Comparing the present inflation to inflationary periods of the past has become a popular pastime for journalists, economists, and ordinary pundits. From all the analyses I have read, one example seems to have received little attention. The period I refer to is the inflation post-World War II (1939-1945).
I was ten years old and living in Pittsburgh when the war ended. I remember the war years as a period of shortages: strict rationing of such staples as meat, gasoline, liquor, butter, sugar, coffee, and most men’s shoes. Many stores were closed due to a shortage of staff and inventory. Tanks were being manufactured instead of automobiles. In some neighbourhoods, vegetables were sold from horse-drawn vans, saving customers from having to use any of their allocated gas coupons. No streetcars were being produced. The old clunkers pressed into service were called “rattlers”. As in the Covid period, the war created a severe shortage of doctors and nurses, but in the ‘40s it was because the medical profession had gone to war.
Unlike the end of peak-Covid, the end of WWII was euphoric. The pent-up demand along with the GIs finally coming home made for a giant, prolonged celebration. Today, on the other hand, things are moving much more slowly. As the Covid pandemic winds down (or is controlled by vaccines) the supply lines are being slowly re-established. Most stores have reopened, and the shelves are gradually being re-filled.
But with so many seniors being still wary of crowds, the buzz of pre-pandemic street life remains in short supply.
The end of WW II caused significant social changes. Notably, the war brought women into the labour force. In factories and shipyards, she was known collectively as “Rosie Riveter.” She drove trucks and buses, joined a union, and got used to having her own chequing account and not being told how she should vote. More and more women became doctors, accountants, and lawyers.
The social changes post-Covid are perhaps less revolutionary, but well documented. The advent of remote work, aided by such tools as Zoom, will surely have lasting impacts on family dynamics, office work, and neighbourhoods. Business trips have become less frequent and sit-down restaurants remain in much shorter supply, as ordering-in has maintained its grip on the population.
Our hope is that today, like after WWII, the remaining supply chain and other dislocations will ultimately dissipate. Workers will surely remain cranky, as they were after WWII, having gone through such a life-changing ordeal. But as social upheaval moderates, our hope is that wage demands will climb only moderately, allowing inflation to level off and markets to move off their back foot.
Just as the Korean War slowed the recovery post-WWII, we contend with the war in Ukraine slowing the current recovery. However, if the war in Ukraine can end soon without nuclear conflict, we may finally see a big lift to the economy and markets.
The views as articulated in this article are those of Briar Foster alone and do not necessarily reflect the opinion of Foster & Associates
