-Robert
Higgs lectures about WWII folly (45 minutes):
-Historian
Robert Higgs writes about how producing mass weaponry does not lead to economic
prosperity:
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.
-Economist
Steven Horowitz published an article in the National Review which concluded
WWII did not raise living standards, but rather degraded them:
"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……”
“In response to contemporary
arguments that the expenditures associated with World War II were a major factor in ending the Great
Depression and should therefore be imitated
today, we offer historical evidence to suggest that the wartime economy was hardly a model of success in the
eyes of most Americans. Expanding on Robert Higgs’ criticisms of the ability of conventional macroeconomic data to
tell the real story, we examine
newspapers, diaries, and other primary source material to reveal the retrogression in living standards in the US during the war.
Our investigation suggests that
wartime prosperity is largely a myth and hardly a model for recovery from the Great Depression.”
-Economist
Art Carden explains that the WWII GDP
figures are misleading:
“ Gross Domestic Product, one
measure of a country's output, is defined as the sum of consumption expenditure, investment expenditure,
government expenditure, and net exports. A serious problem arises with government spending:
How do we assess something not traded in markets?......”
“….This problem was compounded by price controls
during World War II — official prices simply
did not reflect the true cost of the war. If we are going to have meaningful economic calculation, we need real
market prices. Price controls and similar interventions introduce arbitrariness and uncertainty. Procurement at
below-market prices is a way to mask
the cost of any endeavor. Consider the draft, which forces people into military
service at wages below what
they would earn on the unhampered market. The amount spent on wages and board for conscripts is an underestimate of
the real cost of maintaining the
force.” http://mises.org/daily/5069
-An
Analysis by economist Richard E. Vedder states:
“Between
1943 and 1945 government deficits ranged between 21 and 27 percent of GDP — in comparison to the size of today’s economy this
would be the equivalent of annual deficits of around
$3 trillion to $4 trillion. During these three years, the national debt rose
from 50 percent of GDP to over 120
percent. Furthermore, the United States Bureau of the Budget estimated that at the wartime peak 45 percent
of the nation’s civilian labor supply was supported by government spending on the war effort while another
12 million citizens (18 percent of the total labor
force) were employed directly by the military…..”
“…..But
the real economic lesson to come out of the World War II era was not that the conscription of nearly a fifth of the labor
force into grueling and dangerous working conditions abroad and the imposition of a command economy at home —
complete with rationing, price controls,
and government allocation of many aspects of life — could bring unemployment
down. Soviet-style command economies had
many problems, but unemployment was not typically one of them.
Instead,
the true lesson from the period can be ascertained from the events of 1945-1947
when the largest economic “stimulus”
in American history was dramatically and quickly unwound, months before most people
anticipated it (because the atomic bomb brought a sudden unexpected end to the war). No other
episode more clearly supports the notion that the best economic stimulus is for the government to get out of the
way.”
-The
Depression of 1946 (related to WWII)
-An analysis by Jason E. Taylor of the Cato
Institute states:
Historically
minded readers may be saying, “There was a Depression in 1946? I never heard
about that.”You never heard of it
because it never happened. However, the “Depression of 1946” may be one of the most widely predicted events that
never happened in American history. As the war was winding down, leading Keynesian economists of the day argued,
as Alvin Hansen did, that “the government cannot just disband the Army, close down munitions factories, stop
building ships, and remove all economic controls.”
After all, the belief was that the only thing that finally ended the Great
Depression of the 1930s was the dramatic
increase in government involvement in the economy. In fact, Hansen’s advice
went unheeded. Government canceled war contracts, and its
spending fell from $84 billion in 1945 to under $30 billion in 1946. By 1947, the government was paying
back its massive wartime debts by running a budget
surplus of close to 6 percent of GDP. The military released around 10
million Americans back into civilian
life. Most economic controls were lifted, and all were gone less than a year
after V-J Day. In short, the economy
underwent what the historian Jack Stokes Ballard refers to as the “shock of
peace.” From the economy’s
perspective, it was the “shock of de-stimulus.
- Economists
Richard Vedder and Lowell Gallaway studied the “depression of 1946” and
concluded:
“Modern
standard statistical sources suggest there was a very severe economic downturn in 1946. The evidence does not support that conclusion,
and it is clear that
statistical revisions have served to distort the historical experience. Keynesian
economists ex ante predicted a major downturn after the war, but when it did not come
they ex post abruptly changed their
tune…”
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