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>The Great Depression didn’t really end until wartime mobilization caused a surge in incomes and production that wiped out old debts, leveled the wealth distrib

>The Great Depression didn’t really end until wartime mobilization caused a surge in incomes and production that wiped out old debts, leveled the wealth distribution, and gave people confidence in the future. The end of the war also kicked off a baby boom after a long drought of births. a) The author is going to catch some flak for being so bold as to suggest that federal government policy wasn't what dug the US economy out of the great depression. b) If intentionally crafted policy changes designed to fix the problem were ineffective the first time why should we have reason to believe that we have any other option than to wait it out and let some yet unforeseen situational change change things?

gregwebs 5y ago
I also give these statements (the first sentence) flak because the logical conclusion would be that to get out of a depression one should start a war or perhaps just pay everyone to dig ditches. The reality of war is quite the opposite: it is a huge expenditure that makes the parties net poorer. The victor only gets richer if they get to steal more wealth from the looser than the war cost them, which was not the case of WW2.
- throwaway0a5e 5y ago
  I agree that war is a neg negative but the flatting effect on the economy is well studied. If you've got inequality so bad that it's causing serious problems you can still wind up being net positive after a war (or any other net negative event that flattens things out) several years out because the flattening broke the economy out of the feedback loops that were causing problems.
  - gregwebs 5y ago
    So the utility of war isn’t the economic mobilization that is claimed but instead the cover it provides for implementing a progressive tax rate, etc
    - throwaway0a5e 5y ago
      Based on my casual observation it has (almost) nothing to do with the policies and (almost) everything to do with the effect on the economy of a total war.
      - imtringued 5y ago
        What wars do is break monopoly power. If the rich own all the land, money, patents you can take it from them. Inflation doesn't create prosperity through an increase in the supply of money, it increases prosperity by breaking the monopoly power of money. During deflation you create $10 of value (assuming perfect price stability) but since the value of the dollar has risen you only get paid $5. When you add more dollars into the economy the monopoly power is shrinking, you get paid the whole $10 again. Negative interest rates break the monopoly power of money by charging a holding fee for excessive patience. Land value taxes break the monopoly power of land. Democracy breaks the monopoly power on ruling the nation. What we basically need is a slow decline in power, year by year instead of an instantaneous decline of power in a war or revolution.
- TuringNYC 5y ago
  >> The victor only gets richer if they get to steal more wealth from the looser than the war cost them, which was not the case of WW2. It isnt quite that simple. Sometimes it is "stealing" from the future and paying to people now. One example would be recent wars where we took from the future (national debt) and gave to people now (war expenditure.) Another example is "stealing" from the country and re-distributing to select people in the country. An example, again, would be recent wars where we took from the country (national debt; opex) and re-distributed to select people in the country (defense industry; their payroll). The above two, combined with war reparations (even if net-negative reparations) can equal an overall positive to some parties. Finally, post-war, the regime for the opposing country can be such that they favor trade with the US (e.g., using Halliburton to build their new oil infra; using Bechtel to build their new civil infra) -- again, the money flows back to the US, albiet in an uneven and sectioned waterfall
  - imtringued 5y ago
    >It isnt quite that simple. Sometimes it is "stealing" from the future and paying to people now. One example would be recent wars where we took from the future (national debt) and gave to people now (war expenditure.) It's actually the opposite. Debt is about giving later and taking now. When you take on debt to pay for a war, the damage is not done to future generations, it's done to the present. 20 years of war in Afghanistan are the price we paid. We could have done something else with the money, that is what we lost. The debt itself is not the problem, because it also created the money that is necessary to pay it back. Some of the dollars in your wallet are backed by the debt taken on for the sake of the Afghanistan war.
- postingawayonhn 5y ago
  In general you're correct though the US was probably a special case during WW2. The US benefited enormously from being the only industrial power to end the war with no significant loss of territory or industrial capacity. Casualties were also relatively light with only 0.32% of the population dying due to the war. During the war making use of women and other groups that normally wouldn't have been working would have also offset some of the production losses incurred by sending young men off to fight.
  - gregwebs 5y ago
    > The US benefited enormously from being the only industrial power to end the war with no significant loss of territory or industrial capacity This seems mostly an effect of other countries being destroyed (some by the US) rather than the US economy actually benefiting from war mobilization.
- imtringued 5y ago
  Well, the more obvious answer would be to just have negative interest rates. Karl Marx proposed seizing the means of production, why not just make its owners pay for their excessive patience? The problem with a depression is that everyone holds onto money hoping for fictional security in the ability to indebt someone else rather than being the one in debt.
spywaregorilla 5y ago
After WWII the top tax rates were almost 3x higher, reaching above 90%. That'll help level your wealth distribution for you.
- throwaway0a5e 5y ago
  I hate this trope. What were the effective tax rates paid? The high nominal rates were trivially easy to circumvent so the rates people actually paid weren't all that historically anomalous. When you start talking about overall tax burden (sales taxes, fuel taxes, property taxes, etc) the 1950s look like a libertarian's wet dream.
  - spywaregorilla 5y ago
    Effective tax rates on the top 1% were around 43%, falling around 32% in the mid 2000's. Last data point on this source was about 37%. Meanwhile the growth of real income held by the top earners has dramatically risen since the 1980s vs. the other classes. With these two facts in mind, one would assume that a modern day spectrum of income inequality on 1950s taxation policy would see an effective rate MUCH higher than what they experienced, which was still generally noticeably higher than what is experienced today. A couple percentage points makes a big difference. https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality https://www.cbpp.org/research/poverty-and-inequality/a-guide...
- closeparen 5y ago
  Wealth isn't (just) stored-up income. At least, if you're going to make this equivalence, also limit your picture of wealth inequality to the subset of wealth which is stored-up income. My sense is that the vast majority of the wealth inequality picture is driven by returns.
anotherman554 5y ago
To your second point, you might consider that economists have learned a few things since the great depression, just as technologists have learned a few things since 1939.

gregwebs 5y ago

I also give these statements (the first sentence) flak because the logical conclusion would be that to get out of a depression one should start a war or perhaps just pay everyone to dig ditches. The reality of war is quite the opposite: it is a huge expenditure that makes the parties net poorer. The victor only gets richer if they get to steal more wealth from the looser than the war cost them, which was not the case of WW2.

throwaway0a5e 5y ago
I agree that war is a neg negative but the flatting effect on the economy is well studied. If you've got inequality so bad that it's causing serious problems you can still wind up being net positive after a war (or any other net negative event that flattens things out) several years out because the flattening broke the economy out of the feedback loops that were causing problems.
- gregwebs 5y ago
  So the utility of war isn’t the economic mobilization that is claimed but instead the cover it provides for implementing a progressive tax rate, etc
  - throwaway0a5e 5y ago
    Based on my casual observation it has (almost) nothing to do with the policies and (almost) everything to do with the effect on the economy of a total war.
    - imtringued 5y ago
      What wars do is break monopoly power. If the rich own all the land, money, patents you can take it from them. Inflation doesn't create prosperity through an increase in the supply of money, it increases prosperity by breaking the monopoly power of money. During deflation you create $10 of value (assuming perfect price stability) but since the value of the dollar has risen you only get paid $5. When you add more dollars into the economy the monopoly power is shrinking, you get paid the whole $10 again. Negative interest rates break the monopoly power of money by charging a holding fee for excessive patience. Land value taxes break the monopoly power of land. Democracy breaks the monopoly power on ruling the nation. What we basically need is a slow decline in power, year by year instead of an instantaneous decline of power in a war or revolution.
TuringNYC 5y ago
>> The victor only gets richer if they get to steal more wealth from the looser than the war cost them, which was not the case of WW2. It isnt quite that simple. Sometimes it is "stealing" from the future and paying to people now. One example would be recent wars where we took from the future (national debt) and gave to people now (war expenditure.) Another example is "stealing" from the country and re-distributing to select people in the country. An example, again, would be recent wars where we took from the country (national debt; opex) and re-distributed to select people in the country (defense industry; their payroll). The above two, combined with war reparations (even if net-negative reparations) can equal an overall positive to some parties. Finally, post-war, the regime for the opposing country can be such that they favor trade with the US (e.g., using Halliburton to build their new oil infra; using Bechtel to build their new civil infra) -- again, the money flows back to the US, albiet in an uneven and sectioned waterfall
- imtringued 5y ago
  >It isnt quite that simple. Sometimes it is "stealing" from the future and paying to people now. One example would be recent wars where we took from the future (national debt) and gave to people now (war expenditure.) It's actually the opposite. Debt is about giving later and taking now. When you take on debt to pay for a war, the damage is not done to future generations, it's done to the present. 20 years of war in Afghanistan are the price we paid. We could have done something else with the money, that is what we lost. The debt itself is not the problem, because it also created the money that is necessary to pay it back. Some of the dollars in your wallet are backed by the debt taken on for the sake of the Afghanistan war.
postingawayonhn 5y ago
In general you're correct though the US was probably a special case during WW2. The US benefited enormously from being the only industrial power to end the war with no significant loss of territory or industrial capacity. Casualties were also relatively light with only 0.32% of the population dying due to the war. During the war making use of women and other groups that normally wouldn't have been working would have also offset some of the production losses incurred by sending young men off to fight.
- gregwebs 5y ago
  > The US benefited enormously from being the only industrial power to end the war with no significant loss of territory or industrial capacity This seems mostly an effect of other countries being destroyed (some by the US) rather than the US economy actually benefiting from war mobilization.
imtringued 5y ago
Well, the more obvious answer would be to just have negative interest rates. Karl Marx proposed seizing the means of production, why not just make its owners pay for their excessive patience? The problem with a depression is that everyone holds onto money hoping for fictional security in the ability to indebt someone else rather than being the one in debt.

spywaregorilla 5y ago

After WWII the top tax rates were almost 3x higher, reaching above 90%. That'll help level your wealth distribution for you.

throwaway0a5e 5y ago
I hate this trope. What were the effective tax rates paid? The high nominal rates were trivially easy to circumvent so the rates people actually paid weren't all that historically anomalous. When you start talking about overall tax burden (sales taxes, fuel taxes, property taxes, etc) the 1950s look like a libertarian's wet dream.
- spywaregorilla 5y ago
  Effective tax rates on the top 1% were around 43%, falling around 32% in the mid 2000's. Last data point on this source was about 37%. Meanwhile the growth of real income held by the top earners has dramatically risen since the 1980s vs. the other classes. With these two facts in mind, one would assume that a modern day spectrum of income inequality on 1950s taxation policy would see an effective rate MUCH higher than what they experienced, which was still generally noticeably higher than what is experienced today. A couple percentage points makes a big difference. https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality https://www.cbpp.org/research/poverty-and-inequality/a-guide...
closeparen 5y ago
Wealth isn't (just) stored-up income. At least, if you're going to make this equivalence, also limit your picture of wealth inequality to the subset of wealth which is stored-up income. My sense is that the vast majority of the wealth inequality picture is driven by returns.

anotherman554 5y ago

To your second point, you might consider that economists have learned a few things since the great depression, just as technologists have learned a few things since 1939.