WWII and the Great Depression

[ccravens]

Hello all - first time poster (and new member), long time lurker.

I've read on the economics topics a number of times of posters claiming that the massive government spending during WWII put an end to the Great Depression.

Usually it is done by Keynesians/Krugmanites trying to prove that massive government spending is needed to end the current recession, because that is what it did during the early 1940s.

While it did solve the unemplyment problem, I was always taught that many factors were used to measure an economy's health, not just employment. Things like GDP, inflation rates, prices, value of stocks and bonds, etc. etc.

The problem I have is this: it is hard to think of your economy as "growing" and a depression as "over" when 29% of your labor force is conscripted, there is rationing, shortages, price controls, an inability to buy consumer goods, and a longer work week.

Many would argue: after the war was over, in 1946, when government spending fell by 67%, we experienced a tremendous economic boom. Why? because the normal economy was producing the consumer goods people wanted. That's when the Great Depression was over.

If we don't correctly learn from the past, it seems we'll be doomed to repeat it.

 

[expat_panama]

...Many would argue: after the war was over, in 1946, when government spending fell by 67%, we experienced a tremendous economic boom. Why? because the normal economy was producing the consumer goods people wanted. That's when the Great Depression was over.

If we don't correctly learn from the past, it seems we'll be doomed to repeat it.

There was a time that I went along with the spending-cures-unemployment theory. It wasn't easy because it meant I also had to push the 'doesn't-work-means-more needed' theory also.

Over the past few years it's been a lot easier to see how job losses both then and now come from a Washington led 'war on employers'. The fact's driven home by comparing the inaugural speeches of '33 and '09. Both rants stress the 'greed' of the previous decade and go on to promise fairness (AKA getting even) with the rich corporation owners.

Roosevelt's war on employers didn't end until he died 11 years later. Since then we've amended the constitution to halt FDR/BHO-style power abuses so we shouldn't have to wait so long this time.

 

[CrusaderFrank]

FDR Dropping dead was the best thing that ever happened to the economy in the 1940's

 

[Rshermr]

FDR Dropping dead was the best thing that ever happened to the economy in the 1940's

Classy, as normal, Crusader. And so profound, as normal, crusader.

 

[Wiseacre]

I've always had a problem classifying WWII as a stimulus, since it was 5 years long. And the amount of spending was obscene, from a starting point of 10 billion in 1940 to approx 107 billion in 1945, I don't think that instance qualifies as a reasonable example of a stimulus. We didn't have many moochers then, everybody worked doing something. Different time, different business climate, different attitudes, what worked then may not work now.

 

[MikeK]

The factors that brought about and sustained the Great Depression are essentially the same as those which caused our current economic problems. Those factors are diversion of the Nation's wealth resources to a small segment of the population and the hoarding of that wealth. FDR imposed a progressive income tax with a 91% maximum rate and he redistributed the recovered wealth to the working class by creating much needed make-work programs, such as the WPA and the CCC, which repaired and vastly improved our national infrastructure. My own father was employed in these projects which enabled him to support his family through the Depression years.

It was a slow process but the distribution of that money to people who immediately spent it brought about the circulation a national economy needs to thrive and the end result was the period of phenomenal prosperity between the 40s and 80s which gave rise to the American Middle Class.

The beginning of the end of that economic energy came about when Ronald Reagan, the man from General Electric, introduced Reaganomics, the first symptom of which was the Savings and Loan scandal, and it's been downhill at an increasingly rapid rate from then on -- because what was sold to us as trickle-down economics has in actual fact operated to siphon-up the Nation's wealth to a small group of high-level scam artists. The only thing that will repair the damage done to the economy and put America back to work is to go after Wall Street and the Banks, investigate and prosecute the sonsabitches who have grown fantastically wealthy by all sorts of deviously fraudulent schemes, recover what was stolen via massive fines, and imprison those found guilty of malfeasance and fraud. And anyone who doesn't believe there has been a lot of that need only obtain and watch a video called Inside Job.

Watch Inside Job on-line, free, here: http://www.filmsforaction.org/watch/inside_job_2010/ and LEARN!

 

[Unkotare]

WWII didn't end the Great Depression. The end of the war and the end of government controls over the economy did.

 

[MikeK]

[...]

Many would argue: after the war was over, in 1946, when government spending fell by 67%, we experienced a tremendous economic boom. Why? because the normal economy was producing the consumer goods people wanted. That's when the Great Depression was over.

[...]

The economic boom began in the late 1940s and you are almost right about the reason for it.

It didn't take place because of the consumer goods people wanted, but rather because they had the money to buy the things they wanted. And they had that money because of tax increases on the upper income levels and the government make-work projects (thanks to FDR) that put money into working class hands -- including my own father's. The resulting circulation of that money is what stimulated the economy and fostered growth.

Today's economic problem is very similar to that of the Depression era and the same solution is needed to correct it. Our treasury has been looted by white-collar criminals and that hoarded money must be recovered from them and circulated. Investigation, prosecutions, and elevated tax on upper income levels is the way to do that.

 

[Annie]

I've always had a problem classifying WWII as a stimulus, since it was 5 years long. And the amount of spending was obscene, from a starting point of 10 billion in 1940 to approx 107 billion in 1945, I don't think that instance qualifies as a reasonable example of a stimulus. We didn't have many moochers then, everybody worked doing something. Different time, different business climate, different attitudes, what worked then may not work now.

It did seem obscene, until the last 3 years.

 

[ccravens]

The factors that brought about and sustained the Great Depression are essentially the same as those which caused our current economic problems. Those factors are diversion of the Nation's wealth resources to a small segment of the population and the hoarding of that wealth. FDR imposed a progressive income tax with a 91% maximum rate and he redistributed the recovered wealth to the working class by creating much needed make-work programs, such as the WPA and the CCC, which repaired and vastly improved our national infrastructure. My own father was employed in these projects which enabled him to support his family through the Depression years.

It was a slow process but the distribution of that money to people who immediately spent it brought about the circulation a national economy needs to thrive and the end result was the period of phenomenal prosperity between the 40s and 80s which gave rise to the American Middle Class.

The beginning of the end of that economic energy came about when Ronald Reagan, the man from General Electric, introduced Reaganomics, the first symptom of which was the Savings and Loan scandal, and it's been downhill at an increasingly rapid rate from then on -- because what was sold to us as trickle-down economics has in actual fact operated to siphon-up the Nation's wealth to a small group of high-level scam artists. The only thing that will repair the damage done to the economy and put America back to work is to go after Wall Street and the Banks, investigate and prosecute the sonsabitches who have grown fantastically wealthy by all sorts of deviously fraudulent schemes, recover what was stolen via massive fines, and imprison those found guilty of malfeasance and fraud. And anyone who doesn't believe there has been a lot of that need only obtain and watch a video called Inside Job.

Your post was a gross oversimplification, and just plain wrong in the 3 areas you tried to tackle: causes for the depression, the 40's-80s "growth," and the period you refer to as "Reaganomics."

Period 1.The causes of the depression being unequal distribution of the wealth? Hardly. Read a few textbooks, and you'll see that the culprits were: the Feds easy-money policy which created the stock market bubble; the market crash; the Hawley-Smoot tariff; the Revenue Act of 1932; the massive government spending under Hoover and FDR, which displaced the private economy.

Your father would have been better off without all of these factors; then the depression would have been OVER years before, and he wouldn't have had to depend on the New Deal for his living.

Period 2. Redistribution of income thru taxation gave us "the period of phenomenal prosperity between the 40s and 80s which gave rise to the American Middle Class." You must be kidding, right? For one thing, you must not know that there were very real economic problems and recessions during that 40 year time period. Are you reallysaying there was no middle class before? Interestingly enough, it was the tax cuts and sound money policies of both JFK and Reagan that got us out of the recessions of their times.

Period 3. Your gross misreading of history continues. To believe that there was prosperity between the 40's and 80's that Reagan brought to an end is just plain wrong. Either you are uninformed or just lying. Have you never heard of the 11 year stagflation of the 1970s? Don't you remember it, or were you too young? Unemplyment, interest rates in the 20% range, long gas lines, the "WIN" buttons, etc.

It was Reagan who came in during the early 80s, and through tax cuts and a sound currency ENDED the period of stagflation that idiots like Nixon, Ford and Carter had presided over. THAT started the period of prosperiety, from the early 80's to 2008; the greatest period of sustained economic growth in modern history.

Sounds like you listen to economic conspiracy theorists at worst, MSNBC at best. But the real history is out there, if you cared to explore.

 

[regent]

Most economies look good if the nation uses trillions of borrowed money to keep it going. Reagan tripled the national debt and our present problems began with that. We might have recovered from Reagan, but then Bush comes along with his two wars, his tax cuts for the wealthy, and more borrowed trillions, and bingo we seem headed for another Great Depression but something stopped it, perhaps the stimulus or perhaps Boehner's intensifying his tan. In any case while the slide seems stopped we have not yet resumed our properity.
As for FDR the historians have always placed him as one of the three of America's greatest presidents, and recently as the greatest. And what did the people think of FDR, they elected him four times in a row, a position is likely to be FDR's forever? So FDR ended up judged as the greatest president by both historians and the American people.
But Republicans are still chanting, "How about that Bush?"

 

[Widdekind]

it is hard to think of your economy as "growing" and a depression as "over" when 29% of your labor force is conscripted, there is rationing, shortages, price controls, an inability to buy consumer goods, and a longer work week.

First, men drafted into the army are removed from the work-force. Economically, "they don't count". Instead, men "vanished overseas", and women took their jobs. Economically, looking only at the rate (%) of employment, in the potential pool of local labor, E (%) rose, and UE (%) fell. Economically, draftees are non-relevant.

Second, government-imposed controls on Prices & Quantities are not an intrinsic part of Keynesian Fiscal Stimulus. Insofar as war always involves such controls, then war is not the optimal means of effecting Fiscal Stimulus. Keynes pleaded with FDR, c.1933, specifically for a non-war-time Fiscal Stimulus, in a letter Keynes wrote to FDR.

The New Deal was "the right idea" (Fiscal Stimulus, for productive purposes, e.g. infrastructure), but "not enough" (too small); WWII was "big enough", but not necessarily ideal on implementation (being for destructive purposes). Perhaps JFKs "moon mission" would be an example, of a politically powerful movement, for large-scale spending, on productive purposes ? (JFK's legacy was ended amidst the OPEC oil embargoes)

 

[CrusaderFrank]

Most economies look good if the nation uses trillions of borrowed money to keep it going. Reagan tripled the national debt and our present problems began with that. We might have recovered from Reagan, but then Bush comes along with his two wars, his tax cuts for the wealthy, and more borrowed trillions, and bingo we seem headed for another Great Depression but something stopped it, perhaps the stimulus or perhaps Boehner's intensifying his tan. In any case while the slide seems stopped we have not yet resumed our properity.
As for FDR the historians have always placed him as one of the three of America's greatest presidents, and recently as the greatest. And what did the people think of FDR, they elected him four times in a row, a position is likely to be FDR's forever? So FDR ended up judged as the greatest president by both historians and the American people.
But Republicans are still chanting, "How about that Bush?"

Obama borrows over a trillion ANNUALLY.

Is this a good economy?

 

[Unkotare]

As for FDR the historians have always placed him as one of the three of America's greatest presidents, and recently as the greatest.

He was a son of a bitch.

 

[MikeK]

[...]

It was Reagan who came in during the early 80s, and through tax cuts and a sound currency ENDED the period of stagflation that idiots like Nixon, Ford and Carter had presided over. THAT started the period of prosperiety, from the early 80's to 2008; the greatest period of sustained economic growth in modern history.

Sounds like you listen to economic conspiracy theorists at worst, MSNBC at best. But the real history is out there, if you cared to explore.

The fact that you can audaciously suggest Ronald Reagan is who rescued the economy during his presidency tells me you are parroting a lot of relatively sophisticated right-wing snow-job propaganda, which you've swallowed whole but I won't waste time trying to unravel.

I have read the paper which puts forth incontrovertible scientific proof that honey bees are incapable of flying, so I'm not at all impressed by your pseudo-academic contribution. Ronald Reagan was a grade-B actor and dim-witted corporatist puppet whose actions have wrought massive damage upon this Nation. And your attempt to portray him as anything else might appeal to other right-wing morons but I'm not going for it. He, along with Bill Clinton and the elitist sonofabitch who followed him have collectively damaged this Nation so badly we might never recover from what they've done.

 

[Wiseacre]

[...]

It was Reagan who came in during the early 80s, and through tax cuts and a sound currency ENDED the period of stagflation that idiots like Nixon, Ford and Carter had presided over. THAT started the period of prosperiety, from the early 80's to 2008; the greatest period of sustained economic growth in modern history.

Sounds like you listen to economic conspiracy theorists at worst, MSNBC at best. But the real history is out there, if you cared to explore.

The fact that you can audaciously suggest Ronald Reagan is who rescued the economy during his presidency tells me you are parroting a lot of relatively sophisticated right-wing snow-job propaganda, which you've swallowed whole but I won't waste time trying to unravel.

I have read the paper which puts forth incontrovertible scientific proof that honey bees are incapable of flying, so I'm not at all impressed by your pseudo-academic contribution. Ronald Reagan was a grade-B actor and dim-witted corporatist puppet whose actions have wrought massive damage upon this Nation. And your attempt to portray him as anything else might appeal to other right-wing morons but I'm not going for it. He, along with Bill Clinton and the elitist sonofabitch who followed him have collectively damaged this Nation so badly we might never recover from what they've done.

Well thank God you're at least fair and balanced about it.

 

[ccravens]

[...]

The fact that you can audaciously suggest Ronald Reagan is who rescued the economy during his presidency tells me you are parroting a lot of relatively sophisticated right-wing snow-job propaganda, which you've swallowed whole but I won't waste time trying to unravel.

I have read the paper which puts forth incontrovertible scientific proof that honey bees are incapable of flying, so I'm not at all impressed by your pseudo-academic contribution. Ronald Reagan was a grade-B actor and dim-witted corporatist puppet whose actions have wrought massive damage upon this Nation. And your attempt to portray him as anything else might appeal to other right-wing morons but I'm not going for it. He, along with Bill Clinton and the elitist sonofabitch who followed him have collectively damaged this Nation so badly we might never recover from what they've done.

I'm not SUGGESTING that the Reagan tax cuts, along with a sound dollar, rescued the economy. The FACTS say it. Since it seems you mostly engage in sloganeering and rhetoric, you wouldn't be interested in the facts. But they are there for you to see. Here are some of them (not that you're interested or maybe you just can't understand them):

the quarter century starting in 1982 would see 3.3% growth per year; the "misery index" dropped from 21 (under Carter) to 9-10; inflation dropped from record highs to 1.9% in 1896; unemplyment went from 9.6% in 1983, down to the 5 point range; stocks and bonds improved greatly in value. And on, and on, and on. But you'd never let the economic facts get in the way of your political bias, right?

You are "parroting propaganda" from MSNBC, while I am giving you facts. PLEASE refute them! I know you won't. People like you like to parrot slogans and spew propaganda and ignore any facts that don't fit your pre-programmed ideas.

BTW, Congress gave the peanut-farmer Jimmy Carter the tax cuts. He refused to sign the bill. Reagan walked into office, with the tax cuts literally sitting on his desk, and signed. So Reagan wasn't some sort of economic genius. He just had the common sense to do what Carter didn't.

 

[ccravens]

The New Deal was "the right idea" (Fiscal Stimulus, for productive purposes, e.g. infrastructure), but "not enough" (too small); WWII was "big enough", but not necessarily ideal on implementation (being for destructive purposes).

This is classic Krugmanism to explain failed Keynesian policies. It wasn't that massive government spending didn't work; it's just that we didn't SPEND ENOUGH! What a clever excuse! It means never having to admit that you are wrong!

Unfortunately, that is the excuse that out current leaders use to explain why Stimulus I and II haven't gotten us out of our current recesssion. We just need to spend more!

Just like Greece, right!

GREAT IDEA!!

 

[regent]

With the New Deal the economy started to recover, so much so, that FDR stopped some of the programs and the nation had another recession in 1937, There were, and are, no manuals, no
textbooks no programs that tell a president how to cope with a depression and FDR experimented. Try this, try that, but whatever make sure the people are able to cope. The question might be did FDR spend enough, did it take the spending of WWII to finally put enough money into people's pocket so that when the war ended people could buy and they did buy buy buy. They bought cars, refrigerators, washing machines, houses and America was on her way again. If Hoover had continued in office he only knew the Republican answer, help business and it will trickle down. But when business got the money it trickled into savings accounts to wait for the end of the depression.

 

[MikeK]

[...]

I'm not SUGGESTING that the Reagan tax cuts, along with a sound dollar, rescued the economy. The FACTS say it.[...]

Everything Ronald Reagan did that looked like he was rescuing the economy he did by putting the Country on a credit card and tripling the National debt, which is the fact you Reaganites choose to ignore. Briefly stated, Reagan did what Carter could have done -- but didn't.