How Did the War Make the World Great Again Quizlet

In his 2008 volume, The Return of Depression Economics and the Crisis of 2008, Paul Krugman writes: "The Great Depression in the United states of america was brought to an cease by a massive arrears-financed public works program, known equally World War Ii."

He has since repeated this bon mot in a number of columns and television receiver appearances. Like Keynes, Krugman lets his fondness for flippant, pithy sayings go far the way of regard for long-run economical prosperity. (Keynes famously remarked that "In the long run we are all dead," ignoring the fact that in the long run others are alive.)

It is true, as the graph shows, that the country'southward gross domestic product rose sharply during the war.

Merely Gross domestic product measures only the total monetary value of production while ignoring what is really produced. It is but a number, a number that would be no different if consumer goods were produced and sold or if the government set the workforce to making mud pies and then purchased those pies for a like sum. Yet what is produced makes all the difference. The point of an economy is to better people'due south lives by producing appurtenances and services they want and need.

During the war the P in Gross domestic product largely consisted of the munitions needed to defeat the Centrality powers. While these weapons were necessary to win the state of war, they did nothing to provide food, wearable, and shelter. Despite all the production increases that came with the war, the American people were materially worse off while it lasted. Some 15 meg American men and women, over ten percent of the population, served in the armed forces. Living, and sometimes dying, in a foxhole was not an improvement over stateside life—even life during the worst of the Depression. Dorsum in united states of america living standards also dropped (though non as dramatically) as consumer goods, including food and gasoline, were rationed.

Bridges to Nowhere simply Recovery?

Krugman, however, is interested in jobs rather than production. He wants the government to spend massive amounts of money and is relatively indifferent as to how the money is spent: "Allow the regime borrow money and use the funds to finance public investment projects—if possible to good purpose, merely that is a secondary consideration—and thereby provide jobs, which will make people more willing to spend, which volition generate still more jobs, and then on."

This indifference is a logical outcome of his belief that the war ended the Great Low. If, equally Krugman thinks, the economy was rescued then past expending huge amounts of resources to build weapons that disappeared overseas, then we would be that much better off now if the government spent a similar amount of resources on things that take even marginal utility—say, bridges to nowhere. If the bridges provide any long-term economical benefit at all, that would but exist icing on the cake.

Economically, yet, Globe War 2 did not spark a recovery so much as it created a financial bubble—non in Net stocks or housing but in

munitions. Once the war was over, the chimera complanate along with the demand for aircraft carriers and B-17 bombers.

The war's outbreak necessitated two policy changes, though, that did aid the postwar recovery. Outset, President Roosevelt stopped his ceaseless attacks on business. As Amity Shlaes points out in The Forgotten Homo, FDR needed large concern to produce the tanks, planes, and ships required to defeat Hitler and his allies. Second, he ended his erratic, trial-and-error experimentation. Before the war the stated strategy of FDR and his Brain Trust was to endeavour one program later on another until they found something that worked. This resulted in perpetual market place churn that made long-term planning and investment especially risky if non incommunicable. Some other result was the creation of myriad tiny, brusk-lived bubbling. Jobs were created in various locations and in diverse crafts merely to disappear when the government lost involvement and shifted its gaze.

Yet Krugman elsewhere prescribes this same strategy of experimentation for today'southward financial woes: "The indicate of all this is to approach the electric current crisis in the spirit that we'll do any it takes to turn things around; if what has been done and then far isn't enough, do more and do something different, until credit starts to menstruum and the real economy starts to recover."

The Don Ho School

Globe War II forced Roosevelt to concentrate on a single area of production: weapons. This focus was maintained for the duration of the war and resulted in a sustained economic bubble. Without a like attending-focusing crisis, withal, current government attempts at stimulus will simply event in economical effervescence—tiny bubbles inflating and bursting as the winds of politics shift lawmakers' attention. Call it the Don Ho School of Economic Idea.

The disability of the Obama assistants's deficit spending to spark economic recovery may be masked for a time past the Fed's connected expansion of the coin supply. Inflation could resurrect the housing bubble, providing a cursory uptick in the economy, just such policies cannot exist maintained for long.

What the state needs is not more economic bubbles—tiny or otherwise. Information technology needs sustained economical growth. That volition come by strengthening the individual sector, not past strengthening government. The best way to practise this is to reduce government spending, which crowds out the private kind, and to enact long-term tax cuts.

Opposite to popular belief, the "public works program" known every bit Globe War II did not end the Great Depression; it ended the New Deal. The end of the war brought federal spending and taxation cuts and the repeal of the Smoot-Hawley tariffs. All these changes combined to pull the nation'due south economic system out of its long and painful slide, and all could accept been made without the war. Similar changes made now could restore the world's economy without the massive homo suffering that, in their absence, is all but inevitable. Inevitable, even so so avoidable and so unnecessary.

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Source: https://fee.org/articles/world-war-ii-ended-the-great-depression/

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