the crucial Senate committees set out to push
back the frontiers of the New Deal. Income tax
was redistributed to favour the better off; pro-
posals for more federal help for farmers, for public
housing, for education and for additional social
security were rejected. Taft set his sights on
‘straightening out domestic affairs’. The most
important measure of 1947 was probably the
Taft–Hartley Act, which limited union power.
The strike record of the unions and the disrup-
tion they had caused made this acceptable outside
the circles of organised labour, and Truman’s veto
of the bill was overridden by Congress.
Yet, despite undoubted problems, the US econ-
omy passed successfully from war to peace. The
post-war depression that many Americans feared,
repeating the historical experience after 1919, did
not occur. There was a clamour for houses, furni-
ture, consumer goods and cars. In Europe, unable
to produce what it needed, there was a great
demand for American exports. Some unemploy-
ment persisted in the US but the great majority of
the millions demobilised from the armed services
found work. American industry took up the slack
left by the fall-off of wartime production, and
during the post-war years from 1945 to 1949
Americans enjoyed growing prosperity.
It was perhaps natural that the American
people should now wish to get on with their lives
at home. Most of them felt that they had settled
the world’s problems. They were aware of great
hardships suffered in Europe and as individuals
responded generously, despatching food parcels
through organisations set up to care for the
needy. But to pay taxes and then have Congress
vote huge sums as gifts to the rest of the world
while there were still plenty of urban slums and
much real poverty at home, was a different
matter. Should charity not begin at home?
Something akin to the sacrificial spirit of wartime
would be needed to alter these attitudes. The
spectre of communism eventually provided the
motivation, but not in 1945, when the Russians
were still regarded by most of the American
people as valiant allies. Congress, too, reflected a
desire to get back to normal times as fast as pos-
sible and to reduce America’s huge wartime com-
mitments. With the end of the war against Japan,
the administration suddenly cancelled the Lend-
Lease arrangements. Special measures were justi-
fied in war but not in peace. Yet financial experts
in Washington were perfectly aware that interim
measures would be necessary to smooth the
passage from war to peace. A blueprint for post-
war international finance and trade had been
worked out at Bretton Woods from 1944 based
on freeing trade and currencies from restric-
tions. But how to get there, given the imbalance
between the American and European economies?
The US in 1946 exported twice as much as it
imported; its exports were now three times as
large as in 1939. The exports of France and the
rest of Europe combined amounted to less than
half the imports to these countries from the US.
Italy, Germany and Japan had been crushed by
the war, and their import needs, to maintain even
the lowest standards of living, exceeded their
exporting capacity. There was clearly a huge trade
imbalance. Western Europe faced penury, and
hopes of a better life depended on the US.
Eastern Europe also received relief through
UNRRA until 1946, but then East and West
parted company, and the Soviet Union and the
nations under its control faced the daunting task
of recovery without American assistance. The gap
between progress in the two halves of Europe
widened in 1945 and communist mismanagement
continued to increase the differences in the era
from 1945 to the 1990s.
Only the US now had the financial capacity to
become the world’s banker and to recycle through
loans and gifts the huge surpluses America’s
favourable balance of trade earned it. The war had
greatly increased the US’s productive capacity,
and to a lesser extent that of Canada; the needs of
Americans at home and worldwide shortages pro-
vided the market for them. American financial pol-
icy responded with enlightened self-interest. New
loans were negotiated on generous financial terms
so that goods being shipped from the US could be
paid for. But the US wished to return to normal
commercial practice as soon as possible. American
financial advisers were no doubt too optimistic
about the timetable of West European recovery
and thought special assistance would be needed
for only two or three years. In their desire to move
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