Post–World War II economic expansion

The post–World War II economic expansion, also known as the postwar economic boom or the Golden Age of Capitalism was a broad period of worldwide economic expansion beginning with the aftermath of World War II and ending with the 1973–1975 recession. The United States, the Soviet Union, Australia and Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment.
Contrary to early predictions, this high growth also included many countries that had been devastated by the war, such as Japan, West Germany and Austria, South Korea, Belgium, France, Italy and Greece. Even countries that were relatively unaffected by the war such as Sweden experienced considerable economic growth.
The boom established the conditions for a larger series of global changes at the height of the Cold War, including postmodernism, decolonisation, a marked increase in consumerism, the welfare state, the space race, the Non-Aligned Movement, import substitution, counterculture of the 1960s, the beginning of second-wave feminism, and a nuclear arms race.

Timeline

In 2000, economist Roger Middleton wrote that economic historians generally agree that 1950 represented the beginning year of the golden age, while Robert Skidelsky states 1951 is the most recognized start date.
Both Skidelsky and Middleton have 1973 as the generally recognized end date, though sometimes the golden age is considered to have ended as early as 1970.
This long-term business cycle ended with a number of events in the early 1970s:

the collapse of the Bretton Woods monetary system in 1971
the closing of the gold window by President Richard Nixon as a response to the Bretton Woods collapse
the continued growth of international trade in manufactured goods, such as automobiles and electronics
the 1973 oil crisis,
the 1973–74 stock market crash, and
the ensuing 1973–75 recession

While this is the global period, specific countries experienced business expansions for different periods; in Taiwan, the Taiwan Miracle lasted into the late 1990s, for instance, while in France the period is referred to as Trente Glorieuses and is considered to extend for the 30-year period from 1945 to 1975.

Global economic climate

members enjoyed real GDP growth averaging over 4% per year in the 1950s, and nearly 5% per year in the 1960s, compared with 3% in the 1970s and 2% in the 1980s.
Skidelsky devotes ten pages of his 2009 book Keynes: The Return of the Master to a comparison of the golden age to what he calls the Washington Consensus period, which he dates as spanning 1980–2009 :

Metric	Golden Age	Washington Consensus
Average global growth	4.8%	3.2%
Unemployment	4.8%	6.1%
Unemployment	1.2%	9.5%
Unemployment	3.1%	7.5%
Unemployment	1.6%	7.4%

Skidelsky suggests the high global growth during the golden age was especially impressive as during that period Japan was the only major Asian economy enjoying high growth. It was not until later that the world had the exceptional growth of China raising the global average. Skidelsky also reports that inequality was generally decreasing during the golden age, whereas since the Washington Consensus was formed it has been increasing.
Globally, the golden age was a time of unusual financial stability, with crises far less frequent and intense than before or after. Martin Wolf reports that between 1945 and 1971 the world saw only 38 financial crises, whereas from 1973 to 1997 there were 139.

Causes

Productivity

High productivity growth from before the war continued after the war and until the early 1970s. Manufacturing was aided by automation technologies such as feedback controllers, which appeared in the late 1930s were a fast-growing area of investment following the war. Wholesale and retail trade benefited from new highway systems, distribution warehouses, and material handling equipment such as forklifts and intermodal containers. Oil displaced coal in many applications, particularly in locomotives and ships. In agriculture, the post WWII period saw the widespread introduction of the following:

argue that the post war expansion was caused by adoption of Keynesian economic policies. Naomi Klein has argued the high growth enjoyed by Europe and America was the result of Keynesian economic policies and in the case of rapidly rising prosperity that this post war period saw in parts of South America, by the influence of developmentalist economics led by Raúl Prebisch.

Infrastructure spending

One of Eisenhower's enduring achievements was championing and signing the bill that authorized the Interstate Highway System in 1956. He justified the project through the Federal Aid Highway Act of 1956 as essential to American security during the Cold War. It was believed that large cities would be targets in a possible war, hence the highways were designed to facilitate their evacuation and ease military maneuvers.

Military spending

Another explanation for this period is the theory of the permanent war economy, which suggests that the large spending on the military helped stabilize the global economy; this has also been referred to as "Military Keynesianism". This also goes into hand with retired WWII vets with pensions to spend.

Financial repression

This period also saw financial repression—low nominal interest rates and low or negative real interest rates, via government policy—resulting respectively in debt servicing costs being low and in liquidation of existing debt. This allowed countries to deal with their existing government debt level and also to reduce the level of debt without needing to direct a high portion of government spending to debt service.

Wealth redistribution

Much property was destroyed in war. In the inter-war period, the Great Depression also caused investments to lose value.
During both World Wars, progressive taxation and capital levies were introduced, with the generally-stated aim of distributing the sacrifices required by the war more evenly. While tax rates dipped between the wars, they did not return to pre-war levels. Top tax rates increased dramatically, in some cases tenfold. This had a significant effect on both income and wealth distributions. Such policies were commonly referred to as the "conscription of income" and "conscription of wealth".
The Economist, a British publication, opposed capital levies, but supported "direct taxation heavy enough to amount to rationing of citizens' incomes"; similarly, the American economist Oliver Mitchell Wentworth Sprague, in the Economic Journal, argued that that "conscription of men should logically and equitably be accompanied by something in the nature of conscription of current income above that which is absolutely necessary".
Rationing of goods was also widely used, with the aim of distributing scarce resources efficiently. Rationing was widely done with ration stamps, a second currency that entitled the bearer to buy a certain amount of a certain sort of good. Price controls were also used.
In the post-war period, progressive taxation persisted. Inheritance taxes also had an effect. Rationing in the United Kingdom lasted until 1954. Allied war bonds matured during the post-war years, transferring cash from governments to private households.
In Japan, progressive tax rates were imposed during the Allied occupation, at rates that roughly matched those in the United States at that time. High marginal tax rates for the wealthiest 1% were in place throughout Japan's decades of post-war growth. South Korea, after the Korean War, saw a similar trajectory. Marginal tax rates were high on the rich, until falling quickly in the 1990s. The state also legislated significant land reform, cutting deeply into a landholding elite's power and clientelism.

Low oil prices

In the 1940s, the price of oil was about $17, rising to just over $20 during the Korean War. During the Vietnam War the price of oil slowly declined to under $20. During the Arab oil embargo of 1973—the first oil shock—the price of oil rapidly rose to double in price.

International cooperation

Among the causes can be mentioned the rapid normalization of political relations between former Axis powers and the western Allies.
After the war, the major powers were determined not to repeat the mistakes of the Great Depression, some of which were ascribed to post–World War I policy errors. The Marshall Plan for the rebuilding of Europe is most credited for reconciliation, though the immediate post-war situations was more complicated. In 1948 the Marshall Plan pumped over $12 billion to rebuild and modernize Western Europe. The European Coal and Steel Community formed the foundation of what was to become the European Union in later years.

Institutional arrangements

point to the international institutions established in the post-war period. Structurally, the victorious Allies established the United Nations and the Bretton Woods monetary system, international institutions designed to promote stability. This was achieved through a number of policies, including promoting free trade, instituting the Marshall Plan, and the use of Keynesian economics. Although this was before modern eastern countries growing their workforce I.e. before the outsourcing problem protectionists point to.

US Council of Economic Advisers

In the United States, the Employment Act of 1946 set the goals of achieving full employment, full production, and stable prices. It also created the Council of Economic Advisers to provide objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues. In its first 7 years the CEA made five technical advances in policy making:

The replacement of a "cyclical model" of the economy by a "growth model",
The setting of quantitative targets for the economy,
Use of the theories of fiscal drag and full-employment budget,
Recognition of the need for greater flexibility in taxation, and
Replacement of the notion of unemployment as a structural problem by a realization of low aggregate demand.