Mind you, the war didn’t magically “solve” this bubble. Wartime rationing is the price you have to put up with once your fake prosperity has opened into hot war. Plus, if you lose your military struggle (as most aggressors throughout history tended to), there’s always the possibility of having to repay your debt afterwards plus reparation. It’s quite a gamble.
How could that be better for the economy’s capacity to produce (now for the war demand of the government, not for the consumption demands of the people), than simply defaulting in peace time?
People tend to be more permissive if you tell them “You have to sacrifice for the victory of your nation” than if you speak the truth, such as “You have to sacrifice now because you’ve been living well above your means for years”. Of course, this doesn’t enhance productivity in any way. It’s just a really bloody, useless delay of true recovery.
What it can achieve, though, is create a false impression of your former Fuhrer. I hear many folks who lived through this period of time say, sort of under their breath, that “it wasn’t all bad back then” and that “the economy was good”. I then try to explain to them that what they had was not a sound economy, but an inflationary debt bubble that culminated in a world war. For many, that’s a tough sell. Shows how effective propaganda was back then.
Still their industry output increased until new year 1944/45, didn’t it?
May or may not be true, it’s irrelevant as long as people’s preferences are ignored. That’s the problem with Keynes’ aggregate supply and demand. Theoretically, we could all band together and build one giant warship every year just to sink it in the North Sea thereafter. GDP and output may increase by doing so, but what’s the point?
I can well imagine that Germans worked their butts off trying to increase armaments production. What was the point? More destruction and harm to innocents. It didn’t serve anybody.
Am I somewhat right if I say that maybe it isn’t so hard for a planned economy, for a few years at least, to increase output of the “goods” (weapons) that the dictator and generals demand, but that that doesn’t mean “economic growth” since that very concept requires the free individuals to make the valuations. And they’d actually prefer a family car over a cannon, and a vacation over conscription?
Yes, that’s the point. After all, the Soviets were quite successful initially with their space projects; but how many resources were squandered just for these propagandistic stunts! You can set up an economic plan and it may even be fulfilled, but that doesn’t guarantee there will be no shortages or overproduction. That’s what the market pricing system is for.