War: America's second best consumer of goods

[coberst]

War: America’s second best consumer of goods

 

War is only our second best consumer of goods, our very best consumer of goods would be a factory mounted on a ship with the assembly line terminating at the ramp on the stern of the ship whereby the product can be easily dumped into the sea.

 

Such economic prosperity can only be imagined.

[freeztar]

Huh?

[Buffy]

Huh?

He's makin' a joke freezey...

 

An economist will tell you that production of war materiel is detrimental in most cases because it does not provide infrastructure that enhances production and is therefore not subject to the "multiplier effect." It can be counter-argued that it improves the *ability* of the economy to survive and be prosperous, but this is an indirect and immeasurable effect, and could be equally well dealt with through diplomacy or other activity that does not consume natural or other limited resources.

 

Even neocons don't want war....

 

They've to be protected, all their rights respected, til somebody we like can be elected, :(

Buffy

[coberst]

A bit of sarcasm perhaps, but constructed on reality.

 

Economists are politicians in training. I have little respect for that profession. I suspect economics may be the second oldest profession. They perhaps draw their recruits and their training from the oldest profession.

 

I just coppied some quickies from the Internet to support my contention regarding that war spending was the reason for the end of the depression.

 

 

The massive rearmament policies to counter the threat from Nazi Germany helped stimulate the economies in Europe in 1937-39. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilization of manpower following the outbreak of war in 1939 finally ended unemployment.

In the United States, the massive war spending doubled the GNP, masking the effects of the Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts. Most people worked overtime and gave up leisure activities to make money after so many hard years. People accepted rationing and price controls for the first time as a way of expressing their support for the war effort. Cost-plus pricing in munitions contracts guaranteed businesses a profit no matter how many mediocre workers they employed or how inefficient the techniques they used. The demand was for a vast quantity of war supplies as soon as possible, regardless of cost. Businesses hired every person in sight, even driving sound trucks up and down city streets begging people to apply for jobs. New workers were needed to replace the 11 million working-age men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state[citation needed]. However, spending on the New Deal was far smaller than on the war effort.

 

 

1938

No major New Deal legislation is passed after this date, due to Roosevelt's weakened political power.

The year-long recession makes itself felt: the GNP falls 4.5 percent, and unemployment rises to 19.0 percent.

 

1939

The United States will begin emerging from the Depression as it borrows and spends $1 billion to build its armed forces. From 1939 to 1941, when the Japanese attack Pearl Harbor, U.S. manufacturing will have shot up a phenomenal 50 percent!

The Depression is ending worldwide as nations prepare for the coming hostilities.

 

Roosevelt began relatively modest deficit spending that arrested the slide of the economy and resulted in some astonishing growth numbers. (Roosevelt's average growth of 5.2 percent during the Great Depression is even higher than Reagan's 3.7 percent growth during his so-called 'Seven Fat Years!') When 1936 saw a phenomenal record of 14 percent growth, Roosevelt eased back on the deficit spending, worried about balancing the budget. But this only caused the economy to slip back into a recession in 1938.

World War II starts with Hitler's invasion of Poland.

 

1945

Although the war is the largest tragedy in human history, the United States emerges as the world's only economic superpower. Deficit spending has resulted in a national debt 123 percent the size of the GDP. By contrast, in 1994, the $4.7 trillion national debt will be only 70 percent of the GDP!

The top tax rate is 91 percent. It will stay at least 88 percent until 1963, when it is lowered to 70 percent. During this time, America will experience the greatest economic boom it had ever known until that time.

 

 

When this new recession hit, Roosevelt pointed fingers at everyone but himself, even though it was likely that he had caused the recession with his own policies. Americans ended up voting many New Dealers from Congress out of office in the midterm elections of 1938. Freshman Republicans then passed the Hatch Act of 1939 to reform national elections and weaken the Democratic Party’s power over poorer Americans, who had relied heavily on New Deal handouts. With few supporters left in Congress, the New Deal was essentially dead. It would not be until the United States entered World War II in December 1941 that industry would recover and the economy would truly turn around.

[Qfwfq]

He's makin' a joke freezey...

He isn't.

 

An economist will tell you that production of war materiel is detrimental in most cases because it does not provide infrastructure that enhances production and is therefore not subject to the "multiplier effect." It can be counter-argued that it improves the *ability* of the economy to survive and be prosperous, but this is an indirect and immeasurable effect, and could be equally well dealt with through diplomacy or other activity that does not consume natural or other limited resources.

 

Even neocons don't want war....

...and yet I've often read expert's talk about the effect on the economy and how it is weighted as a pro, including the example in his further post about WWII and the Great Depression. Each time I think the same as him in the first post. Better: if a gov't can afford to spend so much on war, why doesn't it just use the cash more directly? It could help the economy more effectively.

[sanctus]

Economists are politicians in training. I have little respect for that profession. I suspect economics may be the second oldest profession. They perhaps draw their recruits and their training from the oldest profession.

 

I actually don't agree on this but I can't deny I had quit a laugh reading it. Why don't you have respect for them? There are also non-capitalist economists, for an alternative view of economy, etc. Why put all in one?

[coberst]

He isn't.

 

...and yet I've often read expert's talk about the effect on the economy and how it is weighted as a pro, including the example in his further post about WWII and the Great Depression. Each time I think the same as him in the first post. Better: if a gov't can afford to spend so much on war, why doesn't it just use the cash more directly? It could help the economy more effectively.

 

 

That is a question I have asked my self before. If spending for war is so good for the economy why not spend that money to help people in need and why would that not help the economy.

 

I have decided that the answer to that question is that there is great profit in war material but no profit in helping people in need. In both cases money is spent on the economy but the difference is the profit factor and the waste factor. Stuff that is manufactured with lots of labor for waste in war is very profitable and is quickly wasted so that more is needed.

 

Industry can better make profit off war material than they can off of the things that hungry people will spend.

[coberst]

I actually don't agree on this but I can't deny I had quit a laugh reading it. Why don't you have respect for them? There are also non-capitalist economists, for an alternative view of economy, etc. Why put all in one?

 

 

I think that most economists in the US work for CA (Corporate America).

 

Most economists can be regarded as doing science, just as a chemist does science, but most economists are narrow minded ideologues, whereas that is not true of the chemist. In my opinion most economists are hired guns for CA and they are driven more by their ideology than their science. Few economists are progressives. They are primarily conservatives who defend the status quo because the status quo is their job.

[Qfwfq]

I have decided that the answer to that question is that there is great profit in war material but no profit in helping people in need. In both cases money is spent on the economy but the difference is the profit factor and the waste factor. Stuff that is manufactured with lots of labor for waste in war is very profitable and is quickly wasted so that more is needed.

 

Industry can better make profit off war material than they can off of the things that hungry people will spend.

That is simply a matter of how much money gov't is willing to pay for one the thing or for the other. The question simply goes back to the reason for this differnce, thus undermining the often-heard argument in favour of war.

[Buffy]

I think that most economists in the US work for CA (Corporate America).

Most people in lots of professions work "mostly" for corporations. That you use this as a pejorative is telling.

 

You really have to stop hating so many people. It affects your judgement.

... most economists are narrow minded ideologues, whereas that is not true of the chemist. In my opinion most economists are hired guns for CA and they are driven more by their ideology than their science. Few economists are progressives. They are primarily conservatives who defend the status quo because the status quo is their job.

...and by saying so you sound like a "narrow minded ideologue."

 

Jackson would tell you that all economists are liberals who want to sink the economy by showing how monopolies and oligopolies make markets inefficient but really just want to create socialism.

 

The truth is somewhere in the middle. Economics is a "social science" which means it is much softer than say, chemistry. There are beliefs and agendas across the map, but to dismiss it all as partisan hackery is throwing the baby out with the bathwater. Heck, there's less controversy about most economics topics than there is about Global Warming or Evolution.

 

Now, back on topic, to answer the question posed as a (non-partisan) economist, coberst is actually right here:

• The foundation of Keynesian Economics is that Government's key role in the economy is to spend money during economic downturns in order to maintain employment and business opportunity. To a certain extent, it doesn't matter *what* you spend money on, as long as you take up the slack in employment and production capacity to keep both labor and capitalists from going broke.
  
• Spending money on *infrastructure* or *R&D* is subject to the afforementioned Multiplier Effect that is really, really, good for the economy. It creates jobs, and that drives the creation of more jobs because the activity improves productivity and drives growth.
  
• Spending money on *war*, is good in the short term, because of point number 1: any spending creates jobs, and utilizes capital and makes the economy grow. What most young folks don't remember is that WWII, Korea, and Vietnam were all followed by pretty severe recessions--WWII was actually the worst--because government spending drops (it can't be maintained indefinitely), and all the stuff that's been produced has for all intents and purposes simply been dumped in the ocean. Labor training as well as production capital is all now built for the "wrong stuff" (even when its "similar" it is usually based on *old* technological processes for expediency's sake) so even that goes out the window until much new investing goes on to re-tool.
  
• War's one saving grace is the issue of *survival*: that is, its benefit is that you get to live to another day still owning your house or your factory, and that is an act of necessity. Because of the previous two points though, war is a *much less desireable* way to "boost the economy."
  

So bottom line, as coberst says, you might as well just dump the stuff rather than have a war.

 

We just dumped $500B in the Iraqi desert, and I'd love to hear how that helps our economy....

 

Danger, Dismal Scientist at Work,

Buffy