Depression, War, and Cold War - Challenging the Myths of Conflict and Prosperity

By Robert Higgs
 

·         President Franklin D. Roosevelt’s New Deal did not end the Great Depression—it prolonged it. By shaking investors’ confidence in the security of their private property rights, the president’s laws and regulations discouraged the long-term private investment needed to revive the economy. Private investment remained low during World War II and only began to rise—for the first time since the 1920s—after the transition to a new administration in 1945.

 

·         In the rush to build a credible military force in 1940, the Roosevelt administration turned toward a “big business” model of national defense. Facing diminished defense capabilities and contractors reluctant to bear the risks of converting from civilian to military production, the new policies offered loan guarantees, tax deferrals, contractual adjustments, and government-provided capital. The majority of defense contracting became concentrated among a small number of giant corporations, where it remains today.

 

·         The belief that World War II created prosperity is a historical myth that stems from the misinterpretation that war or large defense spending benefits the civilian economy. The draft might have reduced official unemployment numbers, but military service yielded little pay under harsh conditions and cannot be reasonably equated with jobs in the civilian sector. Moreover, few durable and non-defense capital goods were produced by the new labor force, and real personal consumption, adjusted for population growth, changed very little between 1941 and 1944. ......To Read More.....