capita was twice that of Germany or France [2], and its economy was still, as J. K. Gailbraith has suggested, "the pivot around which the world economy turned." [3] In accounting for this position of dominance, I will suggest that the US's upward trajectory towards this (temporary) position was the result of long-term trends within the US domestic and world economies, and that its emergence as the dominant economy in 1950 was strongly influenced by the effects of the second world war. In examining these issues, I will deal first with some important general developments in the US domestic economy, before turning to how these developments meshed with the changing world economy to propel the US to the summit of 1950.
At the beginning of the twentieth century, the US enjoyed a number of benefits that were to form the backdrop for its rise to prominence: vast quantities of land under agriculture; an extensive, growing, and well-integrated transport network; and abundant natural resources, such as oil, copper, coal, and iron ore. In a century which would see the wide spread of industrialisation and urbanisation, and the growth of mass-consumption, the ability of the domestic economy to capitalise on these benefits was to help provide the US with the launch-pad for global economic hegemony.
The material advantages that the US possessed are a necessary condition of its domination, but not sufficient in themselves. I suggest that it is in the production processes and their attendant organisational systems - particularly in the manufacturing and industrial spheres - that we can find the key elements that facilitated the US's rise to pre-eminence: in 1950, manufacturing output accounted for 29% of US GNP and 24% of the labour force [4]. Specifically, I suggest that the principles of mass-production and `scientific' management mediated the development of the US economy in such a way that it was supremely well-placed to exploit the opportunities provided by developments in the international economy and in global geo-politics.
The `American system of manufactures' identified at the Great Exhibition of 1851 provides, for me, the dynamic upon which US economic hegemony came to rely. The "new methods of manufacture...established the fundamental patterns and processes of modern industrial production," [5] and it was these patterns and processes that were to be adapted throughout the first half of the twentieth century and which were to provide the means for US expansion domestically and internationally as manufactures usurped primary products as the focus of US export activity.
The fundamentals of mass-production were established in the nineteenth century [6]: large-scale, capital intensive production of manufactures which were characterised by their standardisation (that is, their construction to precise and consistent specifications) and interchangability (which made repairs and modifications simpler). Standardisation and interchangability, made possible through the use of powered tools and by the reduction of the manufacturing process to a series of mechanical actions which could be carried out by relatively unskilled workers, resulted in the development of high-speed, high-productivity manufacture. Economies of scale made possible by the new techniques helped to lower unit costs.
Mass-production, thus established, developed over time a symbiotic relationship with the burgeoning domestic markets of the US, across a range of products from farm machinery and tools to packaged foodstuffs: cheaper production fuelled increased consumption, increased consumption encouraged further investment and mechanisation, and unit costs continued to fall. In an international context, the US in the early twentieth century was a technical leader in a number of fields; sewing machines (Singer), revolvers (Colt), harvesting machinery (International Harvester), and telephones (Bell), for example.
The benefits of these systems were harnessed to new methods of management and organisation, usually labelled `scientific management'. These developments, enshrined in the principles of `Taylorism', sought to analyse the productive process in minute detail and then rearrange each section of that process so that it was carried out to the highest possible level of efficiency, with a minimum of wasted effort [7]. The requirements of mass-production drove the search for improved techniques of management and organisation.
These systems of production and management were amenable to change, so that as new technologies emerged and new products were designed and demanded, mass-production could be adapted to absorb the new technologies and cater for the new needs. Thus, as the twentieth century progressed the emergent technologies of automobiles and electrical goods became important components in the expansion of the US's domestic consumption. Another significant development here is the inauguration of the moving assembly line, which is closely associated with the developing automobile industry, and particularly the Ford Motor Company. The introduction of the moving assembly line into the production of the Model T Ford, for example, cut chassis-construction time from 12 hours to 1.5 hours in 1914 [8]. Again, the development of new consumer markets - automobiles, radio, etc. - fuelled the expansion of mass-production and the concentration of production under the auspices of large firms able to operate effective oligopolies in a number of markets: packaged goods, and machinery and machine tools, for example [9]. The principle in business that `big is beautiful' meant that by 1933, 50% of all non-financial sector corporate wealth was controlled by only 200 firms [10].
The development of the US economy's industrial sector, strongly informed by the principles of mass-production and economies of scale, was to be influenced by the two `World Wars' of the twentieth century. It is to the impact of these conflicts on the US's position in the global economy that I will now turn.
The European War of 1914 - 1918 had contributed to the displacement of Britain as the world's leading industrial nation through the depredation of its domestic and overseas assets, but the US had already overtaken Britain in terms of share of world manufacturing production by 1913 [11]. The Second World War of 1939 - 1945 was to cement the US's position as the leading industrial economy in the world, a position that it had already assumed before hostilities began. This position had been achieved between 1918 and 1939 through "remarkable advances in the efficiency of already familiar techniques" [12] - that is, mass-production techniques.
Another contributor to the establishment of US domination was the fact that after World War One, older industrialised countries such as Britain suffered from the relative decline of the older industries on which they relied and which were vulnerable to newer products and more competitive producers. The US was able to press home its advantage in both of these respects [13]. Additionally, due to the loss of its investments abroad, Britain lost its place as the world's banker, to be increasingly replaced in the that capacity by the US, which provided investment capital world-wide on a large scale: in fact, Britain itself had a debt to the US of some $3.7 billion by 1918. [14]
By 1939, the US was the world's largest industrial producer [15] and yet it had industrial capacity to spare. This spare capacity was taken up as the US converted civilian production to military output, particularly after 1941. The value of the munitions that the US produced in World War Two grew almost ten-fold in four years: from $4.5 billion in 1941 to $42 billion in 1944. [16] Over the period of the conflict the US produced two-thirds of all Allied military equipment. [17] That the US was able to perform this astonishing function is, I suggest, due largely to the predisposition of US industry for the systems of mass-production and the large-scale production runs that these systems allowed. The utilisation of these systems was of great significance in allowing US industry to adapt production facilities to military production and in allowing the development of new techniques, such as at Ford's Willow Run production facility for B-24 Liberator bombers and in the pre-fabrication of `Liberty' ships [18]. The adaptation of mass-production techniques meant that the US, as well as emerging as a military and economic superpower in its own right at the end of the war, was additionally owed large quantities of dollars by its debtor allies, both in the form of payment for arms and for war loans. Thus the US, in performing its vital role as the `Arsenal of democracy', also entrenched a position of financial dominance that was to be of profound importance in the immediate post-war period.
After 1945, when the end of hostilities enabled the resumption of technological developments in the civil sphere, the US economy was again left in a profoundly advantageous position: its `rival' industrial economies were effectively shattered by the war and needed to rebuild; the US had a technical lead in the important spheres of automobiles, aircraft, and armaments; its labour productivity was "significantly" higher than before 1939 [19]; and the increased refinement of mass-production techniques meant that the US was ideally placed to exploit the incipient post-war boom and, initially, to lead the development of the `new wave' of consumer goods - refrigerators, cookers, televisions and washing machines - as they ceased to be luxury goods and became instead commonplace household items. [20] The US stood at the head of the industrial nations poised to exploit the wave of economic expansion that ran from 1945 to the late 1960s, [21] a position underlined by the US's role in creating and underwriting the world trade machinery designed at Bretton Woods. [22]
How, then, to account for the dominant position of the US in the world economy in 1950? I have sketched above the factors that were important in establishing the US's dominance: the increasing size and efficiency of the US industrial machine; the decline of old industries and products; the effects of the 1914 - 1918 war on the older industrial economies; the immensely powerful expansion of US industrial capacity during 1941 - 1945; and the destruction of competitor economies over a similar period. To these I would add that the development of the US industrial economy coincided with global technological and socio-economic changes which were inflating the demand for consumer and capital goods, demands which in the years before 1950 the US was, coincidentally, extremely well-placed to exploit.
The `golden age' of US capitalism which reached its height in 1950 can be seen as an example of how a national economy can, over a particular period, mesh with developments in the world economy in such a way that it come to dominate that economy while those conditions prevail. It does not follow from this that the industrial mode of that period - what we might call `Fordism' - would continue to be the dominant one. Subsequent events suggest that the global economic dominance of the US manifested in 1950 was the result of a series of fortuitous developments in the US domestic economy which provided the US with a series of opportunities to enjoy economic hegemony on a global scale while conditions were propitious for Fordist production. The US's relative economic decline since 1950 can be seen perhaps as the result of changes in the global economy and of the disappearance of the favourable economic circumstances that had allowed the US economy to become pre-eminent.
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Cain, P. J.
and
Hopkins, A. G. - British Imperialism: Crisis and Deconstruction 1914 - 1990; Longman, 1993
Chandler, Alfred - Scale and Scope; Harvard UP, 1990
Gailbraith, J. K. - The World Economy Since the Wars; Sinclair Stevenson, 1994
Heskett, John - Industrial Design; Thames and Hudson, 1980
Hobsbawm, Eric - Age of Extremes; Penguin, 1994
Kemp, Tom - The Climax of Capitalism; Longman, 1990
Kenwood, A.G
and
Lougheed, A. L. - The Growth of the International Economy 1820 - 1990; Routledge, 1992
Mansfield, Edwin - Technology and Productivity in the US, in
The American Economy in Transition (ed., Martin Feldstein); Univ. of Chicago Press, 1980
Overy, Richard - Why the Allies Won; Jonathan Cape, 1995
Walton, Gary
and
Rockoff, Hugh - History of the American Economy; Harcourt Brace, 1994
[1] Kenwood and Lougheed, p. 289
[2] Hobsbawm, p. 258
[3] Gailbraith, p. 163
[4] Walton and Rockoff, p. 659
[5] Heskett, p. 50
[6] for this analysis, see Heskett, Ch. 3 and 4, passim
[7] Walton and Rockoff, p. 383
[8] Chandler, p. 205
[9] Walton and Rockoff, p. 671
[10] ibid., p. 670
[11] Kenwood and Lougheed, p. 171
[12] Kenwood and Lougheed, p. 170
[13] ibid., p. 173
[14] Cain and Hopkins, p. 59
[15] Overy, p. 192
[16] Walton and Rockoff, p. 565
[17] Overy, p. 192
[18] ibid., Ch. 6, passim
[19] Mansfield, p. 564
[20] see Hobsbawm, p. 264
[21] see Kemp, passim
[22] see Kenwood and Lougheed, Ch. 6, passim