There are many people who say the Depression was ended by World War II but offer no reasons why. There can be no question that World War II put many people to work – but what happened when the war effort was over & none of those jobs supporting Defense existed any longer? People feared that unemployment would sky rocket again to Depression levels.
I have done my own study of this & agree with the subscriber above that after more than a decade of Depression & the rationing during the war that there was certainly "pent up demand" in the economy – but according to Professor Jason Taylor of Central Michigan University pent up demand was "not nearly large enough to have meaningfully offset the declines in government spending." Professor Taylor "attributes the post-stimulus economic miracle to the power of the free market to adjust after nearly 15 years of poor government policies by Hoover & FDR." Amity Shlaes, who some of you met @ the recent ISI seminar on Calvin Coolidge @ Princeton, writes that government's "truce with business played an important role" in the return to full employment after the war ended in defiance of Keynesian economic principles. BO continues his war against business.
You also cannot underestimate the American "can do" spirit that resulted from the winning war effort where everyone was united against several common enemies. This included people of high salaries who became low paid military men. As a boy collecting baseball cards in the 1950s I looked @ the stats of players like Ted Williams & Stan Musial & read the words "In Military Service" substituted for stats for several years in these player's primes. That inspiring example of some of my early heroes has only grown in significance to me over the years.
Doug - Just a quick comment on the WW II subject. As for our recovery after WWII let's not forget that much of the industrialized world was left in shambles. America's war machine was in good shape and ready to supply the world to fulfill that pent-up demand. As, I have said many times, money must come in from outside of your economic sphere for an economy to grow and sustain. The recovery after WWII proves that. Without the world-wide demand for American goods, Americans would not have had money to fill their demand.
ReplyDeleteDoug - Let me add my perspective on the WW II matter. I was a teen during the war years and I can definitely relate to the "pent-up demand" of the people when the war was over. With rationing on food and other items for the war years, it was no surprise that people were eager for consumer goods. Because so many worked for the war effort building planes, ships, guns, bullets, bombs etc. they found themselves with money to spend. Car companies that converted to making vehicles for the army went back to making cars for consumers. The same with other companies such as GE that went back to making refrigerators and washing machines and dryers and people bought them. Supermarkets started springing up offering foods you couldn't get during the war years. Everyone was tired of austerity, they had the money and wanted the goods, and business began to boom. The free market took over and did very well, thank you. Proof, once more that the free market is the answer to prosperity.
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