An interesting take on how government spending did not end the Great Depression.
When we apply this standard to life during World War II in America, it’s clear that the war did not end the depression in any meaningful sense. Economic historian Robert Higgs has debunked the statistics that purport to show that the depression ended during the war. Take unemployment. Unemployment of course was historically high throughout the 1930s, and the rate plummeted once the U.S. government entered the war. But this was no sign of returning prosperity. The government drafted 10 million men into the armed forces and others enlisted to avoid conscription. Those men were not producing prosperity by making consumer goods. They were fighting a war. Moreover, statistics showing that industrial production picked up steam in the 1940s are no indication of prosperity because those plants weren’t making consumer goods; they were making war materiel. In fact, those plants diverted scarce resources from the production of consumer goods. The few consumer goods that were produced were rationed. People could buy only a fixed and small quantity of foods, gasoline, and other previously taken-for-granted products. Many things weren’t available at all.
Thus the aggregate statistics fail to capture essential details of life. A million dollars spent making automobiles and a million dollars spent making tanks look the same in the GDP tables. But the difference is vast in terms of consumer welfare.
The author goes on to explain that the average consumer’s quality of life actually dropped during the war, as goods were more scarce and people had to do for themselves what they otherwise would have bought in the marketplace.
As manufacturing was refitted for war production, there was a reversal in the trend toward specialization. Those remaining on the home front were forced to produce for themselves what they had previously been able to purchase. The household again became a center of production rather than consumption alone. The pressures of wartime meant a clear loss in productivity for those forced to engage in the more difficult processes of growing and canning their own food as well as sewing and resewing clothing to make it last longer. Women had less time to spend caring for their children as other household tasks, such as saving cooking grease or tin foil, consumed their time…
So hoping for that next big war to spend us out of our recession is probably a bad idea. Although Paul Krugman thinks an alien invasion might do it.