Okay, what got America out of the Great Depression?

[sevin]

I've heard this over and over again all my life: WWII got us out of the great depression. I hate that kind of thinking because it leads to the assumption that to get out of the next one we'll need WWIII. My brother is a libertarian like myself, but he still seems convinced of this. Anybody know what really happened? Is it because they inflated their way out of it?

 

[forsmant]

Time.

 

[TruthisTreason]

Prices settling to the markets value. Government backed off in the late 30's and early 40's. Confidence returned. Technology led to some economic growth.

It has become a part of conventional wisdom that Word War 2 was a time of great economic prosperity in the U.S., and even that the War rescued the country from the Depression. This is simply not true. If it were, then it might be a good idea to be at war all the time. Think of all the people we'd put to work producing raw materials, building planes, and assembling missiles.

Historians have made much of the substantial production figures that were attained during the war. But most of this increase was due to the construction of armaments and military equipment and payments to military personnel. This production was not geared toward things ordinary people needed. It made consumers worse off by diverting capital and other resources to goods that no consumer would want to buy. Between 1943 and 1945, some two-fifths of the labor force-including armed forces, civilian employees of the armed forces, people who worked in the military supply industries, and the unemployed-was producing neither consumer goods nor capital goods. That was not all, of course; the tax monies of the remaining 60% went to fund the activities of the 40 % that were not producing things consumers needed. All of this amounted to a dramatic loss of material wealth.

 

[RSLudlum]

The ending of many regulations that were put forth before the war actually allowed the economy to rebound....WWII rediverted capital towards the war effort, and only after it ended did available capital flow into more 'productive production', always remember war is the largest human induced destruction of wealth; broken window fallacy.

 

[lodge939]

wasn't it that all the productive capacity built up in WW2 for tanks and the war effort simply turned to making consumer goods which we exported?

 

[gonegolfin]

Prices settling to the markets value. Government backed off in the late 30's and early 40's. Confidence returned. Technology led to some economic growth.

It has become a part of conventional wisdom that Word War 2 was a time of great economic prosperity in the U.S., and even that the War rescued the country from the Depression. This is simply not true.

Remember that World War II was well under way before the US entered the fray. US manufacturing and production was full steam ahead supporting the allied nation side before US entry to the war. The financial elite on Wall Street provided much of the financing and reaped huge rewards on interest payments. The US also accumulated much Gold during this time (for payments), setting ourselves up to be the dominant currency in 1944.

So, World War II did contribute to healing the nation economically during this time. War can be an economic boon if you are on the sideline providing the financing, the bullets, bombs, ships, and tanks. But if you are fighting in the war, it becomes a different story.

Brian

 

[CzargwaR]

savings

 

[Isaac Bickerstaff]

A big loan (or series of small ones) that still needs to be paid back.

 

[TruthisTreason]

Remember that World War II was well under way before the US entered the fray. US manufacturing and production was full steam ahead supporting the allied nation side before US entry to the war. The financial elite on Wall Street provided much of the financing and reaped huge rewards on interest payments. The US also accumulated much Gold during this time (for payments), setting ourselves up to be the dominant currency in 1944.

So, World War II did contribute to healing the nation economically during this time. War can be an economic boon if you are on the sideline providing the financing, the bullets, bombs, ships, and tanks. But if you are fighting in the war, it becomes a different story.

Brian

I'd agree as long as we are selling tanks, guns, etc.. to other countries. But, the problem is we end up loaning them to them. No country had any gold holdings we were selling weapons to, with possibly the exception of France. Britain left the gold standard in the early 30's.

Unless you are getting a return for war production, you only end up putting investment into the wrong sector of the economy.

 

[danberkeley]

wasn't it that all the productive capacity built up in WW2 for tanks and the war effort simply turned to making consumer goods which we exported?

Not really. Most of that productive capacity already existed. There were already, shipyards, airplane factories, gun factories, and automobile factories were turned into tank factories. Any extra capacity built for the war was only marginal. Also, before the war, cars were built with steel bumpers, but when the government nationalized almost everything, cars were built with wooden bumpers. So the private sector suffered because virtually all the resources were directed towards the war.

 

[klamath]

From the way I understand it the war years weren't great it was only afterwards that the machine tooling built for the war turned toward a huge increase in the productivity of the american worker. Many many of those goods were sold overseas for years afterwards.

 

[gonegolfin]

I'd agree as long as we are selling tanks, guns, etc.. to other countries. But, the problem is we end up loaning them to them. No country had any gold holdings we were selling weapons to, with possibly the exception of France. Britain left the gold standard in the early 30's.

Not true. The US accumulated a significant amount of Gold in those early years. Britain was one of the countries that lost a significant amount of Gold to the US. Again, this was significant in setting up the US Dollar to become the world reserve currency in later years. At the end of World War II, the US had the lion's share of Gold.

Brian

 

[Number19]

Remember that World War II was well under way before the US entered the fray. US manufacturing and production was full steam ahead supporting the allied nation side before US entry to the war. The financial elite on Wall Street provided much of the financing and reaped huge rewards on interest payments. The US also accumulated much Gold during this time (for payments), setting ourselves up to be the dominant currency in 1944.

So, World War II did contribute to healing the nation economically during this time. War can be an economic boon if you are on the sideline providing the financing, the bullets, bombs, ships, and tanks. But if you are fighting in the war, it becomes a different story.

Brian

I agree.

Unemployment, after reaching a high of 25% in 1933, had recovered to 14% in 1937. At that time the economy fell into another crisis with unemployment rising to 19% in 1938, but then slowly declining to 17% in 1939 and 15% in 1940.

Roosevelt put America back to full employment by sending the young men to fight wars in Europe and the Pacific.

The money spent on war financing, in part, went into the salaries of the factory worker and to the farmers.

When the soldiers came home, the affluence (compared to the 30's) and the regained industrial capacity and the jobs, released a built-up consumerism and energy which drove the rising standard of living of the 50's.

IMO, it can be justifiably argued that WW2 was the means to ending the Great Depression.