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No, Paul Krugman, WWII Did Not End The Great Depression
Forbes ^ | 08/25/2011 | Bill Flax

Posted on 08/26/2011 9:19:33 AM PDT by SeekAndFind

It’s a recurring fantasy for left wing academics fascinated by central planning that in cyclical downturns government should act decisively on a scale equivalent to war. Nobel Prize recipient Paul Krugman exemplifies this intellectual longing to steer our lives.

Krugman effortlessly slides into a war footing espousing intervention comparable to America’s crusade against Hitler, who, take note, centrally planned an economy himself:

“World War II is the great natural experiment in the effects of large increases in government spending, and as such has always served as an important positive example for those of us who favor an activist approach to a depressed economy.”

After WWII until its glaring failures manifest in the Seventies, Keynesianism inundated economic thought. Paul Samuelson’s textbooks became mainstays across the academy. Samuelson championed mathematical analysis, which transformed macroeconomics into a pseudo science spawning waves of budding planners infatuated with statistics.

From this basis the myth prevails that WWII finally overcame the Great Depression. History has revised Hoover, easily the most meddlesome peacetime president before FDR, into a laissez-faire reactionary. The New Deal – a disastrous example of everything not to do during downturns became beneficial, only it supposedly wasn’t aggressive enough.

(Excerpt) Read more at forbes.com ...


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: greatdepression; paulkrugman; worldwar2

1 posted on 08/26/2011 9:19:35 AM PDT by SeekAndFind
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To: SeekAndFind

This is like saying gasoline does not power an internal comubustion engine.

Putz.


2 posted on 08/26/2011 9:21:02 AM PDT by RexBeach (Mr. Obama can't count.)
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To: SeekAndFind

WWII created TEMPORARY unemployment reductions.

Look at Sanders’ charts on economic growth and unemployment. We are lagging for the same reason FDR’s economy lagged - too much gov’t!!!

http://confoundedinterest.wordpress.com/


3 posted on 08/26/2011 9:23:15 AM PDT by whitedog57
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To: SeekAndFind

http://mises.org/daily/5559/Keynes-and-Space-Aliens


4 posted on 08/26/2011 9:23:45 AM PDT by Redmen4ever
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To: SeekAndFind; RexBeach

The article says Smoot-Hawley came BEFORE the crash?


5 posted on 08/26/2011 9:23:54 AM PDT by sinanju
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To: SeekAndFind
Nobel Prize recipient Paul Krugman

Constatly proves he's as prize worthy a Carter, Gore, and Obama.

6 posted on 08/26/2011 9:24:45 AM PDT by tbpiper (Sarah Palin is the antivenin for the Obama poison)
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To: sinanju

Well, that’s wrong. And, also the WWII did help us get out of the depression. If you destroy Europe and they can make things, your gonna do well, no matter what.


7 posted on 08/26/2011 9:27:09 AM PDT by Palter (Celebrate diversity .22, .223, .25, 9mm, .32 .357, 10mm, .44, .45, .500)
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To: sinanju

I believe that is correct!

Then FDR raised taxes for three years in a row. Great idea.

It is a generally accepted principle that the Depression did not end until early 1942.

Henry Morganthau, FDR’s Sec. of Treas. wrote FDR in May, 1939 that “we did not keep our promises” because the unemployment rate was stilll near 20%.


8 posted on 08/26/2011 9:29:45 AM PDT by RexBeach (Mr. Obama can't count.)
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To: RexBeach

RE: This is like saying gasoline does not power an internal comubustion engine.

So, if WW II is to gasoline as the economy is to the engine, how do we get out out of our current economic stagnation if we were to learn from history?


9 posted on 08/26/2011 9:31:07 AM PDT by SeekAndFind (u)
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To: RexBeach
The ideal economic (not moral) scenario is other countries fighting a war, using our industrial capacity to build the the capacity.

If you fight your own war, then any economic effect is just wealth transfer or additional debt. Just look at Iraq/Afghanistan. Not good economically.

10 posted on 08/26/2011 9:31:37 AM PDT by MrShoop
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To: SeekAndFind
Loved this line:

Krugman assures us liberals have a conscience. Whether they have any common sense is less certain.

11 posted on 08/26/2011 9:33:52 AM PDT by CitizenM (Obama's legacy: - The architect of American Decline)
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To: SeekAndFind

World War 2 did not end the Great Depression. During the war we still could not buy a new car, we could not buy tires for our old car, we could not buy any appliances, we could not buy gasoline, we couldn’t even buy sugar or meat.

It was the ENDING of World War 2 that ended the Great Depression.


12 posted on 08/26/2011 9:35:18 AM PDT by CGalen
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To: Palter
The article notes that before the US got involved, the industrial demands of the war from europe drove GDP growth to 19% - that's huge and will get you out of a depression fast! Actually getting ourselves into the war, not as good economically.

This is the corollary of the broken window theory. If you break someone else's window, and you are the only window maker, it helps you. Is there a net overall economic gain, no.

13 posted on 08/26/2011 9:35:26 AM PDT by MrShoop
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To: SeekAndFind; ding_dong_daddy_from_dumas; stephenjohnbanker; DoughtyOne; calcowgirl; Gilbo_3; ...

I always wish I was on one of these show where libs like Benanke and Mathews claim that WWII got us out of the great Depression and that it is proof that government spending works(to end recessions.)

I would reply :”Well if you really believe that war ends recessions then why did scream murder about Iraq? In fact since we are in three wars now, how many are enough for you?”

The trick is to turn the tables on them. Of course instead Republicans just reply by reading the simple cheat cards given to them for every point a Dem makes.


14 posted on 08/26/2011 9:38:06 AM PDT by sickoflibs (Obama :"We all were undocumented workers once")
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To: MrShoop

The “Broken Window Theory” ALWAYS destroys wealth, and it results in a lower standard of living. There is nothing good about destruction.


15 posted on 08/26/2011 9:39:14 AM PDT by CGalen
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To: CGalen
The “Broken Window Theory” ALWAYS destroys wealth, and it results in a lower standard of living. There is nothing good about destruction.

The thing about production is if you don't end up with a net GAIN of value then you did not really help things. Breaking a perfectly good window negates the value of replacing it.
16 posted on 08/26/2011 9:46:56 AM PDT by TalonDJ
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To: whitedog57

But I thought after the war that is when the economy really grew and lead to prosperity for many. Was I taught wrong?


17 posted on 08/26/2011 9:51:42 AM PDT by ilovesarah2012
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To: SeekAndFind

All I know is that there was a depression before the war and recovery after it. I don’t remember any guy looking for work. Yes there was the great GI bill and the 52-20.

[Wikipedia. - Another provision was known as the 52–20 clause. This enabled all former servicemen to receive $20 once a week for 52 weeks a year while they were looking for work. Less than 20 percent of the money set aside for the 52–20 Club was distributed. Rather, most returning servicemen quickly found jobs or pursued higher education.]

What the war did was to rebuild our production facilities to fight the war and to supply the world with goods after the war. Exporting was the key to recovery as it is today.

We have to make more of what we import or continue to sink.


18 posted on 08/26/2011 9:51:45 AM PDT by ex-snook ("Above all things, truth beareth away the victory")
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To: CGalen

That’s only true if you look at the standard of living in aggregate. If all windows are made in china, and a bunch of windows are broken in the US, the world as a whole loses, because wealth is destroyed. But, if you just look at GDP for China, it will have gained, and if you just look at the US, it will have taken a double hit.


19 posted on 08/26/2011 9:53:19 AM PDT by MrShoop
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To: sickoflibs
RE: "The trick is to turn the tables on them."
Agree. But not so easy to do when you have a majority of half brained people. No use going into all the depressing facts we so often re-iterate as how this whole system went down the tubes.
20 posted on 08/26/2011 9:55:00 AM PDT by Marine_Uncle (Honor must be earned....Duncan Hunter Sr. for POTUS.)
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To: sinanju

Smoot Hawley passed the house in May 1929, about a month before the crash. I think the author is saying that the market may have been reacting to the fear of its effects once they saw it pass the house. It wasn’t signed until June 1930.


21 posted on 08/26/2011 9:56:33 AM PDT by MrShoop
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To: SeekAndFind

FDR negotiated the bombing of Pearl to not only end the depression but to make the public accept our entry into WW2!


22 posted on 08/26/2011 9:58:38 AM PDT by dalereed (uity wise!)
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To: dalereed

Looks like Truthers existed back in the days of FDR.


23 posted on 08/26/2011 10:00:49 AM PDT by SeekAndFind (u)
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To: SeekAndFind

Actually it was the election of Ike who pretty well put an “end” to Hoover, FDR and Truman’s Depression.


24 posted on 08/26/2011 10:08:03 AM PDT by US Navy Vet (Go Packers! Go Rockies! Go Boston Bruins! See, I'm "Diverse"!)
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To: US Navy Vet

If we had a depression under Truman, how were we able to help Europe with the Marshall Plan?


25 posted on 08/26/2011 10:08:52 AM PDT by SeekAndFind (u)
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To: Palter

Then finding a country or two to destroy and rebuild should be an excellent way out of our current economic slump, no?


26 posted on 08/26/2011 10:09:36 AM PDT by count-your-change (You don't have be brilliant, not being stupid is enough.)
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To: SeekAndFind

Yes, they have.

27 posted on 08/26/2011 10:14:22 AM PDT by Palter (Celebrate diversity .22, .223, .25, 9mm, .32 .357, 10mm, .44, .45, .500)
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To: MrShoop

The crash was in October ‘29 . The act just made a bad situation worse.


28 posted on 08/26/2011 10:45:08 AM PDT by Vermont Lt (George Lopez is the black hole of funny. Nothing funny can escape his suck.)
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To: MrShoop; Palter; sinanju

See the late Jude Wanniski’s book, The Way the World Works for the relationship between progres toward passage of Smoot Hawley and the 1929 Crash.


29 posted on 08/26/2011 11:10:03 AM PDT by BlackElk (Dean of Discipline, Tomas de Torquemada Gentlemen's Club: Burn 'em Bright!!!)
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To: BlackElk; Palter; sinanju
There is an article on the Jude Wanniski website on the cause of depression - totally worth reading.

http://www.polyconomics.com/ssu/ssu-010713.htm

30 posted on 08/26/2011 11:37:34 AM PDT by MrShoop
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To: MrShoop

I did read “The Forgotten Man” some years ago.


31 posted on 08/26/2011 12:27:41 PM PDT by sinanju
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To: SeekAndFind
So, if WW II is to gasoline as the economy is to the engine, how do we get out out of our current economic stagnation if we were to learn from history?

WW II was, in fact, what got us out of the Great Depression.

Recall that the war was going on for over two years before we got involved.

And, from 1939 forward, Britain and France were buying large quantitities of U.S. armaments -- artillery, trucks, tanks, airplanes, etc. Lend-lease was enacted in January, 1941, whereby the U.S. government started buying armaments and "leasing" them to the UK. After Barbarossa and before Pearl Harbor, we were also started shipping large quantities of armaments to the USSR.

The result was hundreds of thousands of manufacturing jobs and millions of support jobs. Real jobs in the private sector. Not the temporary jobs created by the WPA and the CCC.

The thing to takeaway from the history of the post-depression era is that a.) it took somebody else getting involved in a war, which b.) created jobs in our private sector.

It doesn't have to be a war. Anything that stimulates activity in the private sector will serve. Like drilling for oil and gas, offshore and onshore and on public lands. Like opening mines, instead of closing them. Allowing timber to be harvested from public lands. Allowing the auto industry to manufacture automobiles that people want and can be manufactured efficiently.

The list goes on and on. But one thing is clear: if the federal government were to end their regulatory regime and start encouraging business rather than threatening it, the effect would be akin to a world war.

32 posted on 08/26/2011 3:32:08 PM PDT by okie01 (THE MAINSTREAM MEDIA: Ignorance On Parade)
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To: SeekAndFind

Thanks for posting!


33 posted on 08/26/2011 4:01:20 PM PDT by billflax (Fighting the good fight.)
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To: okie01

Here is the writer’s own view of what got us out of the depression:

On the surface, wartime spending finally propelled America from the Depression’s pits. As war production expanded from roughly 2% of GDP to almost 40%, statistically, America rebounded. In 1940 dollars, GDP shot from $101.4 billion to $120.7 billion in 1941 up to $174.8 billion by 1945 while unemployment fell below 2%.

America didn’t officially enter the fray until December 1941. FDR had by then rescinded most New Deal regulations, scuttled the WPA and similar agencies and ceased his incessant public bickering with private business. Some surmise he stopped attacking industry recognizing he needed their help attacking fascism.

The pre Pearl Harbor boost stems from three factors: wartime spending by others, which does not reflect stimulus on Washington’s part; Lend-Lease, but giving away munitions abroad promotes no prosperity here, and the demise of the New Deal.

After netting out federal spending, GDP surged 17% from $91.9 billion in 1940 to $107.7 billion in 1941. Once engaged, our non-federal output trickled down to $101.4 billion by WWII’s conclusion in 1945.

The private economy reflected little improvement, partly because private consumption was curbed. Living standards didn’t regain 1929 levels until America restored a market based economy in the aftermath of victory.

The president proposed a “Bill of Economic Rights” predicated on aggregate demand maintenance. Congress thankfully repudiated it. Tax rates were slashed while war time rationing, price controls and regulations receded.

America was one of few industrial nations with its productive infrastructure intact. Despite federal spending falling from $93 billion in 1945 to under $30 billion by 1948 (in 1945 dollars), unemployment stabilized around 4% as Americans, free of New Deal shackles, launched an economic boom.

How does blowing up Germany boost American living standards? How is making men sleep in frigid fox holes under enemy fire enriching? How did rationing everything from the enjoyment of luxuries to our clothing and diets lift anyone’s material standing?

The military doesn’t jumpstart the economy, it protects producers. This represents patriotic sacrifice, not prosperity.

Production is the progenitor of wealth, but making things unvalued by markets doesn’t improve life. Neither does working harder to achieve the same result. Repairing damage caused by war or natural calamity through debt encumbrance does nothing to support sustainable growth. Once said project completes, we’re back where we started with debts to boot.


34 posted on 08/26/2011 5:36:32 PM PDT by SeekAndFind (u)
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To: SeekAndFind

So is this clown saying that we should double the defense budget? Unless he referring to BO’s war on the United States.


35 posted on 08/26/2011 6:02:57 PM PDT by Always Independent
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To: Always Independent

RE: So is this clown saying that we should double the defense budget?

If we take Krugman’s argument to its logical conclusion, then we ought to have another World War to get us out of this funk.


36 posted on 08/26/2011 6:04:58 PM PDT by SeekAndFind (u)
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To: SeekAndFind
The pre Pearl Harbor boost stems from three factors: wartime spending by others, which does not reflect stimulus on Washington’s part; Lend-Lease, but giving away munitions abroad promotes no prosperity here, and the demise of the New Deal.

Well, two out of three ain't bad. I overlooked "the demise of the New Deal" -- but incorporated deregulation in the prescription for ending our economic woes today.

37 posted on 08/26/2011 6:32:43 PM PDT by okie01 (THE MAINSTREAM MEDIA: Ignorance On Parade)
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To: MrShoop

When WW2 began, America had the 16th largest army in the world.

Not true with an all volunteer force.

We had to grow rapidly in 1941, and it did have a great impact on the economy.

Thanks for the post.


38 posted on 08/29/2011 5:43:06 AM PDT by RexBeach (Mr. Obama can't count.)
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To: RexBeach
If putting people in the Army helped the economy, then you it would make sense now for the government to employ all the unemployed. Let's say we took 10 million unemployed people and put them in the army, or dig then fill ditches, and paid them $20k a year. We'd have to collect an additional 200 billion dollars in taxes from the people in the private sector. Every government employee, whether it is a bureaucrat in washington, a soldier, or an FDA inspector is a drain on the economy. Money that otherwise might have gone to producing something, is instead allocated by the government which is inherently inefficient.

btw, I am not an anarchist or a libertarian; I support strong armed forces, but recognize the cost to the economy.

39 posted on 08/29/2011 10:56:12 AM PDT by MrShoop
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To: MrShoop

I am much more of a moderate then most people who post on here, but i do have a few thoughts. First i think that deregulating to much would have disastrous effects long term. Giving corporations to much power could be just as disasterous as giving government to much power. Second, all this talk bout FDR making things alot worse begs a very interesting question. If the FED did absolutely nothing, and let things develop without any interference, what would of happened if things had gotten proggressively worse? Keep in mind everyone that part of the depressions cause was zero accountability by large financial institutions. Yet we are seeing the same problem today. Far to much power in the hands of far to few people will always end in disaster!


40 posted on 06/25/2012 9:30:08 AM PDT by Cainkinison
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