Chapter 26
I. The Postwar Boom
A. WWII Hangover?
1. Armed forces greatly reduced from 12 million in 1945 to 1.5 million by 1948.
2. Defense spending dropped from $76 billion in 1945 to $20 billion in 1946, leading to a loss of one million jobs in the defense industry.
3. Returning soldiers struggled to fit into a transformed economy.
B. G.I. Bill of Rights
1. Enacted in 1944 to soften the blow of an expected postwar recession by easing soldiers back into the work force.
2. Provided veterans with healthcare benefits, occupational counseling up to 52 weeks of unemployment payments as well as priority for certain jobs.
3. Government also provided low-interest loans for veterans to purchase homes and start businesses.
4. Moreover, $14.5 billion was spent between 1945- 1956 to pay for the education of 5.7 million veterans, allowing them eventual access to higher-paying professional jobs
5. This massive government subsidy not only helped veterans return to work but also increased demand for goods and services thus boosting the economy.
C. Other factors
1. Soldiers and people working in the war industries had saved $135 billion during WWII. With more leisure time and the renewed availability of consumer goods after the war, spending spiked.
2. 1945 tax cut for businesses led companies to increase capital spending.
3. Bretton Woods Agreement (1944)- creating of the International Monetary Fund (IMF) to stabilize global currencies and the World Bank to help Europe and Asia rebuild. Bretton Woods also led to the General Agreement on Tariffs and Trade (GATT, 1947), which greatly reduced tariffs other international trade barriers.
4. As the only major economy untouched by the war, the US could buy raw materials cheaply (low demand) and sell industrial products (and agricultural products) to rebuilding nations (Europeans often used Marshall Plan funds to buy US goods).
5. 35% increase in industrial productivity due to automation and other scientific advances
6. Increase in military spending as the US enters the arms race with the Soviet Union (after Soviets detonate an atomic bomb in 1949) and the Korean War (1950-1953). Defense budget increases nearly 4X during the decade.
II. Early Cold War
A. Eastern Europe
1. Disagreements between the US and the Soviet Union began over the fate of Eastern Europe, which Stalin insisted should be a ‘buffer zone’ and a Soviet sphere of influence.
2. Truman viewed Soviet control of Eastern Europe as a betrayal of democratic aims and as a dangerous appeasement of a dictatorial, totalitarian regime.
3. Economically, Soviet control of Eastern Europe would close off valuable access to markets and sources of raw materials
4. Politically, Truman and the Democratic Party feared that a soft stance against Stalin would lead to a loss of support from Eastern-European-American voters.
5. Emboldened by US monopoly of nuclear weapons and public opinion, Truman decided to take a tough stance against Stalin immediately after WWII
6. In early 1946, Stalin closed Eastern Europe to American business and influence
7. Arms race began as US pushed to increase nuclear arsenal and the Soviet Union spared no expense to develop an atomic bomb (August 1949). By 1953, both countries possessed hydrogen or thermonuclear bombs (10x more powerful than the bombs used in Hiroshima and Nagasaki)
B. Containment
1. Concerned that Stalin wanted to also seize control of Turkey and Greece (for dominance in the Mediterranean and the Middle East), Truman pushed for military assistance for these countries ($400 million)- this was the beginning of the Truman Doctrine (Containment).
2. Truman Doctrine vowed that the US would assist nations threatened by Communist takeover.
3. National Security Act of 1947- established the National Security Council (NSC) to advise the President and the CIA to gather information and perform covert operations. It also began the transformation of the War and Navy Departments into the Department of Defense and led to the creation of the Joint Chiefs of Staff.
4. Marshall Plan- Massive financial assistance ($17 billion) to keep Western Europe (especially France and Italy) from falling to Communism
5. North Atlantic Treaty Organization (NATO)- US joined the Western European military alliance, which vows mutual defense (thus extending our nuclear umbrella to Western Europe)
III. The Cold War gets Hot
A. Berlin Crisis
1. 1948- Stalin blocks overland access to West Berlin in response to allies unifying their zones (American, French, and British).
2. Berlin Airlift- led by the US, allies began a massive airlift to supply West Berlin residents (supply planes landing every three minutes for almost one year)
3. US sends B-29s to bases in England and Truman hints that he will use the bomb if necessary
4. Stalin relented in May 1949
5. Allies move to create and rearm a West German state (Federal Republic of Germany), Soviets respond by creating the German Democratic Republic (East Germany)
6. US joins NATO in July 1949
B. Korean War
1. Having failed to block the Communist Party’s success in China, Truman was under pressure to take a tough stance in Asia
2. After WWII, Korea had been split into north and south along the 38th parallel
3. In June 1950, North Korea invaded South Korea, controlling most of the territory by September
4. Truman deployed US military (without declaring war) under General MacArthur to counter the offensive. Within two weeks, South Korean and US forces pushed the North Koreans back almost to the Chinese border
5. Later the same year, Chinese Forces (300,000) joined the North Koreans pushing South Korean and US forces back to the 38th parallel
6. Trench warfare ensued around the 38th parallel for the next two years
7. After a long and costly stalemate, an armistice was reached in July 1953 which kept Korea split at the 38th Parallel
8. The Conflict cost the lives of 54,000 Americans, 900,00 Chinese and 800,000 North and South Korean soldiers. It also caused 2 million civilian deaths due to carpet-bombing and famine
9. The Korean War also set the precedent for “undeclared war” by the US, increased the animosity with China, Prompted US involvement in Vietnam, set the stage for a McCarthyism (the 2nd Red Scare) and intensified the economic boom
IV. The Cold War at Home
A. Insuring Loyalty
1. Exposure of a spy ring that had provided atomic secrets to the Soviets in 1945 as well as State Department leaks to a pro-Communist magazine raised fear and prompted criticism that Truman was soft on communism
2. In reaction, Truman established the Federal Employee Loyalty Program (1947)- barring anyone associated with the Communist Party or of questionable “sympathetic association” from Federal employment
3. 4.7 million job holders and employees underwent “loyalty checks” between 1947-1952
4. Beyond association with the Communist Party, other signs of disloyalty included: liking foreign films, favoring unions or civil rights and being gay
B. Anti-Communist Crusade
1. Truman’s measures set off a chain of events to uncover subversives
2. J. Edgar Hoover, still head of the FBI, led the crusade to uncover reds on college campuses
3. State and local governments as well as major corporations began their own loyalty programs
4. In 1947, the House Un-American Activities Committee (HUAC) was set up and began hearings. In 1950, McCarthy began similar hearings in the Senate
5. HUAC not only investigated “subversives” in government but also in major industries, particularly Hollywood. Studios began to blacklist anyone (Orson Welles, Charlie Chaplin and many others) associated with subversive activities and canceling any productions that could be deemed “subversive”
C. Anti-Communism turns on Truman
1. Alger Hiss-US State Department Official accused of being linked to the communist Party, he was eventually convicted, setting off allegations that the Truman administration and the Democratic Party were teeming with Communists
2. Julius and Ethel Rosenberg (1950)- accused, convicted and sentenced to death for alleged role in passing atomic secrets to the soviet union
3. Joe McCarthy- Republican senator, elected in 1946 by falsely claming to be a wounded WWII veteran. Joe McCarthy concocted a list of “commiecrats” in the Truman Administration, Senate hearings were held and proved McCarthy’s accusations to be a hoax. Still McCarthy continued his persecution throughout the Korean War and gained appeal among some conservatives, blue-collar workers and Democratic Catholics.
