Comments on: The Myth of Wartime Prosperity http://www.thefreemanonline.org/featured/the-myth-of-wartime-prosperity/ Ideas on Liberty Wed, 15 Feb 2012 00:25:45 +0000 hourly 1 http://wordpress.org/?v=3.3 By: CrossFit 1776 | CrossFit in Williamsburg, VA | Williamsburg Strength and Conditioning | Speed, Strength and Agility Training for Football, Wrestling and Mixed Martial Arts in Williamsburg » Strength and Conditioning, Low-carbohydrate nutrition and m http://www.thefreemanonline.org/featured/the-myth-of-wartime-prosperity/comment-page-1/#comment-29565 CrossFit 1776 | CrossFit in Williamsburg, VA | Williamsburg Strength and Conditioning | Speed, Strength and Agility Training for Football, Wrestling and Mixed Martial Arts in Williamsburg » Strength and Conditioning, Low-carbohydrate nutrition and m Tue, 13 Jul 2010 00:40:38 +0000 http://www.thefreemanonline.org/uncategorized/the-myth-of-wartime-prosperity/#comment-29565 [...] The Myth of Wartime Prosperity [...] [...] The Myth of Wartime Prosperity [...]

]]> By: James Madison Fan http://www.thefreemanonline.org/featured/the-myth-of-wartime-prosperity/comment-page-1/#comment-16350 James Madison Fan Thu, 23 Jul 2009 20:36:13 +0000 http://www.thefreemanonline.org/uncategorized/the-myth-of-wartime-prosperity/#comment-16350 Aron, I think it is important to look at what caused the trust to be undermined in the first place. The "Roaring 20's" was financed by paper interest on war debt rather than real money. When the value of the Mark was undermined the value of the loans dropped until they were worthless. Banks failed. People lost their life savings. The economy tanked. This is what undermined the trust. The same thing is true for home and equity loans in the current market. People didn't pay the loans so they were worthless. Banks failed but were propped up. The economy tanked but not as badly. Offering that the Depression was ended by the WWII might suggest we need a war to end our current economic situation and that's obviously not true. The economy will rebound regardless of if we blow things up or not. We've been blowing things up in Iraq for more than a decade and that didn’t prevent the current economic down turn. In fact, it probably contributed to it. So I don’t think war is good for the economy. On the other hand it can't be denied that the US made significant amounts of money rebuilding Europe and Asia. This influx of post war capital from rebuilding loans replaced the pre-Depression reparations loans to Germany. Due to the lessons learned from the Depression these loans were more secure. As these proved to be more reliable confidence grew fostering the "trust.” In addition to this there were technological advances driven by the war that resulted in entrepreneurial investment in airlines and other industries that had limited availability or didn’t exist at all prior to the war. I would agree that many of these advances probably would have occurred, in time, but if necessity is the mother of invention then war is the mother of all necessities. For instance it is almost certain that nuclear energy would not have received a fraction of the attention and financing that it received if the Allies hadn’t been afraid the Axis was going to build the atomic bomb first. This is not to say the "War ended the Depression" but they are chronologically linked and it did set up favorable investment situations that probably would not have existed if it hadn’t happened. Aron,

I think it is important to look at what caused the trust to be undermined in the first place. The “Roaring 20′s” was financed by paper interest on war debt rather than real money. When the value of the Mark was undermined the value of the loans dropped until they were worthless. Banks failed. People lost their life savings. The economy tanked. This is what undermined the trust.

The same thing is true for home and equity loans in the current market. People didn’t pay the loans so they were worthless. Banks failed but were propped up. The economy tanked but not as badly.

Offering that the Depression was ended by the WWII might suggest we need a war to end our current economic situation and that’s obviously not true. The economy will rebound regardless of if we blow things up or not. We’ve been blowing things up in Iraq for more than a decade and that didn’t prevent the current economic down turn. In fact, it probably contributed to it. So I don’t think war is good for the economy.

On the other hand it can’t be denied that the US made significant amounts of money rebuilding Europe and Asia. This influx of post war capital from rebuilding loans replaced the pre-Depression reparations loans to Germany. Due to the lessons learned from the Depression these loans were more secure. As these proved to be more reliable confidence grew fostering the “trust.”

In addition to this there were technological advances driven by the war that resulted in entrepreneurial investment in airlines and other industries that had limited availability or didn’t exist at all prior to the war. I would agree that many of these advances probably would have occurred, in time, but if necessity is the mother of invention then war is the mother of all necessities. For instance it is almost certain that nuclear energy would not have received a fraction of the attention and financing that it received if the Allies hadn’t been afraid the Axis was going to build the atomic bomb first.

This is not to say the “War ended the Depression” but they are chronologically linked and it did set up favorable investment situations that probably would not have existed if it hadn’t happened.

]]> By: Aron Martens http://www.thefreemanonline.org/featured/the-myth-of-wartime-prosperity/comment-page-1/#comment-16349 Aron Martens Thu, 23 Jul 2009 19:01:59 +0000 http://www.thefreemanonline.org/uncategorized/the-myth-of-wartime-prosperity/#comment-16349 It was not the war that ended the Great Depression. The Great Depression didn't end until later in the 1940's and did so only when the "trust" Tony referred to in his comments was restored. This trust was violated by FDR with the numerous changes in the "rules of the game" creating considerable "regime uncertainty" in the minds of investors. This trust wasn't restored until FDR's New Deal bureaucrats were replaced by the more trustworthy pro-business leaders,a shift which continued after FDR's death. It is not the trust created by collective efforts such as war and the environmental movement that create prosperity but rather the trust created by the sanctity of individual property rights. When we see the repeated violation of these rights by politicians in the current environment the prospects for a quick economic recovery seem dim. It was not the war that ended the Great Depression. The Great Depression didn’t end until later in the 1940′s and did so only when the “trust” Tony referred to in his comments was restored. This trust was violated by FDR with the numerous changes in the “rules of the game” creating considerable “regime uncertainty” in the minds of investors. This trust wasn’t restored until FDR’s New Deal bureaucrats were replaced by the more trustworthy pro-business leaders,a shift which continued after FDR’s death. It is not the trust created by collective efforts such as war and the environmental movement that create prosperity but rather the trust created by the sanctity of individual property rights. When we see the repeated violation of these rights by politicians in the current environment the prospects for a quick economic recovery seem dim.

]]> By: James Madison Fan http://www.thefreemanonline.org/featured/the-myth-of-wartime-prosperity/comment-page-1/#comment-15721 James Madison Fan Thu, 02 Jul 2009 21:13:33 +0000 http://www.thefreemanonline.org/uncategorized/the-myth-of-wartime-prosperity/#comment-15721 Mr. Woods has it right. The War = prosperity concept doesn\'t work. About the only exception to this is if you sack the nation and cart off its wealth but even that is a short term injection of wealth. The reason WWII ended the Great Depression is it both figuratively and literally destroyed the bad debt created by the Versailles treaty. The pre-war loans didn\'t have any support besides the failing Mark so once it was completely devalued the loans were worthless. Worthless loans = economic disaster. If you want proof, we just did the same thing with housing loans. After the war new loans were issued to help Europe rebuild and once this happened they became partners in trade rather than enemies in war. These loans had the support of real property, expanding business, and growing economies so they were paid off. In addition to this the newly forged stability resulted in economic prosperity for everyone involved. On a grizzlier note the loss of 50 to 80 million men had a massive impact on global unemployment. The global population in 1940 was around 2 billion so at least 2.5% of the planet suddenly dropped dead. To borrow from Dickens, that removed quite a bit of the “surplus population.” Mr. Woods has it right. The War = prosperity concept doesn\’t work. About the only exception to this is if you sack the nation and cart off its wealth but even that is a short term injection of wealth.

The reason WWII ended the Great Depression is it both figuratively and literally destroyed the bad debt created by the Versailles treaty. The pre-war loans didn\’t have any support besides the failing Mark so once it was completely devalued the loans were worthless. Worthless loans = economic disaster. If you want proof, we just did the same thing with housing loans.

After the war new loans were issued to help Europe rebuild and once this happened they became partners in trade rather than enemies in war. These loans had the support of real property, expanding business, and growing economies so they were paid off. In addition to this the newly forged stability resulted in economic prosperity for everyone involved.

On a grizzlier note the loss of 50 to 80 million men had a massive impact on global unemployment. The global population in 1940 was around 2 billion so at least 2.5% of the planet suddenly dropped dead. To borrow from Dickens, that removed quite a bit of the “surplus population.”

]]> By: Tony http://www.thefreemanonline.org/featured/the-myth-of-wartime-prosperity/comment-page-1/#comment-15716 Tony Thu, 02 Jul 2009 19:37:39 +0000 http://www.thefreemanonline.org/uncategorized/the-myth-of-wartime-prosperity/#comment-15716 Most people have an intuitive understanding of economics that belies the certainty of objective arguments. The material ingredients of a healthy marketplace - talent and resources - are ever present in all but the smallest and most isolated economies. The third ingredient, trust, is often in short supply. While it is wrong to use war for the purpose of ending economic woes, war does create trust, most notably in loyalty between soldiers. This trust is not merely personal: it becomes a contract, progressively formalized, between society and citizenry. The message: Fight for us, and we will give you education, employment and help with building your household. It doesn't matter whether or not World War II ended the Great Depression; what matters is that those who survived the war demanded and got prosperity. Human wants may be unlimited, but the rate of expenditures depends greatly on economic conditions: In hard times broken windows go unfixed. We don't need war to overcome the Recession of 2008, but we do need trust. Trust requires something subjective in pursuit of something objective: a shared desire to overcome a challenge. War works simply because it terrifies almost everyone. Environmentalism might work if it can attract people from across the political spectrum. Prosperity alone cannot work: Money is a tool, not the wellspring of unity. Most people have an intuitive understanding of economics that belies the certainty of objective arguments. The material ingredients of a healthy marketplace – talent and resources – are ever present in all but the smallest and most isolated economies. The third ingredient, trust, is often in short supply. While it is wrong to use war for the purpose of ending economic woes, war does create trust, most notably in loyalty between soldiers. This trust is not merely personal: it becomes a contract, progressively formalized, between society and citizenry. The message: Fight for us, and we will give you education, employment and help with building your household. It doesn’t matter whether or not World War II ended the Great Depression; what matters is that those who survived the war demanded and got prosperity. Human wants may be unlimited, but the rate of expenditures depends greatly on economic conditions: In hard times broken windows go unfixed. We don’t need war to overcome the Recession of 2008, but we do need trust. Trust requires something subjective in pursuit of something objective: a shared desire to overcome a challenge. War works simply because it terrifies almost everyone. Environmentalism might work if it can attract people from across the political spectrum. Prosperity alone cannot work: Money is a tool, not the wellspring of unity.

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