The economic contraction in North America was much more severe

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The civilian labor force was a bit over 50 million in 1940, sonumbers on this scale pretty much fully wipe out the conventional"unemployment rate" -- but without putting any of these millions of people into any productivepeace-time market-type jobs, which is what the normal employmentrate measures. So claims along the line of "the war eliminatedunemployment", you know, gee.
As I said, the economic data for a command economy in wartimesimply are not comparable to those for a peacetime market economy.It's a five-year break in the series.
IIRC, 43% of domestic product was devoted to the military duringthat period; which is to say that 57% was not. My mother doesrecall eating during the war; no, she was not living on K-rations.
Oh, all right, "wasn't any" was rhetorical, as I'd hope most peoplewould understand, since even the Russians had some .
I never said civilians didn't eat (though food and clothing werecertainly rationed). I did say not many bought new cars. Did yourmother always treasure her 1944 Pontiac?
Try reducing civilian consumption on the order of 40% for fiveyears, with the civilians saving a corresponding amount of theirpay in war bonds, and see if you don't get some pent up demand atthe end. That is the actual effect the war had on the real,peace-time market economy.
The economic contraction in North America (and, as I recall, thesouthern cone of South America, then among the world's affluentcountries) was much more severe ... In Europe, the size of thecontraction varied - Germany and Austria saw a 20% contraction,....
A 20% contraction is plenty severe, and their rate of recovery wasa lot faster than ours, as was everybody else's.
A nice politically liberal source detailing the reasons why, andgiving the bulk of the credit to New Deal policies favoring highwages, high-prices -- such as the NIRA act of 1933 that suspendedanti-trust laws for 500 sectors of the economy, etc, etc. (onedoesn't have to be a genius to see how "higher prices" translatesinto lower employment and slower growth) -- is _Lessons from theGreat Depression: The Lionel Robbins Lectures_, by Peter Temin ofMIT. Nice and accessible, if oldish.
There's been lots of academic follow-up since then, such as... Our main finding is that New Deal cartelization policies are a keyfactor behind the weak recovery, accounting for about 60 percent ofthe difference between actual output and trend output. The keydepressing feature of New Deal policies is not government-sponsoredcollusion per se, but rather it is the policy linkage betweenpaying high wages and being able to collude. Our model shows thathigh wages reduced employment directly in the cartelized sectors ofthe economy, and also reduced employment in the non-cartelizedsectors through general equilibrium effects. We conclude that therecovery from the Depression would have been much stronger if thesepolicies not been adopted... [ .pdf. ]
You know, the economy had to recover from the Depression at some rate, so the fact that itdid doesn't automatically entitle the rooster sitting on the top ofthe henhouse at the time to any credit for it at all.
Posted by Jim Glass | September 26, 2008 1:20 AM