reality is not optional

I have wrote before on how the Great Depression lasted until well after World War 2. There is a recent paper out which explains my very premise: that life during WW2 worsened, and that Americans did not return to pre-Depression standards of living until well after the end of the war.

One would expect this to be common sense. Rationing, building war machines, young men being forced out of the workforce to other countries just to die in battle. These do not lend themselves to a feeling of prosperity. Apparently, though, common sense is not common. This paper reviews journals and other contemporary sources to confirm what should be obvious: war does not cause prosperity.

From the paper:

Not only were various consumer items unavailable but those that could be found were of inferior quality. Substitute goods were of sub-standard construction and were often uniform, removing consumer choice of “styles, shapes and sizes.” … As the OPA tightened rations on particular items or they became all together unavailable, consumers turned to clearly inferior substitutes. Several products that still exist today became widely accepted as substitutes during the war including margarine as a substitute for butter. Boxes of Kraft Macaroni and Cheese also became popular during the war as they were provided at a two for one discount per ration ticket. Spam also became a substitute for those craving meat. Other substitutes included “honey for sugar, corn oil for olive oil, cotton or rayon for wool, paper containers instead of tin; and wood furniture instead of metal”. The effects of these changes in consumption cannot easily be measured by economic aggregates, but were the reality for families during the war. Even if household income remained the same or even increased, Americans were forced to live poorer lives during the war due to the reduced quality, quantity, and variety of products available.

This paper is a must read. Those in today’s world who say war creates prosperity are carrying on an Orwellian tradition of Doublespeak.

The Great Depression did not end on the advent of World War 2, but lasted throughout WW2 and only ended after post-war deregulation and spending cuts. This might be counter-intuitive to those who were taught in school that WW2 ended the Great Depression, but a small thought experiment should show that this is true. What standard of living would someone choose if they could pick either 1928 or 1942?

It is key to remember that 1942 standard of living involved mobilization of over 12 million men of a population of 132 million. This 12 million was drawn out of the most productive age group, young men, and many were killed. Millions of other people, just as their families were being torn apart, were now forced to work in their place, not building houses and cars (things that improve life) but building tanks and bullets (items meant to destroy). On top of this, widespread rationing and war production led to shortages:

While some food items were scarce, others did not require rationing, and Americans adjusted accordingly. “Red Stamp” rationing covered all meats, butter, fat, and oils, and with some exceptions, cheese. Each person was allowed a certain amount of points weekly with expiration dates to consider. “Blue Stamp” rationing covered canned, bottled, frozen fruits and vegetables, plus juices and dry beans, and such processed foods as soups, baby food and ketchup. Ration stamps became a kind of currency with each family being issued a “War Ration Book.” Each stamp authorized a purchase of rationed goods in the quantity and time designated, and the book guaranteed each family its fair share of goods made scarce, thanks to the war…

In addition to food, rationing encompassed clothing, shoes, coffee, gasoline, tires, and fuel oil. With each coupon book came specifications and deadlines. Rationing locations were posted in public view. Rationing of gas and tires strongly depended on the distance to one’s job. If one was fortunate enough to own an automobile and drive at the then specified speed of 35 mph, one might have a small amount of gas remaining at the end of the month to visit nearby relatives.

By comparison:

The phrase [the Roaring Twenties] emphasizes the period’s social, artistic, and cultural dynamism. “Normalcy” returned to politics in the wake of World War I, jazz music blossomed, the flapper redefined modern womanhood, Art Deco peaked… Economically the era saw the large-scale diffusion and use of automobiles, telephones, motion pictures, and electricity, unprecedented industrial growth, accelerated consumer demand and aspirations, and significant changes in lifestyle and culture. The media focused on celebrities, especially sports heroes and movie stars, as cities rooted for their home team and filled the new palatial movie theaters and gigantic stadiums. In most major countries women were voting for the first time…

The spirit of the Roaring Twenties was marked by a general feeling of discontinuity associated with modernity and a break with traditions. Everything seemed to be feasible through modern technology. New technologies, especially automobiles, moving pictures and radio proliferated ‘modernity’ to a large part of the population. Formal decorative frills were shed in favor of practicality in both daily life and architecture. At the same time, jazz and dancing rose in popularity, in opposition to the mood of the specter of World War I. As such, the period is also often referred to as the Jazz Age.

Any rational human would take the 1928 standard of living over 1942. In Thomas DiLorenzo’s book How Capitalism Saved America, he addresses the numbers:

Per capita GNP statistics also reveal that, in terms of aggregate production, there was no recovery until after World War II ended and a massive reduction in government expenditures and employment occurred. As seen in Table 10.2, per capita gross national product (GNP) did not recover to its 1929 level until 1940, and even then, just barely so.

Data on personal consumption expenditures tell the same story – there was no economic recovery. Table 10.3 shows that personal consumption expenditures were approximately 8 percent lower in 1940 than they were in 1929.

There was also a massive reduction in private capital investment. From 1930 to 1940 net private investment was minus $3.1 billion, as Americans failed to add anything to their capital stock…

It was not until 1947, when wartime economic controls were ended and government spending and employments levels fell dramatically, that prosperity was restored. Federal government expenditures fell from $98.4 billion in 1945 to $33 billion by 1948, the first year of genuine recovery. Keynesian economists expected a two-thirds reduction in government spending to lead to another depression, but they were dead wrong… Private sector production increased by almost one-third in 1946 alone, as private investment boomed for the first time in eighteen years.

GNP might have increased during WW2, but that says very little about if a country is living a better standard of life. Ignoring wartime price controls and inflation that destroy any semblance of usability of wartime GNP figures, it is foolhardy to think that war is the cure for depressions. If that was the case, why shouldn’t the US declare unending war? The countries of the world could build tanks and planes, pile them in the desert, and blow them up. No one needs be harmed.

This thinking has already been debunked and is known as “The fallacy of the broken window“. Yes, GNP might skyrocket after a hurricane ravages Louisiana, but people are left miserably poor. Bastiat would contend that what is seen is that houses are being built and supplies are being consumed, but what is not seen is that so much more was lost. The labor now used to replace goods could have been used to produce over and beyond what was being replaced. People are left poorer after destruction.

Likewise, building tanks, whose sole purpose is to be shipped onto foreign soil to blow up similar equipment produced for the exact same reason by another country, all the while killing human beings, is not very productive. As a result, memories during WW2 often involve frugal living, rationing, and saving stamps to buy the extremely rare refrigerator. WW2 was desperately impoverishing.