World War II and economic recovery

Rationing

Defenders of Keynesian economics -- essentially, the idea that government spending can drive economic growth and progress -- have a real uphill task. While public sector expenditures can produce brief upticks in economic data, it has never produced long-term prosperity. The only possible exception to this is World War II, when vast levels of spending and an essentially centrally-run economy produced full employment.

This has led to to some rather weird nostalgia on the part of some on the left, who hearken back to World War II as a kind of golden era in the U.S. economy and evidence of the virtues of high government spending and economic planning. Except, as Charles Lane of The Washington Post writes, World War II was awful, even on the home front:

Gauzy memories of national unity notwithstanding, the World War II home front was actually a pretty conflictual place, and increasingly so as the war dragged on. Families chafed under the pressure of rationing and shortages; defense workers staged hundreds of wildcat strikes over unbearable working conditions. Americans hung together because they saw the war as finite and the alternative as catastrophically worse. Today’s polarized American electorate wouldn’t even tolerate a few cents of additional gas taxes, much less Greider’s big move.

What about “force-[feeding] the rapid development of new technologies and new basic industries?” Greider is right that World War II’s aircraft, tanks, bombs and bullets had profitable civilian spin-offs. But we would have built them anyway, because those were the implements of a war we had to win. Today, the choice of investment is a bit more complicated. If government borrows money to fund particular technologies, “green” or otherwise, they must meet the test of the market someday, lest they simply become permanent drains on the Treasury. Energy-saving technologies have a lot of promise, but their ultimate profitability is hostage to the world price of oil. Greider says we should build high-speed rail. Okay. But everywhere else in the world, it’s subsidized, even in densely-populated Japan. Why would it be a money-maker here?

Give the whole thing a read. Prosperity and full employment are not the same, and the post-World War II boom occurred in part because of pent-up demand stemming from all of the wartime rationing and deprivation. This is not a formula we should seek to repeat.