The Post-War World
In recovering from the carnage of the 2nd World War, Western Europe experienced a golden age of growth between 1950 and 1970; but its growth rate rapidly diminished in the decades that followed.
US growth following the war was subdued. The public debt incurred during the War was trimmed by policies that engendered pessimism in businessmen, most notably increased corporate taxes.
With high inflation in the years immediately following WW2, the Truman and Eisenhower administrations committed to the cause of sound money through balanced budgets. Events proved that difficult.
Wars both cold and hot further deepened public debt while darkening the private-sector outlook. (The Cold War was costly in maintaining what Eisenhower called “the military-industrial complex.” The hot wars in Korea (1950–1953) and Vietnam (1955–1973) added substantially to the tab.) Being the leader of the ‘free’ world and fighting Communism proved an expensive proposition.
Between 1950 and 1980, the gap between the English-speaking countries that had won the 2nd World War and those that had lost closed rapidly. By the late 1970s, the popular press often denounced the decline of the United States and the success of German and Japanese industry. British GDP per capita fell below the level of Germany, France, Japan, and even Italy.
Neither the state intervention that began during the Depression and grew after WW2, or the economic liberalization of the 1980s, had much to do with relative growth rates. The Germans and Japanese were disciplined, industrious peoples that rapidly rose from the ashes of their militarism spasm. Their resurgence was practically inevitable.