While discussing the current economic problems with some friends, somebody mentioned that one of the reasons the country pulled out of the Depression was WWII. I questioned that because I couldn’t understand how the military could possibly generate wealth given that all it does is waste money. (Justified or not, that is a different discussion though) He responded: "World War II forced us to fully mobilize our economy to produce the vast amount of war supplies that were needed for the war effort. Everyone was working together, which amounted to a huge amount of resources being produced (I believe our GNP doubled during war time). Also, it ties in to what I said about Roosevelt’s job programs helping more than his spending plans. Many businessmen started taking advantage of the government’s generous benefits to people who helped the war effort (although this was Truman more than Roosevelt).
Basically, World War II turned all the negative energy from the Great Depression into positive energy to help the war effort."
I was unsure of what to say at this point because I can see where he is coming from - it did completely mobilize the economy, it’s just at what cost and why was that better than leaving the money with taxpayers. I’ve been reading some articles on lrc and mises about this but still am not sure so I thought I’d post it. Thoughts?
Sure, the war brought us out. If you don’t mind all the deaths and destructon. And the hardships imposed by rationing. Because nothing helps eliminate demand of certain things and encourages the merchants of death like a good wholesale slaughter of a generation.
Tell him that. Let his jaw drop as he struggles to come up with an answer.
I think this discussion is going on around a lot of watercoolers these days. For starters take a peek at Henry Hazlitt’s Economic in One Lesson. He partially covers these subjects. When reading Chapter 2 The Broken Window Fallacy, I have concluded that during and after World War II we were simply the glazier. In other words we had the unique circumstance of being one of the few industrialized nations that still had its infrastructure intact therefore we could readily supply the rebuilding effort in both Europe and Asia. On the whole though the economy suffered. You need to look no further than asking this question: Would America have been more productive had 418,000 Americans not died or were we less productive as a result? To extrapolate it further was the World more productive or less productive as the result of 25 million deaths? At that point most people will begin to realize that war is a destroyer of wealth not a creator. Sure, the United States no doubt enjoyed economic prosperity due to the unique competitive advantage we enjoyed but we prospered in spite of the wealth that was destroyed not because of it.
I’m new to Austrian Economics myself but this is my understanding anyhow.
Robert Higgs is the resident Austrian who knows all about the economics of war, so reading up on him would help.
When your opponent points toward the increase in GDP during the war, remind him that the statistic is susceptible to the broken window fallacy mentioned above. A higher GDP may not indicate a high standard of living. All those resources like fuel and steel were all literally blown up, while wartime shortages ensued.
When your opponent claims unemployment dropped during the war, remind him that there was a military draft at the time, and men who refused were imprisoned. Coercing people into employment always “solves” unemployment.
Unemployment figures tend to take a hit, when you draft them all - and send them over to die in a war.
Less men, less unemployed = reduction in unemployment figures (thus the irrational conclusion, the war got the US out of a depression… lol and made a move towards prosperity.)