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Source link: http://archive.mises.org/16254/world-war-ii-did-not-end-the-great-depression/

World War II Did Not End the Great Depression

March 29, 2011 by

The illusion of wartime prosperity is rooted in how national income was calculated and in how the statistics were compiled. FULL ARTICLE by Art Carden


Bogart March 29, 2011 at 8:39 am

My argument is that the measuring stick in 1929 was not used during the Depression and into WW2 to measure how great the economy is. That is the Dow Jones. The Dow Jones did not reach its 1929 high until Nov 1953. That was 8 years after the end of WW2. Regardless of productivity and employment numbers, the fact remains that the USA although different at the end of WW2, still had to make up for the pointless destruction created by of the economic policies of Hoover and Roosevelt, and pointless destruction of WW2 itself. (Yes WW2 was pointless. It was a fight between Communists, Socialists recognizing no property rights and thus no other rights. and Fascists, Socialists recognizing some property rights and thus some other rights. The saddest part is that the winning side adopted a nicer form of Fascism.)
I am sensitive to the argument that the Depression ended in 1946 but it took then 8 years to rebuild the destruction and malinvestment of WW2.

Freedom Fighter March 29, 2011 at 8:58 am

If poverty is defined by scarcity of resources and if war kills a lot of people, then there will be less people for the same amount of resources. For the people that survived the war, this is an improvement.

So, from a Keynesian viewpoint, it’s not windows you must break when the economy goes down, it’s people you must kill.

I suppose this is the logic behind the claim that the war ended the depression.

Anthony March 29, 2011 at 5:53 pm

To be fair, that argument entirely depends on whether the per-capita amount of capital increased, decreased or stayed the same, which it would be impossible to determine in quantitatively.

Besides, Keynesians don’t even recognize that capital plays a role in the market, so they would probably say that fewer people sharing a given amount of capital are worse off because of lower aggregate demand.

Luther Stueland March 29, 2011 at 3:29 pm

I have not studied the great depression or WWII, but my simple mind suggests the rapid growth after WWII was due to:
1) People learned to live on less than their production during the war, and
2) Capital ammassed at a rapid pace once wasteful wartime production ceased.

From Mises, “there is only one way that leads to an improvement of the standard of living for the wage-earning masses, viz., the increase in the amount of capital invested.”

Does that layman’s theory hold any water?

Joe March 29, 2011 at 3:51 pm

What greatly helped the USA after the war was the infrastructure was not damaged like in Europe and Japan. The US could now produce for a larger customer base by selling materials all over the world. Talk about a monopoly of unintended consequences.

Adam Smith March 29, 2011 at 11:42 pm

I’m posting this comment here because it was deleted from its appropriate thread, then comments were disallowed. (http://blog.mises.org/16256/clarifying-the-ftcs-censorship-demands/)

I thought that an article advocating First Amendment rights would welcome civil comments or criticisms; I was wrong.

I suspect my comments will be deleted again, but perhaps people will get to read them beforehand:

S.M. Olivia writes:
“I don’t see how anyone — and certainly not the FTC — can objectively determine which religious messages are false, given that all religions rely on things that cannot be empirically proven.”

That’s not what the case is about. The FTC does not have the authority to regulate religion or religious statements, nor were they attempting such a tyrannical power-grab.

Here’s what the court documents say (linked on the author’s preceding post):
“Following a trial, an Administrative Law Judge concluded that Defendants violated the FTC Act by making unsubstantiated claims that BioShark, 7 Herb Formula, GDU, and BioMixx prevented, treated, or cured tumors or cancer.”
The defendants broke a law that’s in place for a reason. That reason has nothing to do with religion.

Ned Netterville April 1, 2011 at 11:52 am

Adam Smith: Regarding comments being deleted and then disallowed. I know, because I asked Jeffrey Tucker why I met with a similar problem and he promptly replied and explained that comments were temporarily suspended while a server change was taking place. I later went back and was able to post my comment. You might try doing the same.

Allen Weingarten March 30, 2011 at 3:14 am

Since wars are the antidote to depressions, let us have the east coast and the west coast go to war, as well as North and South Dakota. Similar battles can occur within cities & states, as they bomb, strafe, and destroy populations & industries.We can even have war amongst the blogs, using viruses & worms, to create jobs for responding to computer crashes.

Joe March 30, 2011 at 11:23 am

A famous quote from Henry Hazlett, “No man burns down his own house on the theory that the need to rebuild it will stimulate his energies.” Allen above said basically the same thing. The war did not end the depression. Here are a few things that might explain why it didn’t end.
The New Deal prolonged the depression because of regime uncertainty in the minds of investors. FDR attacked business and steadily raised income tax rates, corporate tax rates and excise taxes during the 30′s. He added the undistributed profits tax and conducted highly publicized tax cases that sent many investors to prison. FDR issued an executive order for a 100% tax on all personal income over $25k.
When FDR died, and Truman became president, the hostile rhetoric toward businessmen declined and no new tax hikes were added. Businessmen became more optimistic and expanded production, and the US economy was thus able to absorb the returning soldiers and those who had previously worked to make war equipment. (The above scenario is from observations by Robert Higgs, economist) Taken from chapter 16 of the book New Deal or Raw Deal, by Burton Folsom, Jr..

Allen Weingarten March 31, 2011 at 8:14 pm

Joe, did you think I believed that wars were developmental, so that North & South Dakota should go to war with one another?
The last time people didn’t know I was joking was when I wrote that Nancy Pelosi’s approach to the demonstrators in Libya was:
You have to arm them to find out who they are.

Ned Netterville April 1, 2011 at 12:24 pm

Of course war is good for the economy. Look how well Germany’s economy fared as a result of WW II.

Keynesians in general and Krugman in particular believe that war serves as a “fiscal stimulus” in the form of “an enormous public-works projects.” (See, http://jesus-on-taxes.com/ON_PAUL_KRUGMAN.html) In the preface to the German edition of his General Theory, Keynes said (speaking to Adolph Hitler, I presume, who with his Nazi cohorts was at the time (early 1936) in the process of consolidating control of the German economy): “The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.” Hitler adopted Keynes’ fetish for “full-employment,” (See: http://blog.mises.org/10680/keynesianism-loves-the-total-state/) By means of the war he started (WW II), Hitler secured for his German subjects perhaps the fullest employment any modern industrial nation has ever achieved, with even teenagers and old men conscripted to work or fight.

After the war? Keynesians would point to all the employment required to rebuild.

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