Did World War II end the Great Depression?, Megan McArdle asks. Yancey Ward responds:
The success of a private economy is measured by its ability to produce the goods and services desired by the population. WWII, during its interval, does not measure well on this scale. This is the problem with saying the onset of the war ended the depression.Government can — by borrowing, printing, conscripting, and rationing — produce any level of employment and output it desires, but that is no guarantee of true wealth generation. The meagerness of the citizenry’s consumption during the war years is the true measure of the economy’s output. The depression ended after the war due to the fact that the private sector had finished clearing its debt problems, the worst aspects of Roosevelt’s policies were allowed to lapse along with the additional price controls of the war, and the fact (pointed out by Rob Lyman last night) that uncertainty about future government intervention cleared considerably because the war had a discernible endpoint.
If one believes WWII ended the depression, then we can certainly raise the defense budget to 5 trillion dollars/year for the rest of Obama’s 1st term, ration all other goods and services strictly, conscript 40 million men and women, and pay them to sit on army bases all over the country. Prosperity is just around the bend, and we don’t even have to fight a world wide war.