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Thread: Krugman: "What Saved the Economy (in the '30s) was Enormous Public Works Called WW2

  1. #1

    Arrow Krugman: "What Saved the Economy (in the '30s) was Enormous Public Works Called WW2

    http://www.nytimes.com/2008/11/10/op...10krugman.html

    What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.
    He doesn't deserve a Nobel Prize in Economy or Peace.
    "That's one thing about freedom; you have to tolerate the nonsense too." - Ron Paul



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  3. #2
    what's a good rebuttal to this (i know someone who tried making the same argument)

  4. #3
    Quote Originally Posted by MRoCkEd View Post
    what's a good rebuttal to this (i know someone who tried making the same argument)
    An economy is good when it is able to construct alot, a war isn't that constructive.
    (Bombs aren't constructive or usefull to society because it provides nothing to further build on, to the contrary)
    I mean saying that war benefits the economy is a contradictio in terminis when you look at it in it's fundamentals.

  5. #4
    Quote Originally Posted by MRoCkEd View Post
    what's a good rebuttal to this (i know someone who tried making the same argument)
    Read "The Art of War" --- written 5000 years ago by a Chinese general..very short, but gives you great insight into how war is bad for any country. Look at charts for every war. No war has been able to be fought without expanding the money supply drastically---how is that a good thing??

    Also, Krugman is implying he supports FDR's 1943's tax policy of 94%. What intellectual or reasonable person would say taxing all but 6% of your income to be "good"?

  6. #5
    Quote Originally Posted by socialize_me View Post
    What intellectual or reasonable person would say taxing all but 6% of your income to be "good"?
    Stalin and Lenin.
    rewritten history with armies of their crooks - invented memories, did burn all the books... Mark Knopfler

  7. #6
    Quote Originally Posted by socialize_me View Post

    Also, Krugman is implying he supports FDR's 1943's tax policy of 94%. What intellectual or reasonable person would say taxing all but 6% of your income to be "good"?
    I think you bring up a good point. I don't know much about the matter myself.

    I'm assuming the tax was collected to purchase the war supplies. In World War 2, it was good that we all came together for the cause, but it had the unfortunate side effect to usher in more power to a federal government over the years.

    Of course this is what a federal government is good for in a time like that. Organizing the companies of men from each contributing state.

  8. #7
    Quote Originally Posted by ninepointfive View Post
    I think you bring up a good point. I don't know much about the matter myself.

    I'm assuming the tax was collected to purchase the war supplies. In World War 2, it was good that we all came together for the cause, but it had the unfortunate side effect to usher in more power to a federal government over the years.

    Of course this is what a federal government is good for in a time like that. Organizing the companies of men from each contributing state.
    War is the health of the state.. and the enslavement of its people through nationalism.
    rewritten history with armies of their crooks - invented memories, did burn all the books... Mark Knopfler

  9. #8



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  11. #9
    Vox Day responds to Krugman's Epic Fail here, and sprinkles it with some Rothbard:
    However, in his Nov. 10 column entitled "Franklin Delano Obama," Krugman offers two historical lessons to the incoming Obama administration. The first, the political lesson, is entirely correct. Economic missteps can absolutely undermine an electoral mandate, and they will do so very rapidly indeed. The problem, however, is that Krugman's second lesson, the economic one, advocates precisely such a misstep, a failure of such proportions that it can only be described as epic. He writes:

    My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It's much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.

    Krugman's incredible notion is that the failure of the New Deal to lift America out of the Great Depression was due to FDR's overly conservative approach to government spending. He admits that federal spending increased dramatically, but argues that this was overshadowed by the previous administration's tax hikes and a reduction in state and local spending. He quotes the conclusion of an M.I.T. study that he considers definitive, in which E. Cary Brown states that the Keynesian-prescribed fiscal stimulus failed "not because it does not work, but because it was not tried." And he draws the wrong conclusion from economic growth of the 1950s when he concludes that it was the "enormous public works project known as World War II" that "saved the economy."

    Incredibly, the Austrian economist Murray Rothbard managed to accurately foretell Krugman's column 45 years ago in the introduction to the 1963 edition of his book "America's Great Depression":

    Suppose a theory asserts that a certain policy will cure a depression. The government, obedient to the theory, puts the policy into effect. The depression is not cured. The critics and advocates of the theory now leap to the fore with interpretations. The critics say that failure proves the theory incorrect. The advocates say that the government erred in not pursuing the theory boldly enough, and that what is needed is stronger measures in the same direction."
    [...]

    In fact, if the president-elect is to take Krugman's advice seriously, by the end of his first term he will have to spend more than the $5.605 trillion annually that would be the equivalent of FDR's spending. Even if state and local government spending remained flat, at $2.951 trillion, this would mean that government spending would account for 62 percent of the U.S. economy in 2007 without any economic contraction. If, however, the U.S. were to enter into a depression of similar proportions, an FDR-style spending increase would account for 115 percent of the entire economy!

    Now it's obvious that Krugman's idea is that a massive spending shock would avert the greater part of the contraction; that's the whole idea of attempting to smooth out the business cycle in the first place. But the Nobel Prize winner is failing to account for two extremely important facts. The first is that in 1929, combined federal, state and local spending only accounted for 11.3 percent of GDP. In 2007, it accounted for 39.3 percent. Therefore, the massive spending shock has already been applied and even an increase to the historic 1945 level of 53.3 percent would be much smaller, in percentage terms, than the 98 percent increase that Krugman tells us was too small.

    The reality is that Krugman's advice is incorrect because his Neo-Keynesian economic model is hopelessly flawed. Americans are witnessing, in real time, an unnecessary empirical test of John Maynard Keynes's failed theory. It is a real tragedy that Messrs, Bernanke and Krugman have studied the failures of the past only to reach precisely the wrong conclusions about the consequences of government attempts to manage the economy. For, if the Austrians are correct and these fiscal interventions only serve to exacerbate and prolong the depression, the famous students of economic history will not prevent a Great Depression, they will cause an even greater one.

    On his blog Vox Popoli, Day is having a group study
    of Rothbard's America's Great Depression, complete with a quiz on each chapter.

  12. #10

  13. #11
    Our economy was rebounding already by the time WW2 came to America. The war had a completely stifling effect on us, as most working age men went off to fight and die, but our own problems seemed pale in comparison to the conflict and the tragedies that occurred overseas. By the end of the war, America had been untouched by a single enemy bomber, where every other country was a completely decimated pile of burning rubble. How do you think we looked, economically, in comparison?

    HMMMMM.

    Of our soldiers that returned home, they had families to return to. They still had houses. There were still factories in need of workers.

    Not so in europe.
    Last edited by Xenophage; 11-17-2008 at 05:31 PM.

  14. #12
    Quote Originally Posted by Xenophage View Post
    Our economy was rebounding already by the time WW2 came to America. The war had a completely stifling effect on us, as most working age men went off to fight and die, but our own problems seemed pale in comparison to the conflict and the tragedies that occurred overseas. By the end of the war, America had been untouched by a single enemy bomber, where every other country was a completely decimated pile of burning rubble. How do you think we looked, economically, in comparison?

    HMMMMM.

    Of our soldiers that returned home, they had families to return to. They still had houses. There were still factories in need of workers.

    Not so in europe.
    The economy had rebounded from 25% unemployment in 1933 to 14% unemployment in 1937; but then slipped into another crisis with unemployment rising back up to 19% in 1938. In 1939 and 1940 unemployment had slowly recovered to 15%. Roosevelt solved the unemployment by sending our young men to Europe and the South Pacific.

  15. #13
    Since we all know that the current and incoming administrations and MSM treat Krugman as Ra himself, how long before we have his "solution" implemented upon us?

    The auto industry will be ordered to double production. (The Fed will buy the surplus cars)
    The financial industry will be ordered to loan as much as possible. (The Fed will guarantee repayment)
    There will be capital gains ceilings - no more record profits for oil industry, with, of course, mandatory production limits so they can't get out of working for free.
    There will be gasoline price fixing - expect shortages.
    There will be 'carbon emission' taxation - get ready to pay a buttload for any product that comes from a process requiring heat.

    And when all that fails, we'll have to go to war with whatever states we haven't already attacked, because "that's what saved us last time".
    "You cannot solve these problems with war." - Ron Paul

  16. #14
    Quote Originally Posted by MRoCkEd View Post
    what's a good rebuttal to this (i know someone who tried making the same argument)
    The short version?

    WWII eliminated unemployment because they basically drafted all of the unemployed and then killing a significant number of them.

    The consumer economy was taken over with the government basically buying majority of the manufactures and "consuming" them by destroying them all in combat.

    Savings were built up for a capital base because people were employed to make all of the things thus consumed -- but because of rationing, there was nothing for people to spend their money on, they saved it.

    This led to the "explosion" of pent-up demand for consumer goods in the post-war era, demand that could be created because of the capital available to fund the manufacture, and sufficient savings to purchase it all in a debt free manner.

    And finally, a new "work ethic" was fostered in an entire generation (the Silents) via the sense of fear/duty/patriotism of the War years.



    One thing most people do not realize is that in a recession, we have just as much "human capital" in potential labor as there is in the boom years -- it is just that less is done because a sense of "apathy" sets into the population -- people are disillusioned, and are "sidelined" and choose not to do the work they could.

    THIS is the unspoken (hidden) part of the Keynsian "confidence" equation -- mentioned only in obfuscatory terms -- that it is really ALL a matter of "motivating" people to do additional work. Hence the reason that "wars" function as economic boosters even though they actually destroy the fruits of peoples labor, and often coincide with higher taxes (that would normally produce apathy). If you can work the emotions and motivate a vast mass of people up into a "froth" of effort, you can achieve a vast amount of work, either creative or destructive -- from building Pyramids to staging Riots -- or most likely some combination of both (like waging wars against an "enemy" -- whose people have likewise been worked up into a mirror "froth").

  17. #15
    Quote Originally Posted by Xenophage View Post
    Our economy was rebounding already by the time WW2 came to America. The war had a completely stifling effect on us, as most working age men went off to fight and die, but our own problems seemed pale in comparison to the conflict and the tragedies that occurred overseas. By the end of the war, America had been untouched by a single enemy bomber, where every other country was a completely decimated pile of burning rubble. How do you think we looked, economically, in comparison?

    HMMMMM.

    Of our soldiers that returned home, they had families to return to. They still had houses. There were still factories in need of workers.

    Not so in europe.
    Actually, the economy was stagnant. The only portions of the economy that were growing were the war-related industries. Most people alive today are unaware that the Roosevelt administration (via various "loans" to Britain & France) was already on an aggressive military buildup even BEFORE Germany invaded Poland in 1939 -- and indeed we conveniently "forget" that the draft was reinstated about 6 months PRIOR to Pearl Harbor.

    Long and short of it is that the entire "New Deal" (which was just an expansion of Hoover's programs) was a total disaster -- and the same was true of ALL the other countries very similar such socialist programs (whether England, Germany, Italy, France, or even Japan -- ALL of their programs had failed equally).

    And THAT is what is so scary right now -- we are seeing the SAME kind of thing as the 1930's -- socialistic attempts by virtually ALL of the major countries to "save" their economies via a repeat of the same failed programs.

    Will the end "play" be the same? Yet another world war?

    I SHUDDER to contemplate that they would actually choose to blow up the world AGAIN, rather than face the reality of the failure of their "programs" and "policies" -- but history does not make me an optimist.

  18. #16
    The argument of wither war is really good or bad for the economy is irrelevant to any sane person. What a sickening thing to say, I was flabergasted as a child hearing that.
    Its like justifying robbing and killing someone becuase it improves your personal finances.


    "It is forbidden to kill; therefore all murderers are punished unless they kill in large numbers and to the sound of trumpets."- Voltaire
    "If a life could have a theme song -- and I believe every worthwhile one has -- mine is a religion, an obsession or a mania, or all of these expressed in one word: individualism. I was born with that obsession and have never seen and do not know now a cause more worthy, more misunderstood, more seemingly hopeless, and more tragically needed." -Ayn Rand



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  20. #17
    Quote Originally Posted by berrybunches View Post
    The argument of wither war is really good or bad for the economy is irrelevant to any sane person. What a sickening thing to say, I was flabergasted as a child hearing that.
    Its like justifying robbing and killing someone becuase it improves your personal finances.


    "It is forbidden to kill; therefore all murderers are punished unless they kill in large numbers and to the sound of trumpets."- Voltaire
    Or the more recent statement (by Krugman?) of bulldozing a significant % of the houses in this country to eliminate the housing price crash.

    But AMEN -- you are right in saying THAT [above] as idiotic as it is, would need to be ruled as "sane" and acceptable in contrast to those who advocate war (and the maiming and killing of millions, with mostly innocents among the maimed and dead).


    Sociopathy, Psychopathy and Ponerology writ large.

    Ergo FDR and Wilson (and GWB) were truly SICK MF's... not really any different in nature (or even much by extent) than Stalin and Hitler.
    (When one understands what they actually DID. Well, it's enough to make one WANT to believe in a "special Hell" with eternal torture for those who cause such things; murderers and rapists like Manson et al, are insignificant in comparison.)

    (BTW for this reason alone... I am not certain I could/should EVER visit Washington D.C. -- as I would be sorely tempted to take a sledgehammer to the FDR "memorial" statues... and possibly others as well. The Glorification and Deification and Idolatry of Murderers!)

    Last edited by WRellim; 11-18-2008 at 01:57 AM.

  21. #18
    Quote Originally Posted by fletcher View Post
    Krugman's Prescription for Disaster

    Krugman is an idiot, not an economist.
    The two seem to overlap sometimes.
    "That's one thing about freedom; you have to tolerate the nonsense too." - Ron Paul

  22. #19
    Quote Originally Posted by ninepointfive View Post
    I think you bring up a good point. I don't know much about the matter myself.

    I'm assuming the tax was collected to purchase the war supplies. In World War 2, it was good that we all came together for the cause, but it had the unfortunate side effect to usher in more power to a federal government over the years.

    Of course this is what a federal government is good for in a time like that. Organizing the companies of men from each contributing state.

    Actually it was a political maneuver as much as anything.

    Rich people who were part of the "Roosevelt cabal" were given fair warning and assistance in making certain that their monies and investments were safely ensconced in appropriate tax shelters; which then allowed a confiscatory tax to basically emasculate the wealthy who were opponents of Roosevelt -- crippling their ability to fight back politically or otherwise (it sent them scurrying trying to find their own tax shelters and thus helped limit their involvement in the political opposition.)

    You don't really think tax policy is about raising actual revenues? Not in a country where they had already spent a decade simply "printing" whatever money they needed. Taxes were a form of social "control" -- and a political mechanism for vilification of political enemies should the need ever arise. (The IRS laws are specifically designed to be so complex so that people can NOT actually ever be in 100% compliance -- that is the whole point -- they can ALWAYS find something you didn't follow, and this keeps the proverbial Sword of Damocles ever dangling above.)
    Last edited by WRellim; 11-20-2008 at 10:15 PM.



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