<P> In the 19th century, recessions frequently coincided with financial crises . The Panic of 1837 was followed by a five - year depression, with the failure of banks and then - record - high unemployment levels . Because of the great changes in the economy over the centuries, it is difficult to compare the severity of modern recessions to early recessions . Recessions after World War II appear to have been less severe than earlier recessions, but the reasons for this are unclear . </P> <P> At the beginning of the century new innovations and improvements in existing innovations opened the door for improvements in the standard of living among American consumers . Many firms grew large by taking advantage of economies of scale and better communication to run nationwide operations . Concentration in these industries raised fears of monopoly that would drive prices higher and output lower, but many of these firms were cutting costs so fast that trends were towards lower price and more output in these industries . Lots of workers shared the success of these large firms, which typically offered the highest wages in the world . </P> <P> The United States has been the world's largest national economy in terms of GDP since at least the 1920s . For many years following the Great Depression of the 1930s, when danger of recession appeared most serious, the government strengthened the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending . Ideas about the best tools for stabilizing the economy changed substantially between the 1930s and the 1980s . From the New Deal era that began in 1933, to the Great Society initiatives of the 1960s, national policy makers relied principally on fiscal policy to influence the economy . </P> <P> During the world wars of the twentieth century the United States fared better than the rest of the combatants because - aside from the attack at Pearl Harbor on 7 December 1941 - neither world war was fought on American territory . Yet, even in the United States, the wars meant sacrifice . During the peak of Second World War activity, nearly 40 per cent of US GDP was devoted to war production . Decisions about large swaths of the economy were largely made for military purposes and nearly all relevant inputs were allocated to the war effort . Many goods were rationed, prices and wages controlled and many durable consumer goods were no longer produced . Large segments of the workforce were inducted into the military, paid half wages, and roughly half of those were sent into harm's way . </P>

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