15.2 The Industrialized Democracies

Read the following section and answer the questions that follows. The Industrial Democracies
Terms, People, and Places
recession
suburbanization
segregation
discrimination
Dr. Martin Luther King, Jr.
Konrad Adenauer
welfare state
European Community
gross domestic product (GDP)

In a speech at Harvard University in June 1947, U.S. Secretary of State George Marshall made the case for the Marshall Plan, a United States assistance program for Western Europe.
“Our policy is directed not against any country or doctrine but against hunger, poverty, desperation, and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of . . . condition in which free institutions can exist.”

The industrialized democracies of North America, Western Europe, and Japan grew in prosperity and went through social change during the Cold War. Throughout this period, the United
States was the world’s wealthiest and most powerful country. By the end of the Cold War, however, Western Europe and Japan rivaled the United States economically.

America Prospers and Changes

In the postwar decades, American businesses expanded into markets around the globe. The dollar was the world’s strongest currency. Foreigners flocked to invest in American industry and to buy U.S. government bonds. America’s wealth was a model for other democracies and a challenge to the stagnant economies of the communist world.

America Plays a Central Role 
During the Cold War, the United States was a global political leader. The headquarters of the League of Nations had been symbolically located in neutral Switzerland. The headquarters of the newly formed United Nations was built in New York City.
The United States also played a leading economic role. America had emerged untouched from the horrendous destruction of the Second World War. Other nations needed American goods and services, and foreign trade helped the United States achieve a long postwar boom. The long postwar peace among democratic nations helped to spread this boom worldwide. The World Bank, an international agency that finances world economic development, was headquartered in Washington, D.C. The International Monetary Fund (IMF), which oversees the finances of the world’s nations, was based there as well.

The Postwar American Boom 
America’s economic strength transformed life in the United States itself. During the 1950s and 1960s, boom times prevailed. Recessions, or periods when the economy shrinks, were brief and mild. Although segments of the population were left behind, many Americans prospered in the world’s wealthiest economy. As Americans grew more affluent, many moved from the cities to the suburbs. The movement to communities outside an urban core is known as suburbanization. Suburbanites typically lived in single-family houses with lawns and access to good schools. Suburban highways allowed residents to commute to work by car.
During the postwar decades, many Americans also moved to the Sunbelt or the states in the South and Southwest of the United States. Jobs in these states were becoming more plentiful than in
the industrialized North, and the warmer climate was an added bonus. The growing availability of air conditioning and water for irrigation in states such as Arizona helped make the movement to the Sunbelt possible.
The wide popularity of American culture abroad vividly illustrated the global influence of the United States. The world embraced twentieth-century art forms such as American movies, television, and rock-and-roll music. American originals such as Elvis Presley, musical comedies, Hollywood romances, and action movies had a worldwide following.
The federal government contributed to the economic boom. Under President Truman, Congress created programs that helped veterans, the elderly, and the poor. Truman’s successor, Dwight Eisenhower, approved government funding to build a vast interstate highway system. Government programs also made it easier for people to buy homes.

The Oil Shock of the 1970s - In 1973 and 1974, a reduction in the supply of oil led to shortages and higher prices for gasoline. Motorists had to wait in long lines to fill up with scarce gasoline.

An Oil Shock Brings Recession 
However, America’s growing dependence on the world economy brought problems. In the early 1970s, a
political crisis in the Middle East led to decreased oil exports. Oil prices soared worldwide. Waiting in long lines for scarce and expensive gasoline, Americans became aware of their dependence on imported oil and on global economic forces.
In America and in the other industrialized democracies, which were even more dependent on imported oil, higher prices for oil left businesses and consumers with less to spend on other products. The decades of postwar prosperity ended with a serious recession in 1974. During the 1970s and 1980s, the world’s economies suffered a series of recessions alternating with years of renewed prosperity.

Democracy Expands Opportunities
Although America prospered after World War II, the American promise of equality and opportunity had not yet been fulfilled for ethnic minorities and women. In the postwar decades, these groups demanded equality. In American politics, liberals and conservatives offered contrasting programs to increase opportunities for the American people.

Segregation and Discrimination 
The prosperity of the postwar years failed to benefit all Americans equally. Although slavery had been
abolished a century before, many states denied equality to African Americans and other minority groups. These groups faced legal segregation, or forced separation, in education and housing. Minorities also suffered discrimination—unequal treatment or barriers—in jobs and voting. After World War II, President Harry Truman desegregated the armed forces. Then, in 1954, the U.S. Supreme Court made a landmark ruling, Brown v. Board of Education of Topeka, declaring that segregated schools were unconstitutional.

Gandhi and the Civil Rights Movement 
The U.S. Civil Rights Movement was heavily influenced by the ideas of Mahatma Gandhi. The Indian leader’s nonviolent protests, which helped free India from British rule in the 1940s, set a standard for peaceful civil disobedience that many civil rights activists, including Martin Luther King, Jr., openly emulated. One such act sparked the Civil Rights Movement in 1955 when Rosa Parks refused to give up her seat to a white man on a public bus. Caesar Chavez, who fought for farm workers’ rights through the United Farm Workers’ union, also found inspiration in Gandhi’s sacrifices. Like Gandhi, Chavez enacted boycotts and hunger strikes to gain attention to his cause. One of his strikes in 1988 lasted for 36 days.

Americans Demand Civil Rights 
By 1956, a gifted preacher, Dr. Martin Luther King, Jr., had emerged as a leader of the civil
rights movement. This movement aimed to extend equal rights to all Americans, and particularly African Americans. King organized boycotts and led peaceful marches to end segregation in the United States. In
1963, King made a stirring speech. “I have a dream,” he proclaimed, “that one day this nation will rise up and live out the true meaning of its creed: ‘We hold these truths to be self-evident, that all men are created equal.’”
Americans of all races joined the civil rights movement. Their courage in the face of sometimes brutal attacks stirred the nation’s conscience. Asians, Latinos, Native Americans, and other groups joined African Americans in demanding equality. The U.S. Congress outlawed public segregation, protected voting rights, and required equal access to housing and jobs. Poverty, unemployment, and discrimination still plagued many African Americans. However, some were elected to political office or gained top jobs in business and the military.

Women Demand Equality 
Women too faced discrimination in employment and other areas. Inspired by the civil rights movement,
women fought gender-based discrimination during the 1960s and 1970s. The women’s rights movement won laws banning discrimination against women. More women also gained higher salaries and positions in politics and business.

The Government’s Role Grows 
During the 1960s, the government further expanded social programs to help the poor and disadvantaged. Under Presidents John F. Kennedy and Lyndon Johnson, both Democrats, Congress funded Medicare, providing health care for the elderly. Other programs offered housing for the poor.

Republicans Respond 
In the 1980s, President Reagan and the Republican Party called for cutbacks in taxes and government spending. They argued that cutting taxes was the best way to improve opportunities for Americans. Congress ended some social programs, reduced government regulation of the economy, and cut taxes. At the same time, however, military spending increased.
The combination of increased spending and tax cuts greatly increased the national budget deficit or the shortfall between what the government spends and what it receives in taxes and other income. To deal with the deficit, Republicans pushed for deeper cuts in social and economic programs, including education, welfare, and environmental protection.

Western Europe Rebuilds
Americans arriving in Europe as liberators or occupiers in 1945 were astonished at the damage that the war had inflicted. Germany in particular lay in ruins. Many Europeans had suffered grievously. However,

Western Europe recovered economically more rapidly than anyone had expected—and then moved on to even higher standards of living.

Germany Divided and Reunited 
At the end of World War II, the United States, Britain, and France—all democracies—occupied the west-
ern portion of Germany. The Soviet Union occupied eastern Germany. The goal had been to hold elections throughout Germany for a single German government, but disputes between the Soviet Union and the Western powers led to Germany’s division into two separate countries by 1949. West Germany became a member of NATO, while East Germany became a member of the Warsaw Pact. For 40 years, differences between the two Germanys widened.
“There are no homes, no shops, no transportation, no government buildings. Only a few walls. . . Berlin can now be regarded only as a geographical location heaped with mountainous mounds of
debris.” —New York Herald Tribune, May 3, 1945
While West Germany had a democratic government, East Germany was a communist state. While West Germany enjoyed an economic boom, East Germany’s command economy stagnated. Before the Berlin Wall was built, millions of East Germans fled to the freedom and prosperity of West Germany. After the wall was built, some East Germans still managed to escape, but others were shot as they tried to cross the border.
In 1989, as Soviet communism declined, Germany moved toward reunification. Without Soviet backing, East German communist leaders were unable to maintain control. They were forced to reopen their western borders. Quickly, East Germans demanded reunification with the West. In 1990, German voters approved reunification.

West Germany’s “Economic Miracle” 
Early in the Cold War, the United States rushed aid to its former enemy through the Marshall Plan
and other programs. It wanted to strengthen West Germany against communist Eastern Europe. From 1949 to 1963, Konrad Adenauer (AHD uh now ur) was West Germany’s chancellor or prime minister. He
guided the rebuilding of cities, factories, and trade. Because many of its old factories had been destroyed, Germany built a modern and highly productive industrial base. Despite high taxes to pay for the recovery, West Germans created a booming industrial economy.

Britain’s Narrowed Horizons 
Britain’s economy was slow to recover after the war. Despite U.S. assistance through the Marshall Plan, Britain could no longer afford a large military presence overseas. Therefore, Britain abandoned its colonial empire in the face of demands for independence. After several years of economic hardship, however, Britain’s economy recovered during the 1950s and 1960s. Although Britain did not
enjoy a boom like Germany’s, its living standard did improve.

Other European Nations Prosper 
Most European nations emerged from World War II greatly weakened. Like Britain, European colonial
powers such as Belgium and the Netherlands gave in to demands for independence from former colonies. France was forced to abandon its empire after bloody colonial wars in Vietnam and Algeria drained and demoralized the country.

Most Western European countries had suffered serious wartime damage. Like West Germany, they received U.S. assistance through the Marshall Plan. As in West Germany, this helped them to build more modern and productive facilities. During the 1950s and 1960s, most of Europe enjoyed an economic boom. Living standards improved greatly for most Dutch, Belgians, French, and Italians. Poorer European countries, such as Spain and Ireland, were able to attract outside investment that led to
economic growth.

Building the Welfare State 
In the postwar decades, Europeans worked to secure their economic prosperity. From the 1950s through the 1970s, European nations expanded social benefits to their citizens. During this time, many European nations also moved toward greater economic cooperation.
Many European political parties, and particularly those representing workers, wanted to extend the welfare state. A welfare state is a country with a market economy but with increased government responsibility for the social and economic needs of its people. The welfare state had its roots in the late 1800s. During that period, Germany, Britain, and other nations had set up basic old-age pensions and unemployment insurance.
After 1945, European governments expanded these social programs. Both the middle class and the poor enjoyed increased benefits from national healthcare, unemployment insurance, and old-age pensions. Other programs gave aid to the poor and created an economic cushion to help people get through difficult times.
However, the welfare state brought high taxes and greater government regulation of private enterprise. In Britain, France, and elsewhere, governments took over basic industries such as railroads, airlines, and steel. Conservatives, or people who favor free markets and a limited role for government, condemned this drift from the free enterprise system toward socialism.

Limiting the Welfare State 
In 1979, British voters turned to the Conservative Party, which denounced the welfare state as costly and
inefficient. The Conservatives were led by Margaret Thatcher. Thatcher’s government reduced social welfare programs and returned government-owned industries to private control. Faced with soaring costs, other European nations also moved to limit social welfare benefits and to privatize state-owned businesses during the 1980s and 1990s.

Toward European Unity 
Greater economic cooperation helped fuel Europe’s economic boom during the 1950s and 1960s. In 1952, six nations—West Germany, the Netherlands, Belgium, Luxembourg, France, and Italy—set up the European Coal and Steel Community. This agency established free trade in coal and steel among member states by eliminating tariffs, or fees, and other barriers that limited trade. This small start spurred economic growth across Western Europe and led to further regional cooperation.
In 1957, the same six European nations signed a treaty to form the European Economic Community, later known simply as the European Community. This was an organization dedicated to establishing free trade among member nations for all products. The European Community

gradually ended tariffs and allowed workers and capital to move freely across national borders. In later years, the European Community expanded to include Britain and other European countries.

Japan Is Transformed
In 1945, Japan, like Germany, lay in ruins. It had suffered perhaps the most devastating damage of any nation involved in World War II. Tens of thousands of Japanese were homeless and hungry.

American Occupiers Bring Changes 
Under General Douglas MacArthur, the Japanese emperor lost all political power. Japan’s new constitution established a parliamentary democracy. Occupation forces also introduced social reforms. They opened the education system to all people, with legal equality for women. A land reform program bought out large landowners and gave land to landless farmers. The United States also provided funds to rebuild Japan’s cities and economy.
In 1952, the United States ended the occupation and signed a peace treaty with Japan. Still, the two nations kept close ties. American military forces maintained bases in Japan, which in turn was protected by American nuclear weapons. The two countries were also trading partners, eventually competing with each other in the global economy.

Japan Develops a Democracy 
Over the years, democracy took root in Japan. The Liberal Democratic Party (LDP) dominated the government from the 1950s to the 1990s. The LDP, however, differs from political parties in the United States. The LDP is a coalition, or alliance, of factions that compete for government positions.

An Economic Miracle Relies on Exports 
Like Western Europe, Japan achieved an economic miracle between 1950 and 1970. Its gross domestic product (GDP) soared year after year. GDP is the total value of all goods and services produced in a nation within a particular year.
Japan’s success was built on producing goods for export. At first, Japan sold textiles. Later, it shifted to selling steel and machinery. By the 1970s, Japanese cars, cameras, and televisions found eager buyers on the world market. Soon, a wide range of Japanese electronic goods were competing with Western, and especially American, products.
How did Japan enjoy such success? After World War II, Japan, like Germany, had to rebuild from scratch. Also like Germany, it had successfully industrialized in the past, so it quickly built efficient, modern factories that outproduced older industries in the West. With American military protection, Japan spent little money on its own military and could invest more in its economy. In addition, Japan benefited from an educated and skilled workforce. Finally, the government protected home industries by imposing tariffs and regulations that limited imports.
These policies, along with the high quality of Japanese exports, resulted in a trade surplus for Japan. That is, Japan sold more goods overseas than it bought from other countries. By the 1980s, United States manufacturers were angered by what they saw as unfair competition and the
United States pushed Japan to open its economy to more imports. However, Japan’s trade surplus persisted.

( vocab ) suburbanization

( vocab ) segregation

( vocab ) discrimination

( vocab ) Dr. Martin Luther King, Jr.

( vocab ) Konrad Adenauer

( vocab ) welfare state

( vocab ) European Community

( vocab ) gross domestic product

( checkpoint ) How was the U.S. economy linked to the broader global economy during the Cold War?

( checkpoint ) Over time, how did the U.S. government expand opportunities for Americans?

( checkpoint ) What were some advantages and disadvantages of the welfare state in Europe?

( checkpoint ) What factors explain Japan’s economic success in the decades after World War II?

( assessment ) How did Democrats and Republicans differ on the best ways to improve opportunity
for Americans?

( assessment ) How was the economic development of Western Europe during the Cold War years simi-
lar to or different from that of Japan?

( assessment ) How was trade important to the economic development of Western Europe, the United
States, and Japan during the postwar decades?

( objectives ) Explain with examples how the United States prospered and expanded opportunities.

( objectives ) Explain with examples how Western Europe rebuilt its economy after World War II.

( objectives ) Describe with examples how Japan was transformed.

( focus question ) How did the United States, Western Europe, and Japan achieve economic prosperity and strengthen democracy during the Cold War years?