10 thoughts on “The Depression, World War II And Keynes”

  1. Most of the aircraft carriers and battleships (the long-lead-time items) were laid down in 1941, based on orders placed in 1940. These orders were directly as a result of WWII. That has no correlation to unemployment in 1941 falling to 6%? Really? They’re just completely unrelated.

    Regarding income inequality, the argument isn’t that income for the bottom 4/5s did not increase. It did. The argument is that income for the bottom 1/5 didn’t outpace inflation while that for the top 1% went up 275%. Focusing on the mean while ignoring the outliers is missing the entire point.

    1. Isn’t the point to demonize rich people until the torches and pitchfork brigade of the Democrat party marches through the streets and seizes or destroys the property of those they dislike?

      If that isn’t the point, then someone needs to clue Obama and his OWS protesters.

    2. Building some ships doesn’t employ enough people to make a significant difference in employment rates, since a significant portion of the US population can’t physically fit into shipyards. They’re just too small.

      More directly, July 1941 shipyard employment was 348,000 workers. Based on the increase in output from the summer of 1940, the shipyards had been employing about 120,000 workers. Given that the production of railroad cars (and cars) also just about doubled over the same period, only about half the increase in shipbuilding would’ve been naval. The civilian labor force employed in 1940 was 47.52 million, so Navy shipbuilding in 1941 probably bumped national employment up by 0.25 percent.

      Perversely, just as the economy was booming, the Federal government tried to stamp out consumer demand so there wouldn’t be competition for things like steel and rubber.

      Anyway, between 1938 and 1941 residential construction contracts doubled. Betweeen the summer of 1938 and the summer of 1939, exports almost doubled. Steel office furniture doubled. Consumer goods production rose 15% in the first half of 1941 compared to a year earlier. During 1939 and 1940 consumer credit jumped from 3 billion dollars to 5 billion dollars (mostly from car dealers).

      You might enjoy this look at the business situation in 1941, published in September, 1941 by the Department of Commerce.

      1. All those ships needed steel, which was sent to the shipyards by rail. Ditto the tanks and artillery and guns being made. Steelworkers, coal miners (to supply the steel mills) and railroad people were needed to support the shipyards and armories. BTW, exports increased radically because warring countries were buying whatever they could from the US.

        All those people, now that they had jobs, went out and bought a house and a car. That, shockingly, meant more employment for steel mills (again), and coal miners (again) and railroads (again).

        It’s called a multiplier effect. Government spending (ours and the warring parties) flowed through the economy, hitting multiple hands and thus having an effect many multiple times what a direct payout would have caused.

        1. Um, no. When you spend a dollar building a ship, that dollar doesn’t multiply itself to pay a dollar to wages, a dollar to steel (more wages), a dollar to the railroads (more wages), a dollar to the car industry (more wages). It’s not six dollars, it’s just one dollar that had to get split between all those costs.

          The big jump in outputs started in 1938, so were all those farmers and truck drivers somehow smarter than the diplomats, seeing war coming a year before Hitler decided to roll his Panzers over Europe? Why did people start buying houses three years before they knew where the defense plants would be built, as the vast leap in residential construction contracts doubled in the last half of 1937, then doubled again between the summer of 1938 and the fall of 1940? As an aside, can you ever imagine the modern housing market reporting construction contracts doubling, then doubling again? These were huge growth numbers, and as the recent collapse of the housing market suggests, home starts have a HUGE impact on the economy. Building a few more ships, not so much, or Obama would be preaching for a massive Navy buildup to ease the unemployment rate.

          Industrial production started the nearly linear climb to 1941 levels in May or June of 1938. Freight car loadings started to climb a few months earlier.

          Likewise, the jump in export occured between the summer of 1938 and the early fall of 1939, prior to the war. Once the war started in Sept 1939, exports declined by about 20%, and stayed lower than their 1939 pre-war peak except for one brief peak in the fall of 1940 which was about 10% higher than the pre-war peak.

          Likewise, the big jump in iron and steel production started in the summer of 1938 and ended in the fall of 1939.

          And finally, if the big jump in shipbuilding drove the economy, the real depression would’ve hit in 1946 when the Navy cancelled all the contracts. Once all that government spending stopped cold, Keynesians predicted an economic collapse, but instead we got a boom.

  2. All the libs I know are obsessed with Zero Sum thinking. I like to get them P/O’d by asking WHO they stole their money from to get where they are. Especially when I’ve known them for 25 or 30 years and I know they are doing better NOW than they were then.

    I get all giddy then, tangling them up in their own words about who, from the government, helped them, what programs they depended on to get where they are now, etc.
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    Chris G.,
    are you including Pelosi, Reid, et al , in that being part of that 275% increase? They’ve both done quite well increase wise according to their released tax records online.

  3. Der Schtumpy–that’s a great question to ask. I may have to steal it from you! 😀

    I’ve been thinking a lot lately about questions like that I might ask someone I know who used to be rather conservative in her views, but has since started hanging out with a liberal crowd and echoing the things they say. This friend of mine likes to talk a lot about her investments and how well they are doing; I keep thinking that I should ask her when she is going to distribute her gains to everyone else, since she surely must be obligated to do so.

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