Thursday, September 23, 2010

Over at Kevin's place, some thoughts about what actually got us out

of the Depression and allowed us to prosper after WWII. Part of it:
The Keyneseans insist that it was the "public spending" of the war economy that brought us out of the depression and spurred the incredible growth of the post-war economy.

Not so.

They seem to neglect the fact that, after the war, the United States was the only major industrialized nation that hadn't been smashed. We had our own sources of raw materials, unmatched manufacturing capability, and the rest of the world needed rebuilding.

Who else was there to provide the things the world needed to rebuild? America's economy didn't magically rebound because our government had spent a lot of money it didn't have - that was just what had provided the manufacturing base. Without a market to sell to we'd have crashed right back down. But that market was there, and it needed what we could make.

That market isn't there now, and the rest of the world makes everything anybody might need. We buy most of it ourselves, if you haven't noticed.

The world is not the same as it was after WWII, and only a fool or an idiot would fail to recognize that.

I will note that this is a followup to what started at this post, which is now up to 561 comments.

1 comment:

Titan Mk6B said...

During WW2 it was public spending to industry. I imagine it also let folks build up some savings that was let loose after the war was over. That probably primed the pump for the growth that followed. The clowns in DC now think that public spending on equity - bailing out banks and car companies - will achieve the same result. Not even close. Wealth is created by making things. Or digging up the raw materials to make them.