Skip to content


Military Keynesianism Can’t Work … Because WWII Was Different from Current Wars

Military Keynesianism Can’t Work … Because WWII Was Different from Current Wars

By WashingtonsBlog
washingtonsblog.com

World War II Was Different

“Military Keynesians” – people who think that war is good for the economy – base their theory on the idea that World War 2 pulled us out of the Great Depression.

I have exhaustively demonstrated that this is a myth: war is not good for the economy.

But even if WWII were good for the economy, things are completely different today.

World War II Employed Armies … Not Drones

Wikipedia points out:

Some critics, and even some supporters, contend that in the modern world, these policies are no longer viable for developed countries because military strength is now built on high-technology professional armies, and the military is thus no longer viable as a source of employment of last resort for uneducated young people.

Given that America fights its current wars with drones and smart bombs, it “employs” far fewer men then during WWII. It is a different world.

The Marshall Plan, Special Trade Provisions and Other Unique Circumstances Made WWII Different

Steven Hill noted yesterday:

Krugman has written, “Deficit spending created an economic boom – and the boom laid the foundation for long-run prosperity.”

But this viewpoint ignores a fairly obvious counterpoint. The United States emerged from World War II as the world’s conqueror, with virtually every economic competitor destroyed. Suddenly, America was the big boy on the block, leader of the Pax Americana, and our industries enjoyed numerous competitive advantages over international rivals. The dollar, suddenly, was the dominant global currency, and that granted Americans cheap money and influence that spurred unprecedented economic growth.

In addition, we then launched the ambitious Marshall Plan, which not only rebuilt our former adversaries, but also created international markets for US producers. One of the Marshall Plan’s conditions was that nations receiving funding were required to give American exporters preferred access to their emerging markets. The years of the Marshall Plan, from 1948 to 1952, saw one of the fastest periods of growth in European history, with industrial production increasing by 35 percent and agricultural production substantially surpassing prewar levels. American businesses, especially those specializing in manufactured goods and raw materials, benefited greatly from these fast-emerging markets. Any massive stimulus plan today would not benefit from those same advantages.

Krugman has rejected this critique, writing, “Trade was a minor factor in the American economy both before and immediately after the war, with imports and exports a much smaller share of gross domestic product than they are now.” Krugman admits that there was an increase in trade for a few years in the late 1940s due to the effects of the Marshall Plan, which allowed ruined economies to buy more from the United States, but it’s impact “was temporary,” he says.

But Krugman’s response is unconvincing. Here is a simple thought experiment to illustrate why. Imagine if America had lost World War II and not emerged as the dominant power. Does anyone seriously believe that all of that wartime stimulus money would have resulted in anywhere near the post-war boom that the United States experienced? Krugman is underestimating the impact of being the world’s conqueror, and the financial, economic and psychological advantages that conveys.

Certainly, a large dose of fiscal stimulus right now would spur an increase in aggregate demand, but without a surging export sector, that would probably result in more government jobs (and perhaps more than a few “bridges to nowhere”) than private-sector jobs. There’s no guarantee it would boost private-sector growth, since America’s struggling export and manufacturing base still would face stiff competition from many upstart international rivals, with none of the advantages enjoyed by US exporters in the aftermath of World War II. The world today, and America’s position in it, are far, far different from what they were in 1945.

***

In short, the world is decidedly multipolar now, and even if it was possible to pass a massive stimulus plan through the US Congress, there’s simply no guarantee that it would have an equivalent positive impact without the favorable conditions that existed after the Second World War.

Optimism – More Than Keynesian Stimulus – Got Us Out of the Depression

Economist Robert Higgs – who has studied the effect of World War II on the economy in great detail – argues that it was optimism, rather than stimulus spending, which got us out of the depression:

Which brings us to what may be the most important factor of all: the performance of the war economy, despite its command-and-control character, broke the back of the pessimistic expectations almost everybody had come to hold during the seemingly endless Depression. In the long decade of the 1930s, especially its latter half, many people had come to believe that the economic machine was irreparably broken. The frenetic activity of war production “never mind that it was just a lot of guns and ammunition “dispelled the hopelessness. People began to think: if we can produce all these planes, ships, and bombs, we can also turn out prodigious quantities of cars and refrigerators.

***

To sum up, World War II got the economy out of the Great Depression, but not in the manner described by the orthodox story. The war itself did not get the economy out of the Depression. The economy produced neither a carnival of consumption nor an investment boom, however successfully it overwhelmed the nation’s enemies with bombs, shells, and bullets. But certain events of the war years “the buildup of financial wealth and especially the transformation of expectations “justify an interpretation that views the war as an event that recreated the possibility of genuine economic recovery. As the war ended, real prosperity returned.

America’s performance in World War 2 made the U.S. a superpower. The fact that we defeated the Nazis, Mussolini and imperial Japan made us proud.

But now we’ve been a superpower for more than half a century. Indeed, we’ve been the sole superpower for more than 20 years … since the fall of the Soviet Union.

There is no way that Americans can be proud that we’ve become a superpower for the first time. Indeed, Americans are now terrified of losing our superpower status to China and coalitions of nations.

So a war today cannot have the same effect of creating optimism that WWII did.*

We’ve Got Much More Debt Now Than at the Beginning of WWII

U.S. debt at the beginning of World War 2 was actually much lower than it is today on a debt-to-gdp basis … even after all of Roosevelt’s New Deal programs. Here is a chart taken from Office of Management and Budget data (via Talking Points Memo):

debtgdp Military Keynesianism Cant Work ... Because WWII Was Different from Current Warsdebtgdp Military Keynesianism Cant Work ... Because WWII Was Different from Current Wars

While people can debate how much debt the U.S. economy can handle, the fact is that there was a lot more breathing room before WWII than today. Put another way, the stimulus of WWII had more of an effect, because it was acting on a lower debt load to start with.

If This Was Like WWII, It Would Have Worked By Now

I noted last year:

We’ve been in Iraq for years longer than WWII. We’ve been involved in 7 or 8 wars in the last decade. And yet we’re still in a depression. (And see this).

If [things were the same as in WWII], don’t you think things would have improved by now?

Indeed, the Iraq war alone could end up costing more than World War II. And given the other wars we’ve been involved in this decade, I believe that the total price tag for the so-called War on Terror will definitely support that of the Greatest War .

In fact, it is well known that the longer wars last, the worse they are for the economy. The 11 years we’ve been fighting in Afghanistan are almost 3 times longer than the the 4 years we spent fighting WWII. And leaked reports say that we’re not very close to victory in Afghanistan. Therefore, the entire “war on terror” (or whatever we’re calling it these days) is much worse for our economy than the much shorter engagement of WWII.

* In addition, most Americans think that the Iraq war was a mistake and the Afghan war is “not worth it” anymore, whereas virtually all Americans thought that WWII had to be fought and won. As such, there is much less of a boost from pride and optimism about our future.

View the original article at Washingtons Blog

Related Posts with Thumbnails

Posted in Finance & Economics, War on terror.

Tagged with , , , , , .

Support #altnews & keep Dark Politricks alive

Remember I told you over 5 years ago that they would be trying to shut down sites and YouTube channels that are not promoting the "Official" view. Well it's happening big time. Peoples Channels get no money from YouTube any more and Google is being fishy with their AdSense giving money for some clicks but not others. The time is here, it's not "Obama's Internet Cut Off Switch" it's "Trumps Sell Everyones Internet Dirty Laundry Garage Sale".

It's not just Google/YouTube defunding altenative chanels (mine was shut), but Facebook is also removing content, shutting pages, profiles and groups and removing funds from #altnews that way as well. I was recently kicked off FB and had a page "unpublished" with no reason given. If you don't know already all Facebooks Private Messages and Secret Groups are still analysed and checked for words related to drugs, sex, war etc against their own TOS. Personally IU know there are undercover Irish police moving from group to group cloning peoples accounts and getting people booted. Worse than that I know people in court at the moment for the content they had on their secret private group. Use Telegrams secret chat mode to chat on, or if you prefer Wickr. Or if you need to, buy a dumb phone with nothing for the NSA to hack into if you are that paranoid. Ensure it has no GPS tracking on it and the battery can be removed. These are usually built for old people to get used to technology storing only a set of numbers to call. However they have no games, applications to install and other ways people can exploit the computer tracking device you carry round with you most of the day.

So if your not supporting this site already which brings you news from the Left to the Right (really the same war mongering bollox) then I could REALLY do with some..

Even if it's just £5 or tick the monthly subscription box and throw a few pound my way each month, it will be much appreciated. Read on to find out why.

Why?

Any support to keep this site would be appreciated. You could set up a monthly subscription for £2 like some people do or you could pay a one off donation as a gift.
I am not asking you to pay me for other people's articles, this is a clearing house as well as place to put my own views out into the world. I am asking for help to write more articles like my recent false flag gas attack to get WWIII started in Syria, and Trump away from Putin. Hopefully a few missiles won't mean a WikiLeaks release of that infamous video Trump apparently made in a Russian bedroom with Prostitutes. Also please note that this article was written just an hour after the papers came out, and I always come back and update them.

If you want to read JUST my own articles then use the top menu I have written hundreds of articles for this site and I host numerous amounts of material that has seen me the victim of hacks, DOS plus I have been kicked off multiple hosting companies, free blogging sites, and I have even had threats to cease and desist from the US armed forces. Therefore I have to pay for my own server which is NOT cheap. The more people who read these article on this site the more it costs me so some support would be much appreciated.

I have backups of removed reports shown, then taken down after pressure, that show collusion between nations and the media. I have the full redacted 28/29 pages from the 9.11 commission on the site which seems to have been forgotten about as we help Saudi Arabia bomb Yemeni kids hiding in the rubble with white phosphorus, an illegal weaapon. One that the Israeli's even used when they bombed the UN compound in Gaza during Operation Cast Lead. We complain about Syrian troops (US Controlled ISIS) using chemical weapons to kill "beautiful babies". I suppose all those babies we kill in Iraq, Yemen, Somalia and Syria are just not beautiful enough for Trumps beautiful baby ratio. Plus we kill about 100 times as many as ISIS or the Syrian army have managed by a factor of about 1000 to 1.

I also have a backup of the FOX News series that looked into Israeli connections to 9.11. Obviously FOX removed that as soon as AIPAC, ADL and the rest of the Hasbra brigade protested.

I also have a copy of the the original Liberal Democrats Freedom Bill which was quickly and quietly removed from their site once they enacted and replaced with some watered down rubbish instead once they got into power. No change to police tactics, protesting or our unfair extradition treaty with the USA but we did get a stop to being clamped on private land instead of the mny great ideas in the original.

So ANY support to keep this site running would be much appreciated! I don't have much money after leaving my job and it is a choice between shutting the server or selling the domain or paying a lot of money just so I can show this material.

Material like the FSB Bombings that put Putin in power or the Google no 1 spot when you search for protecting yourself from UK Police with "how to give a no comment interview". If you see any adverts that interest you then please visit them as it helps me without you even needing to give me any money. A few clicks per visit is all it takes to help keep the servers running and tag any tweets with alternative news from the mainstream with the #altnews hashtag I created to keep it alive!

However if you don't want to use the very obvious and cost free ways (to you) to help the site and keep me writing for it then please consider making a small donation. Especially if you have a few quid sitting in your PayPal account doing nothing useful. Why not do a monthly subscription for less money instead. Will you really notice £5 a month?


0 Responses

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.



Some HTML is OK

or, reply to this post via trackback.



css.php