Can the U.S. Reconvert to Peace?

Bedazzled by the way in which the American economy successfully handled three post-war recessions, many observers have concluded that prosperity is now normal and routine, built-in to the system. Not only has the economy become less susceptible, they say, to the kind of cataclysmic collapse experienced in the 1930s, but it may well be that the business cycle itself has at long last been done away with, at least in our own generation. They point to the supposed fact that the downward cumulative force of a recession was halted time and again by a battery of built-in stabilizers which sustained demand in different parts of the economy. Steep progressive income taxes, unemployment insurance, high level capital expenditures and national pattern wage bargaining have all seemingly contrived to keep things going at a bubbling pace.

All this suggests to the new optimists that the affluent economy of the 1950s was totally different in quality from the economy of the 1930s and 1940s, and that the 1960s will continue the happy trends established after Korea. Productive capacity, the ability of the economy to maintain a flow of goods and services, is now almost double the 1929 level and the government presumably is better aware of the need to step in whenever economic events threaten to take a turn for the worse.

With Korea there came an upsurge in private spending, initiating a hectic but good-natured scramble for goods by both business and consumers. There was also a gr...