Wednesday, February 17, 2010
One More Time: World War II Did Not Bring Us Out of the Depression
...As Bob Higgs has shown, in numerous scholarly as well as popular publications and interviews, the private sector of the economy continued to perform poorly throughout World War II and normal, civilian-oriented prosperity only resumed after the war, in 1946.
The misconception that World War II was a period of prosperity apparently comes from measurements such as the unemployment rate falling from an estimated range of somewhere between 9 and 15% in 1940, down to 1.2% in 1944. As Dr. Higgs points out, this is not surprising given that a total of 16 million people served in the military forces during the course of the war, and were thereby removed from the labor force. Meanwhile, industry shifted to producing vast amounts of materiel to be destroyed—planes, ships, guns, etc. If such production created prosperity, then building airplanes simply to crash them into the ocean would indeed be good economic policy. At the same time, consumer goods became largely unavailable and/or rationed, and standards of living remained quite low. Yet the attitude of “shared privation for the common good” in many ways made people feel no longer depressed despite the very real fact that the economy remained below pre-1929 levels of prosperity....