Monday, December 1, 2008

FDR Didn't End the Depression: WWII Did

Both liberal and conservative economists seem to agree that WWII ended the Depression. But conservative economists go further. They say that FDR's actions (esp. the WPA programs) were, at best, useless & a waste of money or, at worst, the reason the Depression lasted until WWII.

I see two problems with this. First: the value of the work programs. I'm sure there was some waste, fraud and abuse. But a lot of today's infrastructure, like Eisenhower's highway system in the 1950s, was built under FDR.

Second, they ignore the "why" in the "WWII ended the Depression". I am NOT an economist (I barely survived the basic Econ. courses in graduate school), but, from an economic point of view, what did WWII do?

Well, it took millions of young men our of the civilian labor force and put them to work for the government. Then the government spent a lot of money on all the manufactured goods needed to run the war. It was government money that paid for the planes and tanks and uniforms and food and weapons, etc. And who produced these goods? Well, with a lot of the men doing government work, a whole new class of workers, women, went into the work force. I don't know what the combined number of new military men and new women in the workforce was, but certainly the result was the largest government works program in U.S. history.

So, the Conservatives draw the wrong conclusion. Yes, WWII ended the Depression. But it was precisely because it created an even greater expansion of Federal spending in the private sector. FDR's programs didn't work the miracle because they simply were not big enough.

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