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News Do wars create wealth? aka, How did WWII help to end the Depression?

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  1. Feb 9, 2009 #1

    Ivan Seeking

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    There is a popular claim that the New Deal didn't end the Great Depression; that it only ended because of WWII.

    1). How did WWII help to end the depression?
    2). Generally speaking, do wars create wealth, and if so, how?

    If your answer to number 1 is government "government spending", then how is this different from any spending package that creates short-term or long-term jobs?
     
    Last edited: Feb 9, 2009
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  3. Feb 9, 2009 #2

    lisab

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    Re: Do wars create wealth?

    If wars created wealth, shouldn't we all be filthy rich by now?

    edit: we = Americans
     
  4. Feb 9, 2009 #3
    Re: Do wars create wealth?

    I think war creates "consumers" or there are more necessity goods (ammunition). It's pretty obvious that anyone can get a job during the war period.

    But I was thinking about post-war unemployment. I googled some graphs which show that post-war unemployment was much less than pre-war.
     
  5. Feb 9, 2009 #4

    russ_watters

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    Re: Do wars create wealth?

    Since we don't fight a lot of wars, probably not...
     
  6. Feb 9, 2009 #5
    Re: Do wars create wealth?

    Not all wars are profitable but I think if one is clever and starts war at the right time with the right opponent, big profits can be made.

    Opium war?
     
  7. Feb 9, 2009 #6
    Re: Do wars create wealth?

    Hell yes wars create wealth.

    Where does Israel get its weapons?

    Where does Iran get its weapons?

    Where does sadam get its weapons?

    Where does europe buy its F-16s and F-18s?

    Where does canada get its F-18s?

    Let's not forget tanks, RPGs, rifels, hand guns, grenades, smoke gas, armor plating, vehicles....
     
  8. Feb 9, 2009 #7
    Re: Do wars create wealth?

    History lesson of the day:

    • 1902 they had a powwow with the Phillipines(U.S. Victory)
    • 1914-1918 World War 1 aka The Great War until World War 2(Allied Victory U.S. was apart of the allies)
    • 1939-1945 World War 2(Allied Victory U.S. was apart of the allies) (U.S. fought from 1941-1945),
    • 1945-1992 The Cold War(U.S. Victory)
    • 1951-1956 Korean War(U.S. fought with South Korea U.S. Victory)
    • 1960-1975 Vietnam War,(U.S. and South Vietnam defeat)
    • 1990-1992 The Fist Gulf War(U.S. and allies victory)
    • 2001-present Iraq War.

    More than half of the 20th centry the US was involved in some form of a war.
     
  9. Feb 9, 2009 #8

    Ivan Seeking

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    Re: Do wars create wealth?

    That all sounds to me more like a transfer of wealth; not a creation of wealth.

    While your point is well taken, I am most interested in the notion that wars fought by the US boost the US economy.
     
  10. Feb 9, 2009 #9

    Vanadium 50

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    WW2 was, essentially, a full employment program for the US.

    What made the Great Depression different from other recessions was the high levels of unemployment that persisted, even at times when other economic indicators were favorable. WW2 solved that problem.
     
  11. Feb 9, 2009 #10

    lisab

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    But WW2 happened at a time when we made stuff here in the States...lots of stuff, and we did it well. We are much more of a service economy now. How can war grow a service-based economy? How does a war encourage people get more haircuts?
     
  12. Feb 9, 2009 #11

    Gokul43201

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    Re: Do wars create wealth?

    Seems you forgot Afghanistan and Kosovo.
     
  13. Feb 9, 2009 #12
    Re: Do wars create wealth?

    Well, I got that list from googling US wars in 20th century: I just copy pased. :redface:
     
  14. Feb 9, 2009 #13

    Ivan Seeking

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    Who paid for the employment? Again, how is this different from any other spending program that creates short-term or long-term jobs?

    Beyond that, how does the production of weapons benefit the economy, as opposed to building infrastructure, for example?

    lisab, that is one reason that I like Obama's approach: He wants to create a new industry in the process of working to solve our energy and environmental problems. Many Green jobs are Blue jobs.
     
  15. Feb 9, 2009 #14

    russ_watters

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    Re: Do wars create wealth?

    ...which makes it about the most peaceful century in history for major world powers.
     
  16. Feb 9, 2009 #15
    Re: Do wars create wealth?

    I have no idea what you mean by this, or why its relevant.
     
  17. Feb 9, 2009 #16

    Gokul43201

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    So, when you said "Since we don't fight a lot of wars...." you meant we don't fight a lot of wars, compared to, say, the 15th century, and not we don't fight a lot of wars, compared to say, Canada?


    And what 'we' were you talking about: the US or "major world powers"?

    At the very least, that's an oversimplification.

    Unemployment rates had been falling long before Pearl Harbor.

    In attachment (when it becomes visible), the first vertical line indicates the approximate timing of the New Deal, and the second roughly marks Pearl Harbor. Unemployment rates were down below 10% - from a high of 25% - before the US declared war on Japan.
     

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  18. Feb 9, 2009 #17

    russ_watters

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    ...anyway....

    In general, military spending works about the same as any other government spending: it both helps and hurts the economy. Money is taken from everyone and given to specific sectors, whether it is for defense, infrastructure, or welfare. Some money is better spent than other, but in general, money spent on defense or infrastructure has a neutral effect on the economy when in a steady-state (roughly constant yearly spending), whereas money spent on welfare is essentially flushed down the toilet because the government gets nothing in return for that money.

    Now a war isn't constant defense spending, but in many circumstances, it works similar to the economic stimulus package in that it is basically neutral except that since it isn't a steady-state, so when the money is spent, you get a large benefit.... which is then balanced out by a large negative by the fact that you have to pay for it later. It is simple math that running up the debt sucks money out of the gdp. I read an article today that predicted a -.3% effect for the next decade from the stimulus package: +$800 B over two years, -$800 B (plus interest, of course) over the next 10.

    Now not all wars/stimulus packages are created equal. Little to medium sized wars like the last few don't have any impact on the national morale and stay self-contained. Wars like WWII are often called "total wars" meaning the entire effort of the country has to be dedicated to wartime production. It changed behaviors in ways that helped change our economy beyond what simple spending could do. People bought bonds, women learned to build tanks and airplanes, people donated rubber to the war effort and grew little gardens, etc. When it comes down to it, economics is more about attitude than anything else. We're in a deep recession now instead of the mild one we were in in August because of confidence and in a major war effort, patriotism takes over, and turns the economy around.
     
  19. Feb 9, 2009 #18

    russ_watters

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    Re: Do wars create wealth?

    You brought it up, Cyrus. You implied that the 20th century for the US was one that saw a lot of war. For that to be true, you have to compare it to other countries and other centuries. Otherwise, what you said was just meaningless.
     
  20. Feb 9, 2009 #19

    russ_watters

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    Speaking of oversimplifications, are you meaning to say that American involvement in WWII started with Pearl Harbor? And are we to assume that any drop in unemployment was a direct result of the New Deal (perhaps it could have dropped faster without it?)? Have you heard of the "Roosevelt recession?" It's that little blip where unemployment rises again after falling - which is what you would expect when a quick influx of cash wears off.

    Now it is also true that some parts of the New Deal involved preparing for the war, but I tend to take separate parts separately: Like the current proposed economic stimulus package, there are good and bad parts. Hoover Dam? Turns water into money for 75 years. That's a good thing. Pyramid scheme welfare system? That's a bad thing. Wartime shipbuilding long before the start of the war? That's WWII helping to pull us out of the Depression more than 5 years before Pearl Harbor.

    Now though I said the tone of the country made WWII different from other wars, it was still a lot like this economic stimulus package: money into the economy now, paying for it later. But we had another ace in the hole that helped us in that situation: Europe owed us money too. So it didn't hurt us as much in the long run as the 2nd Gulf War or this economic stimulus package will. [edit] And another one: Europe was destroyed, we weren't. That put us in a unique position to help rebuild their decimated countries/economies using our still strong economy.
     
    Last edited: Feb 9, 2009
  21. Feb 9, 2009 #20
    Re: Do wars create wealth?

    Why do I have to compare it to other countries and other centuries to validate my statement? I simply said over 50% of the last hundred years the US was involved in major wars, which is contrary to your claim that the US wasn't in a lot of wars. In fact, it was involved in three major wars, the last one (cold war) consumed more money and resources than any past war in the US history. Again, I fail to see merit in your complaint.
     
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