Die Heuning Pot Literature Guide
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Summary & Analysis

During the Eisenhower era, Americans achieved a level of prosperity they had never known before. While other parts of the world struggled to rebuild from the devastation of World War II, citizens of the United States saw their standard of living surpass what previous generations had only dreamed about.

Eisenhower himself deserves a good deal of credit for this economic growth. He found the right combination of low taxes, balanced budgets, and public spending that allowed the economy to hum along at a steady clip. He also benefitted from steady growth in spending on new homes and consumer goods as citizens turned away from older notions of thrift and began to buy on credit.

The Decade of Prosperity

The economy overall grew by 37% during the 1950s. At the end of the decade, the median American family had 30% more purchasing power than at the beginning. Inflation, which had wreaked havoc on the economy immediately after World War II, was minimal, in part because of Eisenhower's persistent efforts to balance the federal budget. Except for a mild recession in 1954 and a more serious one in 1958, unemployment remained low, bottoming at less than 4.5% in the middle of the decade.

Many factors came together to produce the Fifties boom. The G.I. Bill, which gave military veterans affordable access to a college education, added a productive pool of highly-educated employees to the work force at a time American businesses were willing to pay handsomely for engineering and management skills. Cheap oil from domestic wells helped keep the engines of industry running. Advances in science and technology spurred productivity. At the same time, potential competitors in Europe and Asia were still recovering from being bombed into smithereens during World War II.

Eisenhower's Middle Way

Eisenhower steered a balanced course economically. Some Republicans called for rolling back the New Deal, but the president realized that many of Franklin D. Roosevelt's libeal social programs were both popular and effective. Instead of getting rid of Social Security, for example, Ike actually expanded it to cover another ten million people who had been left out of the original program. Instead of turning away from big public works projects, he instead invested federal money in the Interstate Highway System, one of the largest public spending projects in the country's history.

The main economic goal that Eisenhower pursued through both his terms in office was to achieve a balanced federal budget. The government ran a small deficit in 1954 and 1955, then registered a surplus for each of the next two years. As the nation went into a recession in 1958 and 1959, Eisenhower allowed the federal deficit to grow in order to stimulate the economy. By 1960, he managed to return to a surplus.

To achieve a balanced federal budget was a balancing act in itself. Democrats were clamoring for increases in defense spending in order to counter the Soviet threat. Congressional representatives from both parties pushed for tax cuts. Eisenhower used his credentials as an experienced military leader to reassure the nation that the defense budget did not need to be increased as much as some wanted. Though he favored low taxes himself, he dug in his heels and fought tax cuts whenever they threatened to plunge the government into debt.

The Rise of Consumerism

One of the factors that fueled the prosperity of the Fifties was the increase in consumer spending. Americans enjoyed a standard of living that was inconceivable to the rest of the world. For example, Vice President Nixon told Nikita Khrushchev in the mid-1950s that there were 60 million cars in the United States, but the Soviet leader simply refused to believe him. When Khrushchev came to visit America, Eisenhower arranged for him to fly in a helicopter over busy roads and parking lots to witness the remarkable signs of abundance for himself.

The time was ripe for Americans to change their spending patterns. The adults of the Fifties had grown up in conditions of economic deprivation, first due to the general poverty of the Great Depression and then due to the rationing of consumer goods World War II. During the Thirties, with unemployment sky-high and the economy in shambles, most people could simply not afford much beyond the basics. During the war, much of the nation's productive capacity shifted to armaments. Everything from sugar to gasoline to tires to nylon stockings were rationed. When consumer goods became available again, people wanted to spend. By the 1950s, though they made up just 6% of the world's population, Americans consumed a third of all the world's goods and services.

The difference between a production society, which focused on meeting basic needs, and a consumption society, which emphasized customers' wants, was like the difference between a 1908 Ford Model T and a 1959 Ford Galaxie. The Model T, available only in black, was a utilitarian piece of machinery intended for basic transportation. The Galaxie, decked out in shiny chrome, was a way to show off and to enjoy a sense of luxury, not just to move from place to place. Within a year or two, it would be obsolete as fashion changed. Blessed with abundant resources, America could afford to turn part of its productive capacity to creating glitz and fashionable waste. An older generation was careful to save and reuse; Americans in the Fifties began to use and throw away. They became "consumers."

Consumerism was driven by advertising. Spending on product promotion boomed, from $6 billion annually in 1950 to more than $13 billion by 1963. "The reason we have such a high standard of living," Robert Sarnoff, president of the National Broadcasting Company, said in 1956, "is because advertising has created an American frame of mind that makes people want more things, better things, and newer things."29

There's no question that advertising drove the purchase of new products, which in turn kept the nation's economic wheels turning. And, as Sarnoff pointed out, Americans did achieve a high standard of living. But some critics questioned whether a reliance on consumers to drive a huge portion of the economy was wise in the long term. Half a century later, our current economic crisis, fueled in part by a collapse of consumer spending, has raised the question again.

A Nation in Debt

Though Eisenhower tried mightily to balance the federal budget, consumers did not follow suit when it came to their own family budgets. Americans had traditionally been thrifty by nature, but in the Fifties they were willing to "buy now, pay later," as automobile advertisements urged. The Federal Housing Administration and the Veteran's Administration both offered low-interest loans to allow families to buy new homes.

The very first credit card——the Diner's Club card—— appeared in 1950. That particular card was limited to paying for meals at a limited number of restaurants, but it was quickly followed by other cards, touching off a dramatic growth in borrowing. Private debt more than doubled from $104.8 billion to $263.3 billion during the Fifties. People borrowed to buy houses, cars, appliances, and even swimming pools.

Buying on credit stimulated the economy, helping many to enjoy the good things in life even as it kept industry busy and unemployment low. Too much debt, as we've seen lately, can be a dangerous thing, but during the Fifties, borrowing mostly helped fuel the robust economy.

Left Out of Prosperity

The prosperity of the Eisenhower years did not touch all Americans, however. Even as the nation prospered and the middle class did well, something like 25% of citizens lived in poverty (then defined as an annual income under $3,000 for a family of four). Much of this poverty was said to be "invisible;" it affected blacks in urban neighborhoods and whites in depressed rural areas like the Appalachian Mountains. Middle-class folks enjoying their new swimming pools in the suburbs could go through their lives without ever seeing the misery in other sectors of American society. Poverty amid plenty was another paradox of the Fifties, but most were able to ignore it.

In the final assessment, President Eisenhower successfully guided the United States to become an economic superpower, giving the majority of its citizens a better life and a sense of security. Historian Robert Griffith summed up Eisenhower's approach to the national economy as a desire to "fashion a new corporate economy that would avoid both the destructive disorder of unregulated capitalism and the threat to business autonomy posed by socialism."30 In general, this middle way proved highly successful, even though it did fail to reach everyone.

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