WWII, Inflation, Housing
Paper Session
Friday, Jan. 5, 2024 10:15 AM - 12:15 PM (CST)
- Chair: Michael Haupert, University of Wisconsin-La Crosse
Inflation, World War II Bond Ownership, and the Rise of Republicans
Abstract
We study the role of war bond ownership in the presidential elections of the 1950s. Household saving increased dramatically during World War II, to nearly 20 percent of GDP, and the federal government conducted aggressive campaigns to convince Americans to invest their savings in wartime savings bonds. Although they were nonnegotiable and protected from interest rate fluctuations, the real value of the returns paid by the savings bonds sold during the war was eroded significantly by two major inflationary episodes soon after the war, in 1946-48 and 1950-51, contributing to a political backlash against the incumbent Democrats. In a difference-in-differences framework, we find that counties with higher war bond ownership shifted their preferences towards the Republican party in the postwar elections, relative to the elections of the late 1930s and early 1940s. To address concerns related to the endogeneity of war bond ownership, we instrument for WWII bond subscriptions using county data from the World War I liberty loans, and find similar results. Data on inflation expectations from the Survey of Consumer Finances, Gallup poll data, and campaign materials and party platforms confirm the importance of inflation in the postwar elections. Our results indicate that the promotion of savings bonds made Americans more sensitive to the high inflation that prevailed after the war, contributing to the breakdown of the New Deal Democratic coalition and Republicans’ victories in the 1950s.The U.S. Rubber Famine during World War II
Abstract
In recent publications (Field, 2022, 2023) I have argued that manufacturing productivity fell sharply in the United States between 1941 and 1945. The main causes were the sudden, radical, and ultimately temporary changes in the product mix associated with economic mobilization for war, the effects of which would have been serious even had there been no additional disruption of resource supplies. For the most part, U.S. adversaries were unable directly to attack the U.S. industrial infrastructure. But they were able to disorder the economy by means that went beyond simply forcing a change in the product mix. The most important enemy action was the Japanese success in cutting off almost all supplies of natural rubber, the one strategic material for which the United States had no domestic sourcing. It was anticipated that conflict with Japan would have this result, and understood that there were three means, beyond suppression of consumer demand and encouragement of the use of reclaim, whereby the U.S. might protect itself: 1) accumulate a large strategic stockpile of natural rubber; 2) subsidize domestic production of plant-based sources of latex; or 3) construct a synthetic rubber capability. At the time of Pearl Harbor each of these remedies had been pursued either in a very limited fashion or not at all. The decisions that led, collectively, to this outcome represented a strategic failure of great consequence. The rubber famine aggravated downward pressures on U.S. manufacturing productivity and represented a persisting threat to the country's military capabilities during the conflict.Exchange controls and the segmentation of international currency markets
Abstract
This article relies on a new hand-collected dataset of end-of-month exchange rates quoted in 17 national financial centers (i.e., countries) over the 1900-1999 period. By measuring deviations from the Law of One Price in international currency markets, I put forward two contributions.First, I provide a new long-run measure of financial integration. I reveal that currency markets were well integrated except during the Bretton Woods period when foreign exchange controls were widespread. I find that controls were also used, to a much moderate extent, during the interwar.
My second contribution is to measure currency market integration at the currency level. I show that, during the Bretton Woods period, virtually all countries in my sample maintained controls against the US and Canadian Dollars. These controls split the world into two independent currency zones: a Dollar zone (including the US and Canada) and a non-Dollar zone (including Western Europe, Japan and Australia). Within each zone, the market for non-Dollar zone currencies was integrated. The two zones progressively merged starting in the early 1960s as exchange controls were abandoned.
Discussant(s)
Jonathan Rose
,
Federal Reserve Bank of Chicago
Sarah Quincy
,
Vanderbilt University
Rowena Gray
,
University of California-Merced
Matthew Jaremski
,
Utah State University
JEL Classifications
- N4 - Government, War, Law, International Relations, and Regulation
- N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations