Government Spending

World War II Spending Did Not End the Great Depression

The aggregate statistics fail to capture essential details of life.

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Conveniently for most politicians, a popular doctrine holds that government spending is good for the economy. According to this doctrine, when the economy needs to recover from a recession or even a slowdown, an increase in government spending is indispensable—even if huge budget deficits and a growing national debt result. Keep spending! is the battle cry. This is one reason why there is widespread opposition to "sequestration," the scheduled across-the-board reductions in the rate of growth in government spending. (For the most part, absolute reductions in spending are not on the table.) 

The advocates of spending think they have a killer piece of evidence for their position that economic vitality requires larger government budgets: World War II. The standard story has it that despite Franklin D. Roosevelt's best efforts, the New Deal did not quite end the Great Depression. What did? According to this story, it was the massive spending behind U.S. participation in the wars in Europe and the Pacific. The vigorous economic growth of the late 1940s and 1950s is touted as evidence for the blessings of big government spending.

This version of events is routinely conveyed by Keynesian economists, including at least one Nobel laureate with a prominent newspaper column, and the pundits who parrot their doctrine. Hardly a day goes by that a cable-TV commentator doesn't credit World War II with "getting us out of the Depression." This belief has prompted members of the intelligentsia to lament that perhaps nothing short of a big war can cure a sick economy. The political will for major domestic spending is lacking, they say, but a national emergency (perhaps rumor of an alien invasion) would unite the country and dispel fears of deficits and debt.

The underlying theory is that economies slow down because aggregate demand is insufficient to keep things humming. If we consumers aren't buying enough, and various efforts to stimulate private consumption don't do the trick, there is no alternative to government stepping up its own spending. This surge in demand, so the theory goes, will put people and capital to work, and by the miracle of the "multiplier effect," the bang will be far bigger than the buck. All will be well—as long as we have the political will to spend and spend, which requires losing our Puritan fear of deficits and borrowing.

It shouldn't take much deliberation, however, to see the flaw in this doctrine and the associated belief that World War II ended the Depression. We have to start by asking: What does "end the depression" mean? The technical definition of a recession is a specified period of shrinking gross domestic product (GDP). (We may think of a depression as a severe and prolonged recession). The focus on GDP seems to suggest that a recession ends when GDP stops shrinking and starts growing.  

But there's a problem: There's less to GDP than meets the eye. It's a statistical aggregate that includes government spending, but in itself, it tells us nothing about what's happening with living standards.

In human terms, a depression isn't a shrinking GDP or some other changed statistical construct. It's a decline in real people's living standards. Therefore, ending a depression requires not a change in sign from minus to plus in a statistical measure, but a rise in prosperity. You can tell a depression has ended by the fact that people live better than they did previously.

When we apply this standard to life during World War II in America, it's clear that the war did not end the depression in any meaningful sense. Economic historian Robert Higgs has debunked the statistics that purport to show that the depression ended during the war. Take unemployment. Unemployment of course was historically high throughout the 1930s, and the rate plummeted once the U.S. government entered the war. But this was no sign of returning prosperity. The government drafted 10 million men into the armed forces and others enlisted to avoid conscription. Those men were not producing prosperity by making consumer goods. They were fighting a war. Moreover, statistics showing that industrial production picked up steam in the 1940s are no indication of prosperity because those plants weren't making consumer goods; they were making war materiel. In fact, those plants diverted scarce resources from the production of consumer goods. The few consumer goods that were produced were rationed. People could buy only a fixed and small quantity of foods, gasoline, and other previously taken-for-granted products. Many things weren't available at all.  

Thus the aggregate statistics fail to capture essential details of life. A million dollars spent making automobiles and a million dollars spent making tanks look the same in the GDP tables. But the difference is vast in terms of consumer welfare.  

As Higgs has written:

Yes, national output as conventionally measured did grow hugely during the war… [G]ross domestic product (in constant 1987 prices) increased by 84 percent between 1940 and 1944. What the orthodox account neglects, however, is that this "miracle of production" consisted entirely (and then some) of increased government spending, nearly all of it for war materials and equipment and military personnel. The private component of GDP (consumption plus investment) actually fell after 1941, and while the war lasted, private output never recovered to its pre-Pearl Harbor level. In 1943, real private GDP was 14 percent lower than it had been in 1941. If a nation produces an abundance of guns and ammunition, it does not thereby achieve genuine prosperity.

Those who lived through the war … forget the scarcity of decent housing, the hassles in commuting to work, and the severe rationing or complete absence of basic consumer goods…

Because of the many other ways that the well-being of consumers deteriorated during the war, which the official data fail to capture, actual wartime conditions were even worse than [the] figures suggest.

Note that this argument has nothing to do with whether the U.S. government should have entered the war. That's a different subject altogether. What we're dealing with here is whether war spending brought a return to prosperity. It emphatically did not. Deprivation worsened, even if people felt differently about it.  

Higgs's thesis has recently been extended and strengthened by economist Steven Horwitz of St. Lawrence University and a former student of his, Michael J. McPhillips, in "The Reality of the Wartime Economy: More Historical Evidence on Whether World War II Ended the Great Depression" (Independent Review, Winter 2013). Horwitz and McPhillips emphasize the deterioration in daily living that occurred during the war because of the diversion of scarce resources to war production. The trend toward the division of labor was actually reversed as people had to spend time making or repairing things they previously had relied on the marketplace for. Horwitz and McPhillips write:

As manufacturing was refitted for war production, there was a reversal in the trend toward specialization. Those remaining on the home front were forced to produce for themselves what they had previously been able to purchase. The household again became a center of production rather than consumption alone. The pressures of wartime meant a clear loss in productivity for those forced to engage in the more difficult processes of growing and canning their own food as well as sewing and resewing clothing to make it last longer. Women had less time to spend caring for their children as other household tasks, such as saving cooking grease or tin foil, consumed their time…

Not only were various consumer items unavailable, but those that could be found were of inferior quality. Substitute goods were of substandard construction and were often uniform, precluding consumers' choice of styles, shapes, and sizes. The reduction in variety and precision of sizes is yet another form of economic retrogression, and the consequent welfare losses for consumers are difficult to quantify in traditional measures.

Among other things, Horwitz and McPhillips trace changes in advertisements for kitchen appliances to show the deteriorating living standards of American consumers. Taken-for-granted goods increasingly became unavailable during the war. Such indicators belie the claim that the depression ended during World War II, as do the long stretches of time spent in line waiting to buy things.

Their bottom line: "Whatever the war's effects on seemingly booming conventional macroeconomic aggregates, it entailed a retrogression in the average American's living standards, and that disconnect should alert us to those aggregates' limitations." 

Keep this in mind the next time a politician or pundit exhorts you to support more government spending in order to restore prosperity. Rising living standards comes from saving, entrepreneurship, and innovation—in a word,freedom—not politicians' self-indulgent schemes with your money.

This article originally appeared at The Project To Restore America.

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172 responses to “World War II Spending Did Not End the Great Depression

  1. Not only were various consumer items unavailable,

    But they were still actively destroying them under Depression-Era programs, burning corn, wheat, pork and beef. When they were rationing such things.

    1. It was the FEDERAL government doing it, so they must have had a good reason.

    2. A lot of the New Deal idiocies were ended during WWII to aid the war effort. So in that sense, the war did contribute to ending the GD.

      1. Did they end to help the war effort, or because FDR died?

      2. A lot of new deal economic regulation continued after the war, causing the shitty economy to continue where it left off before the war. Then some of the remaining new deal shit was shut down, and things got better.

  2. You know who else forced the U.S. government to increase spending without creating consumer goods or adding prosperity?

    1. My ex-wife?

    2. Jimmy Carter?

    3. David Koresh?

    4. Ish Kabibble?

      1. gozer the gozerian

  3. A story for your amusement;

    My grandfather had a contract with the army to use wehrmacht prisoners ( kept seperate from the hardcore nazis) as labor to cut pulpwood. He told me they would try to escape….not to go back to germany or to sabotage anything, but to try and sneak into the movie theater in town or get locals to give them some candy or coke.

    Usually he would wait a while, then drive into town and find the guys. He would buy them a coke and give them a ride back to the POW camp. They told him ” We had no idea what america was like when we were drafted. We didnt know how BIG this country is, how powerful. There is no way germany can beat america. Besides , we dont want to conquer america, we want to come live here.”

    1. Louisiana?

      1. Yes. Camp Livingston in Rapides parish was the biggest POW camp that I know of. Practically the whole state was part of one military base or another.

    2. My grandmother worked as a short-order cook in Brownwood, TX while my grandfather was in Europe. The German POWs from Camp Bowie were trucked in to town on Friday and Saturday, given some sort of cash allotment, and let loose on furlough. They had to return to the trucks (or get a ride from the locals) by a certain time to make it back before lock-in. The diner was usually packed with them coming from the theater that was across the street getting some chow before heading back to the trucks. My grandmother said that fresh eggs and real bacon were apparently real treats for them as they usually ordered breakfast, even in the evening.

    3. My dad went to grade school with a kid whose dad had been a German POW and had met and married a local Nebraska farm girl and stayed. Most of my dad’s classmates fathers had fought in the war. He said they tortured that poor kid like you wouldn’t believe. Poor kid.

      1. My dad’s grandfather came from Germany to eastern Iowa during World War I when he was 14. He was a farmer, and would get into fist fights all the time with locals. At one point they burned his barn down. My mom’s great grandfather came over a generation earlier and settled in eastern Nebraska. Even though they were fairly integrated by the time World War I came around, one of my mom’s great uncles was mysteriously killed at school for failing to understand directions in English. The family was asked to forget the incident happened, and I only learned of it at my great grandma’s 100th birthday.

        The POW camp at Algona, IA was filled with German POW’s who were only a few generations removed the farmers in the surrounding area. A lot of them shared last names. I can’t decide which would be harder: fighting culturally-different countrymen in the Civil War or fighting guys who would have been culturally-similar neighbors a few decades earlier.

        1. We had a guy living in our county who was taken into the forest and executed after the end of the war because he was suspected of having worked with the germans.

          As it turns out, he HAD worked with the germans during the occupation, and had been an semi-important double agent and informant for the resistance movement at the time. They held an honor guard for him during his funeral.

    4. My wife and I worked on a dude ranch in Dubois, WY back in the 80s. It had been a tie hack work site set up by Swedish immigrants back in 19th century and later used as a work camp for German POWs during WW2.

      At the end of the war the prisoners protested, almost violently, when they learned they were being sent back home.

      1. I love that area. One of my good college buddies was from Worland, and we’d travel from Rapid City to go mountain biking in the Wyoming Basin. I’ve only been through Dubois for my cousin’s wedding in Jackson; it came off as a bit of a Jackson Lite, without the skiing.

    5. Read “Nazi Prisoners of war in America” by Arnold Krammer. A very interesting and enjoyable read.

    6. We have friends from our International Fraternity that came to visit from Germany in the 1990s. They spent a month touring the Western United States by automobile.
      Their reaction was similar, all the time they are explaining this showing us their German language maps of the US marked with their points of interest and comparing it to maps of Germany. Same size maps, vastly different map scales.

  4. are we recycling columns or is someone peddling a book? Because seems this topic has been addressed at least once before, like during the days of debate over the stimulus.

    1. Considering the importance of debunking the idea that government spending is the preferred (if not only) way to ‘fix’ anything, it’s worty repeating many more times.

    2. It has been, but I don’t mind, it gives me more combative talking points. I feel like this topic is the greatest lie that was preached to me in high school. Out history textbook cast no doubt – NONE! – that World War II carried us out of the Great Depression, and that the only reason we didn’t slide deeper was because of the New Deal. I think if you ask people why we got out of the depression, most would say they don’t know because they are disinterested in history, but the second largest group would parrot the World War II stuff.

  5. Sounds liek a pretty solid plan to me dude. wowl.

    http://www.ImAnon.tk

  6. It seems to me that the primary factor in the post depression/post war recovery was that the rest of the world’s industrial base was destroyed while ours was untouched. However, I’ve rarely heard any economist or pundit refer to this. If this is what truly drove our economic growth post war, it seems to undermine the left’s nerrative that the middle class/ unions built our prosperity.

    1. It seems to me that the primary factor in the post depression/post war recovery was that the rest of the world’s industrial base was destroyed while ours was untouched.

      That’s not correct. In absolute terms, the US was worse off because the rest of the world’s industrial base was destroyed.

      Surely you would not argue that if Europe were destroyed today US GDP would improve. Or that if New York’s industrial base were destroyed, California’s GDP would improve.

      The primary factor in the post-depression/post-war recovery was that there were 15 years of consumer demand that was utterly unmet and completely predictable. When people know what will sell, they can produce it. That’s most of GDP right there.

      1. The primary factor in the post-depression/post-war recovery was that there were 15 years of consumer demand that was utterly unmet and completely predictable. When people know what will sell, they can produce it. That’s most of GDP right there.

        And it sure didn’t hurt that U.S. industry had zero outside competition.

      2. In absolute terms, the US was worse off because the rest of the world’s industrial base was destroyed.

        How so? It sounds like you’re arguing that Europe would have been better off relative to the US if they had destroyed their own industrial base even in the absence of a war.

        1. He’s saying that destroying productive capacity does not help anyone.

          1. It doesn’t help in the aggregate, but I’m not sure how it doesn’t help those who still have productive capacity. That it is a net loss doesn’t mean everyone loses.

          2. Sure it helps someone. It helps the person who still has the capability. If you’re my top competitor in a running race, it would absolutely help me if someone ran you over and broke your legs. It might not be good for the sport, but it makes it easier for me to get the trophy.

            1. Right. Note that we re comparing the US standard of living post war, vs. during the Great Depression.

              US standard of living might have been better, still, had WW I and II not happened (they were flare-ups of a long conflict, realistically). But that’s not the comparison we make.

            2. Sure it helps someone.

              It helps someone in relative terms.

              Using your example, if the goal is to win the race, then it would absolutely help you if your competitor was hurt. But if the goal was to run the race in the least time, almost certainly it would absolutely help you if your competitor was as healthy as he could be. And your example doesn’t even allow for the gains of trade that economic “competition” allows!

              1. Ah, but in the example of the US losing its foreign competition, wasn’t it the case that domestic firms remained to compete against each other? Going back to the racing example, maybe the guy who got run over was on Team 1. This is good for Team 2 as a whole, but the members of Team 2 still have to compete internally to get the spot at the meet.

                1. Regardless of the competition within Team 2, the international final will be run in a higher time than if Team 1 could compete.

                  1. Maybe. What if I’m a world record contender but the injured guy wasn’t? There are other incentives than simply beating the other guy.

                  2. Right.

                    We just don’t know what he time would be. Bastiat. Seen,, nseen, etc

              2. Are you also getting seconds subtracted from your time for medical services provided to your hurt competitor?

                1. You mean added, I assume – or else I can’t make sense of this.

        2. That’s why I said “absolute terms”. If I had meant relative terms, I would have said “relative terms”.

          1. Because comparing how the US did with an existing industrial base relative to countries without one has something to do with “absolute.” Correct non sequiturs are still non sequiturs.

            1. I’m not comparing the US relative to other countries. I’m comparing the US relative to itself in an alternate history where the US could actually buy things those other countries produce if it so chooses.

              Since the latter offers choices the first doesn’t include, the US is necessarily better off in the latter.

              …unless you’re an unrepentant mercantilist or you believe that envy is the most important metric in international relations.

              1. Maybe you’re not, but the post to which you responded was: “…was that the rest of the world’s industrial base was destroyed while ours was untouched.”

                1. The two alternatives are a 1945 where the rest of the world’s industrial base was destroyed and a 1945 where the rest of the world’s industrial base was fine.

                  The US is in absolute terms better off in the latter case than the former case because it has more opportunities for comparative advantage. That is, the US doesn’t have to waste precious resources producing things that the rest of the world’s industrial base can produce.

                  1. How is it a waste of resources to make things that other people are buying? It’s not like we were manufacturing things out of the goodness of our hearts; there was wealth flowing to our firms in exchange for those goods. Some of that wealth was our own that had been transferred over to those governments as part of the Marshall plan et al, but not all of it. Neither was it the case that the plants were building goods that sat in inventory or were just immediately destroyed.

                    1. It is a waste of resources if you are not producing to your comparative advantage. Producing things has an opportunity cost. It means you don’t get to produce something else. And if the other countries aren’t producing something that the US therefore must produce, the US doesn’t get to produce something else it is better at producing.

                      The hypothesis is that other countries couldn’t produce anything in exchange for what the US produced for them. If they could, then their industrial base wasn’t destroyed.

                    2. This is not necessarily the case. There is more to an economy than manufacturing.

                      Further, it’s ridiculous to say that the US wasn’t producing to its comparative advantage postwar. We’re also such a big country anyway that we can potentially do a lot of things well in their own right, and there is probably no single sector that is large enough to employ the whole labor market. Even if we do have a natural comparative advantage in car making, there are only so many cars that can be made and sold. Big economies can’t specialize.

                    3. I agree that, due to the sheer size of the US economy, the difference is likely small. But the difference is positive. It is not negative, as the argument that the US was better off than otherwise because Europe and Japan were in ruins would have you believe.

                    4. And everyone is forgetting the lost markets. Post-war Europe couldn’t afford to buy our products either.

      3. The primary factor in the post-depression/post-war recovery was that there were 15 years of consumer demand that was utterly unmet and completely predictable. When people know what will sell, they can produce it. That’s most of GDP right there.

        Why didn’t this apply in 1940, when there was 10 years of unmet demand? In many ways the economy was worse in 1940 than it was in 1930.

        1. Because the entire economy was focused on producing tanks and ships in 1940?

          1. The war didn’t begin for us until basically 1942. Lend-Lease did involve some war equipment production but that didn’t start until spring 1941.

            1. War production in the US was already ramping up in 1940. There were a lot of new ships in 42/43, that would not have happened if they had not started in ’40.

            2. “Entire economy” was a mistake on my part, you’re right that it wasn’t until 1942 (noting 21044’s point as well) that it basically took over the economy.

              However, you answered your question. The economy in 1940 was miserable. The biggest difference between 1940 and 1946 was that many New Deal stupidities were no longer in effect.

        2. Indeed, there was something else that was needed. Among the possibilities I have seen are:

          1. Due to the regime uncertainty of the New Deal, industry was simply too gunshy to act. As someone notes downthread, World War II didn’t end the Depression, it ended the New Deal.

          2. Industry took advantage of the much higher labor mobility after the war as soldiers returned and didn’t necessarily go back to their hometowns.

      4. You are leaving out the fact that half of Europe and Asia decided to impose Central Planning for their economies after the war which essentially meant that they didn’t want to have economies. That left most of the world’s productivity to the few countries that didn’t impose such stupidity.

    2. It seems to me that the primary factor in the post depression/post war recovery was that the rest of the world’s industrial base was destroyed while ours was untouched.

      I’ve heard a lot of people make this assertion and it is 100% wrong.

      Think about it. The assertion says that reducing trade is what led to US prosperity. Well if that’s true then recreate that situation with massive tariffs. Which would of course massively damage our economy.

      1. I’m not sure that’s what the assertion says at all. It appears to say that the United States was in a position to fill a void, which allowed expansion beyond which would have been feasible if Japan and a lot of Europe were not in ruins.

        If the world “needs” X industrial output, even apart from the broken windows bit, and the United States has the ability to provide a larger portion of X because Japan and Europe can’t, how is that not advantageous to the US even if it is not advantageous in the aggregate?

        If a remote town has two auto dealers and one is destroyed in a tornado, wouldn’t the business prospects of the second dealer improve, as long as he can meet the additional demand?

        1. After WWII America had half of the world’s factory output. The unions got fat off of this, until the rest of the world recovered. With factories that were 50 years newer. American unions could not adjust to the competition, and are still trying to bring back the 1950s.

        2. If the world “needs” X industrial output, even apart from the broken windows bit, and the United States has the ability to provide a larger portion of X because Japan and Europe can’t, how is that not advantageous to the US even if it is not advantageous in the aggregate?

          What was America trading for that output?

          All of the major trading partners were in ruins and not in a position to trade anything (other than promises) and most of the rest of the world was undeveloped. Much of America’s output went to help rebuild Europe and Japan in the 1940s and 1950s.

          Even if you just look at it domestically the argument falls apart because it presupposes that a lack of competition is beneficial. Which was true for the legacy producers but not for the economy as a whole.

          1. Which was true for the legacy producers but not for the economy as a whole.

            In this scenario, the US was the legacy producers. Again, there wouldn’t be a benefit in the aggregate, but that doesn’t mean that there aren’t benefits to some… namely, those with productive capacity.

            1. Consider what would happen if the world’s economy was reduced to a subsistence level, except for my factories. I’d have no competition and no customers. In what sense am I better off?

              1. You wouldn’t be. That wasn’t the state of the world after WWII.

        3. If a remote town has two auto dealers and one is destroyed in a tornado, wouldn’t the business prospects of the second dealer improve, as long as he can meet the additional demand?

          If all you care about is the auto dealer, you are right.

          Usually, however, it’s the prospects of the general populace that are considered in judging the health of an economy. And in your example, their prospects are worse off.

          1. Again, the original post in this thread was solely concerned with the auto dealer, i.e., the US. No one, as far as I can tell, is arguing that there is a net benefit to the global economy, only that the US benefited relative to a rubble-ified Europe and Japan.

            1. The US is not the auto dealer!!! US manufacturing — specifically US manufacturing of products needed in Europe — is the auto dealer!

              Counting that as the entirety of economic concern leaves out manufacturing that uses this manufacturing as an input, other manufacturing, services, and, most importantly, the end US consumer of all of those things.

              Thinking that the auto dealer is the US is mercantilism in a nutshell.

          2. Yeah, but this is about the US (ie, the auto dealer), not about the general public (US + Europe).

            Anyway, I think you’re right about the whole thing being a dubious line of argument. Sure, Europe lost their productive capacity, but in so doing they also lost their purchasing power. So how could that lead to higher demand for US goods?

            That’s what the auto dealer analogy misses. We’re talking about a more-or-less closed system, so in a proper analogy, not only are the two auto-dealers the only producers, they’re also the only two consumers (they buy each others cars). So when one’s dealership gets destroyed by a tornado, the other one doesn’t benefit, because while he lost his only competitor, he also lost is only customer.

      2. The assertion says that reducing trade is what led to US prosperity.

        No, it says that the US being the exporter of most of the industrially-produced goods in the world is what led to US prosperity.

        1. Which assumes that a large trade surplus is the path to prosperity and ignores the collapse of trade caused by the destruction of Europe and Japan.

          Again, that situation can be recreated by high tariffs or currency manipulation, which no economist thinks positive.

          1. It seems like it could at least be a path to prosperity, under the right circumstances.

          2. that situation can be recreated by high tariffs or currency manipulation

            No, it can’t. In the real world those actions are likely to cause other nations to do the same thing, which hurts our exports.

            You cannot reproduce the conditions at the end of WW2 by any economic policy measures.

            1. No, it can’t. In the real world those actions are likely to cause other nations to do the same thing, which hurts our exports.

              But destroying our trading partner’s countries and economies won’t hurt our exports?

        2. I also have seen work that points out there wasn’t a big enough jump in exports to explain the explosion of the U.S. economy. Maybe Higgs?

    3. Actually, the reason for the great recovery was to repealing of many war time restrictions and the availability of millions of returning soldiers.

      The recession is often laid in part to the trade war which ensued after Taft-Hartley.

      A trade war actually has an effect similar to destruction of a country’s industrial base.

      1. Sorry, it was Smoot-Hawley tariff that is credited with amping up trade wars.

  7. Looks like it’s time to stimulate the economy by invading and destroying Europe and Japan again.

    1. That is so old fashioned. The great Nobel Prize winning economist Paul Krugman is way ahead of us on this and thinks what we need is an alien invasion of Earth.

      We need to follow the script of the movie “Battleship” and send a signal to other worlds where they will get the message and send a fleet of ships to attack us and then we can then build battleships to fight them off.

      * Warning, actually watching the movie ‘Battleship” will probably lower your intelligence at least 10 points if not more.

      1. One of the most annoying political slogans is “lets rebuild America”. I wasn’t aware it was ever torn down. It looks pretty good to me. Do such politicians plan to bomb it?

      2. Funny, I actually watched it with my wife last night. It’s basically a really long recruitment video for the Navy. Clearly, we are scraping the bottom of the Netflix barrel.

        1. Tonight you could just watch three of Alfred Hitchcock’s 1930s British movies over on TCM. No Netflix required. And the movies are probably a fair sight better than Battleship anyway.

      3. See article. His name is not to be spoken.

        He who shall not be named, is how we shall refer to him.

      4. My Brother of the Binary Anonbot will back me up on this, but it would be better if robots did the invading. We could build the robots (jobz) and then fight them (more jobz, fewer civilians, lower unemployment). Aliens just give us the latter.

        And this is neither here nor there, but I, for one, look forward to our new robot overlords.

    2. Wouldn’t it be cheaper to destroy Chicago?

  8. Here is your daily nut punch. Notice they admit this is “largely a symbolic” So they are going to fuck people who need pain medication so they can make a symbolic gesture against those who don’t. And note the brain dead NYT writer for mindlessly repeating the “ODs have tripled” line without giving the raw numbers. How many people are we talking about here? You can’t tell.

    http://www.nytimes.com/2013/01…..ref=health

    1. “””Refills without a new prescription would be forbidden, as would faxed prescriptions and those called in by phone. “”‘

      And then they wonder why costs go up when modern communication devices are prohibited and each prescription refill will require a doctors visit.

    2. Scum. Utter sub-human scum.

      I hope they are in a fire and don’t die of it.

      1. Those lying, fancy 1 percenter junkies, and their new-fangled technology, are exacerbating the suffering of the real junkies.

        Everyone knows that all these so called “chronic pain sufferers need is a good bloodletting.

        1. As the article explains, the reason the FDA panel is recommending this rule is that a bill to accomplish this objective failed in Congress “after lobbying by pharmacists and drugstores.”

          The regulators wouldn’t have to do this if only the processes of representatives government produced the correct results!

          1. Painkillers now take the lives of more Americans than heroin and cocaine combined, and since 2008, drug-induced deaths have outstripped those from traffic accidents.

            Sounds like a self-correcting problem.

            Political apparatchiks propose political solution for political problem. News at 11.

  9. WWII didn’t end the depression. It ended the New Deal, and that ended the depression.

    1. Exactly.

    2. Boooyah!

    3. Getting closer.

      FDR croaking ended the New Deal, which ended the Depression.

    4. Statistically 1946 was the worst year in our history. Unemployment skyrocketed as servicemen were mustered out. GDP plummeted as we stopped building tanks. Yet it was still the best year in our history. New Deal and wartime central planning had come to an end, confiscatory taxes were cut, regime uncertainty had come to an end. And real living standards grew faster than in any other year in our history.

  10. Canadian immigration officials have denied Randy Quaid’s request for permanent resident status in Canada.

    Quaid has sought to stay in Canada, claiming he was being hunted by “Hollywood star-whackers” who had killed his friends David Carradine and Heath Ledger.

    1. So in real life he’s as crazy as the characters he plays?

      1. I’ve heard his wife is the crazy one and controls who he talks to and the information he gets.

    2. How nuts ya gotta be for Canada to turn ya down?

  11. World War II did help to end the Great Depression, but not in the way that Keynesians believe. It did so by:

    1) Economically destructive New Deal policies were ended during the war as part of the victory effort.

    2) Massive monetary expansion combined with rationing created forced savings and deleveraging by consumers and firms. At war’s end there was four years of repressed consumer demand and those consumers had healthy balance sheets.

    3) Wartime rationing and planning were rapidly ended in 1946 within a year the economy was freer than it had been for decades.

    1. Funny how liberals act like the 46 off year elections never happened. Those were the elections where Republicans took control of Congress because Dems wanted to continue war planning and rationing like the UK did.

      1. Yep.

        And employment increased steadily from 1946 through the beginning of the Korean War. 39,800 in Jan 1946 to 45,000 in Jun 1950. All in the face of demobilization and massive cuts in government spending.

      2. Those were the elections where Republicans took control of Congress because Dems wanted to continue war planning and rationing like the UK did.

        Why was this? That is, why would the Dems have wanted to do such a thing? I assume there was some misguided reasoning behind it. Not snarking, I just don’t know about this b

        1. The publicly stated reason was that the wartime economy had full employment and “what works in war will work in peace”.

          The reason they really wanted it was because it gave them ridiculous amounts of control over people’s lives.

        2. It’s what Labor actually did in the UK. The standard of living in the UK went down after the war.

      3. Uh-huh. Outside of the Solid South that modern Dems sweep under the carpet, the Dems would have had only three states (AZ, NM, RI) with a majority Dem representation in the House after that election.

    2. So if we monetize the debt, hand out free money to US citizens, and destroy all their flat screen TVs and iPods, the economy will boom?

      1. No broken window required.

        The analogy would be

        1) Let insolvent banks fail and do emergency bankruptcy liberization to rapidly deleverage.

        2) Undo the last twenty years worth of regulations.

        The economy would be booming within a year.

    3. Massive monetary expansion combined with rationing created forced savings and deleveraging by consumers and firms. At war’s end there was four years of repressed consumer demand and those consumers had healthy balance sheets.

      According the Horowitz article, post-war savings weren’t affected by the consumer boom; they stayed at high levels. They were paying for their new products with real wages.

    4. Actually, I will give you that the replacement of the 1935 NLRA with Taft-Hartley in 1947 was HUGE in enabling the postwar boom.

  12. Another dimension to the myth that WWII was great for the economy of the US and it’s citizens is that US civilian employment peaked in Nov 1943 at 42,800 and then gradually decreased for the duration of the war to 40,400 in August 1945. And then 3 million jobs were lost the following month with victory.

    However, within six months employment was higher than it had been in Aug 1945 and in another six months it was higher than it had been at any point during the war.

    1. Uh, there were a lot more civilians in 1946 than there were in 1945 or at any point during the war. I hope you immediately realize why this is so.

      1. Yeah, so what.

        The Keynesians at the time were predicting a return to depression with demobilization.

        The were 180? wrong.

        The point is that employment grew faster after the war than it did during the war despite a collapse in government spending.

        1. Contrast post-war Britain (where the Keynesians ruled) with post-war U.S.

          And Britain had so many broken windows to be fixed.

  13. I don’t think anyone is arguing that prosperity began DURING the war, which is what Richman seems to be assuming his opponents are arguing. The wartime economy was obviously not classifiable in the ways a peacetime economy is. The argument is that prosperity began AFTER the war and because of the war’s effects.

    1. Actually, that’s exactly what his opponents argue. That’s why Keynesians at the time thought the end of the war would bring a recession.

      1. Not everybody who thinks WW2 ended the Depression is a Keynesian.

    2. Yes, that’s EXACTLY what the Keynesians are saying.

      All those real-world facts are just fussy things that get in the way of the narrative.

    3. Wrong. Macroeconomists only look at the numbers, not the human beings. And the numbers show negative unemployment (yes, negative) and during the war and GDP figures that were significantly over the trendline. They will assert with a straight face that the economy *during* the war was great, and will thump the numbers to emphasize their point.

  14. Well, we now know that the Keynesians are liars who don’t even truly believe in their own rubbish, since they just channeled their inner Herbert Hoovers and raised taxes in the middle of global depression, which even Keynes himself said was a stupid idea.

    After this and the ongoing Japan disaster, I don’t know how anyone could ever possibly take these fraudulent con artists seriously again.

    1. Well, that’s actually somewhat simple. Whatever his shortcomings (and they are myriad) Keynes was basically trying to push an intellectually coherent argument. Whether out of good will or just fear of getting caught, he did want his arguments to hold up to some intellectual scrutiny. Unfortunately, Keynesianism is more a political ideology than an intellectual proposition. As such there’s no real requirement for any intellectual consistency.

    1. fucking awesome

  15. What’s missing here is an explanation for how balancing budgets during recessions and cutting taxes for rich people is what actually makes the economy prosper.

    1. Maybe because those things were not the topic of this thread and commenters have stayed on topic.

      1. There’s a first time for everything…

    2. T o n y| 1.27.13 @ 12:49PM |#
      “What’s missing here is an explanation for how balancing budgets during recessions and cutting taxes for rich people is what actually makes the economy prosper.”

      Well, shithead, until you posted this crap, nothing was missing from the discussion.
      Given your stupidity, posting lies as you have done here is pretty much expected of an ignoramus such as you, shithead, so no one is surprised.
      Is that clear, shithead? Or do I need to explain in simpler terms, shithead?

    3. Balancing budgets during recessions: Because you can’t spend more money than you have, so you either print new money (bad) or borrow more money (bad if you haven’t budgeted it). Balancing the budget won’t make the economy prosper, but it WILL stop the economy from festering further.

      Cutting taxes for rich people: Calls to soak the rich have nothing to do with fixing the economy, and everything to do with stupid class warfare. The wealth of the 1% is not sitting under their mattresses, but out in the economy in the form of investments, which helps the economy. Taxing their wealth away means less investments which hurts the economy.

  16. Balanced budgets are terrible when they imply increased taxes, as they have in Europe.

    And cutting taxes for rich people are irrelevant if they don’t accompany spending cuts. But, supposing the spending cuts are made, cutting taxes for rich people allows more money to flow to long term investment, which brings prosperity when those investments come to fruition.

  17. Let’s start with an attack on Keynesian idea of “insufficient demand”. Ridiculous! When have the vast majority ever not wated (“demanded”) more? Suppose public policy focused on one goal; creation of (more) wealth. Supply and demand theory suggest prices, measured not in the transactional medium of money but in terms of labor expended, would fall. Suppose tax law exempted the basic cost of living + education + health care + savings (for investment, or at the least capability for investment). The first bows to populist demands for “progressivity”, while the other three serve to enhance the productivity of the work force. More production, no matter how imperfectly distributed, means a better standard of living. It aloso responds to demands for greater spending by the state on items it provides by increasing the tax base. What am I missing?

  18. WWII and spending DID end the great depression!!! Don’t you readz histories?!

    I am embarrassed to say that thanks to my upbringing and education in our lovely public school systems, I believed his horse shit for many years.

  19. It is truly startling how many people in this thread exhibit a mercantilist mindset. It seems to be another common misconception that the US was better off after World War II because the rest of the world’s industrial base was in ruins. Not better off than the rest of the world, mind you. Better off than it would have been had the rest of the world’s industrial base not been in ruins.

    VG Zaytsev says, correctly, that if that is true, then the US should just impose high tariffs on imports to simulate the rest of the world not being able to produce anything for you. Others reply that that’s not the same because the other nations will simply respond in kind.

    Okay, how about simulating a rest of the world that can’t produce by building a large artificial atoll in the middle of the Atlantic. Call it Exportlandia. Now US factories can produce goods for Exportlandia, confident that Exportlandia can’t produce them for itself or produce anything else that might compete with US production. Put those goods on a ship and sail the ship to Exportlandia. Once there, throw the goods overboard to sink to the bottom of the ocean. The ships return to the US, safely empty of any goods that might compete with US industry and thereby harm US interests.

    GDP and trade surpluses go through the roof! But is the US really better off?

    1. Don’t give Krugman any ideas.

    2. I want to live in Exportlandia.

    3. Creative, but trade surplus and GDP doesn’t increase unless the goods are exchanged for money. Which Exportlandia doesn’t seem to be providing.

      US trade surplus in the late 40s and early 50s was gigantic — one of the reasons the Marshall Plan didn’t hurt — so clearly someone was paying us back in something.

      1. I’m not sure that anyone exchanges goods “for money.” Money is an IOU for a future purchase of goods. Goods are exchanged for goods.

        1. Uh, no. Goods are exchanged for money, that’s one way we keep on top of the countries we buy things from; they send us goods and we send them ever more worthless pieces of paper.

          1. And the money is then exchanged for goods, otherwise there is no “exchange,” only a strange sort of charity.

      2. Tulpa (LAOL-PA)| 1.27.13 @ 10:20PM |#
        “US trade surplus in the late 40s and early 50s was gigantic — one of the reasons the Marshall Plan didn’t hurt — so clearly someone was paying us back in something.”

        The money we ‘loaned’ them via that Marshall Plan? And the money that had been loaned and which loans were later repudiated?
        It remains an interesting question; a book read recently claims the Marshall Plan wasn’t nearly sufficient to rebuild the Euro economy; it was the great good fortune of the Euros that Erhard became the German finance minister.

        1. The MP was a jumpstart. They did get lucky to have sane persons in charge of West Germany and France.

      3. I forgot to mention: Exportlandia does have one industry apart from dumping cargo overboard. They have a printing press that produces currency with beautiful pictures of fanciful sea creatures on it. In order to keep this wonderful export machine going, the Fed will exchange Exportlandian dollars (EXD) one-for-one with US dollars (USD).

    4. And again, you don’t seem to understand my argument. I’m not saying the benefits are reaped from foreign imports not competing with domestic industry. I’m saying that in the rest of the world OUR exports aren’t competing with anyone else’s, or any foreign countries’ domestic industries.

      1. And I’m saying that OUR households do not have as many goods and services as they would have if the rest of the world was able to produce things for OUR consumers and wasn’t collaterally distracting industries into exporting things they could just as well produce themselves.

        The standard by which you should the success of an economy isn’t how much industry is exporting, or even how well industry is doing as a whole, but rather how much the populace is consuming.

  20. “This version of events is routinely conveyed by Keynesian economists, including at least one Nobel laureate with a prominent newspaper column, and the pundits who parrot their doctrine. Hardly a day goes by that a cable-TV commentator doesn’t credit World War II with “getting us out of the Depression.””

    In fairness, this version of events was also conveyed routinely by those who wanted to argues that the New Deal was ineffective and counterproductive. It is relatively recently that it morphed into the implicit argument that FDR did too little.

    1. This. To the millionth.

  21. So Sheldon, liked and happen to agree with the article, but you left me hanging.

    What, in your opinion, DID end the Great Depression?

    1. I don’t know about Sheldon’s opinion, but you can listen to Bob Higgs’ explanation: http://www.econtalk.org/archiv…..he_gr.html

  22. This is a fascinating article that makes numerous excellent points. In the end, however, its central premise seems to have been formed in a near vacuum.

    Never mind all the economic statistics. Try talking to people who lived through the era. For those who suffered through the great depression, the sudden massive growth of jobs and paychecks provided all the proof necessary that WWII had in fact broken the depression.

    Tens of thousands of new jobs at factories producing all manner of military equipment generated paychecks, often the largest that workers had ever seen, and those paychecks brought families and communities a return to prosperity. The assertion that jobs producing military equipment shouldn’t count because they didn’t produce consumer goods is particularly unpersuasive. Those jobs produced paychecks. That’s all that mattered to the people who scrambled for those jobs.

    1. If they were all so prosperous why were they canning there own food, repairing their own houses and otherwise doing things only poor people did? People becoming more prosperous don’t do these things and they certainly don’t go into debt while doing them. Debt to GDP went up from 45% (bad but not crippling) to 116% (near meltdown levels) during WW2 (American timing).

      1. Do you know why backyard gardens were called “victory gardens”, Michael? Or the posters proclaiming “When you drive alone you ride with Hitler”?

        A lot of that stuff was done out of patriotism, to avoid diverting resources away from the war effort, not due to poverty.

      2. And private persons weren’t going into debt, the govt was. Private persons were buying war bonds for god’s sake.

        1. Tulpa (LAOL-PA)| 1.27.13 @ 10:32PM |#
          “And private persons weren’t going into debt, the govt was.”

          Pretty hard to go into debt when there are no goods so buy. Care to explain the point?

          1. Is this supposed to be a rebuttal? It doesn’t contradict my claim.

            1. Yes.
              Your claim is that people ‘weren’t going into debt’.
              Of course they weren’t. They had no ability or mechanism to do so; care to beat on another strawman?

    2. Enter the Bastatian economist…

    3. It’s nice to have money when there is nothing to buy.

  23. Let’s not forget fed debt went up 71% of GDP 41-45. So they were sacrificing future prosperity for current prosperity, and they didn’t get it.

  24. Here’s something that hasn’t been mentioned yet. After the end of WWII 49% of college students were veterans. The GI Bill allowing many soldiers to attend college and join the workforce. Not sure if there is any correlation there but it seems important at that time in history.

  25. If this holds true King Obama better cut off the government spending.

  26. One of the fundamental flaws of Keynesian Economics as well as most other economic theories is not recognizing that war materials are not the same as production machinery and consumer goods in terms of economic effect and benefit.
    War materials are designed to be expended in the same fashion as the “Potlatch” of Northwestern American Indian Tribes. The tribe that could demonstrate the greatest wealth was the one that could throw the most goods over a cliff and into the river, where it was carried out to sea thereby benefiting nobody. One difference in character of war materials is that they don’t just get expended but are used to actively reduce the goods of the opponent to piles of useless rubble. Sort of like a Potlatch on steroids.
    Most Keynesians recognize the waste of the Potlatch but have a central vision blind spot when it comes to war material. Until economic theory recognizes the true value [it being a drag not a plus] of war material production they are all so many cracked pots waiting to fall off the shelf and be swept into the dustbin of history.

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