Thomas Woods

World War II Was Bad for the Economy


Thomas E. Woods, senior fellow at the Ludwig von Mises Institute, discusses the evidence that contradicts Paul Krugman’s opinion that war is good for the economy, the renewed skepticism on the cause-and-effect relationship between WWII production and U.S. economic recovery, the stifling of private investment during the Depression due to erratic governmental interventions, the centrality of managerial intransigence to current Big-3 automaker woes and the debate on the benefits of a global division of labor.

MP3 here. (38:15)

Thomas E. Woods. is a senior fellow at the Ludwig von Mises Institute, co-editor with Murray Polner of We Who Dared to Say No to War: American Antiwar Writing from 1812 to Now, and author of The Politically Incorrect Guide to American History and Meltdown: A Free-market Look at Why the Stock Market Collapsed, the Economy Tanked, and the Government Bailout Will Make Things Worse.

30 thoughts on “Thomas Woods”

  1. And the aftermath? The Soviets took ( were given ) 1/2 of Europe to rape for the next few decades..then the Talmudic Pharasaical Zionists terrorized the Brits out of the Holy Land ( along with approximately 750,000 Palestinians in April/May 1948..then the Communists ( who the Japanese had been fighting which is why the Brits had viewed them as natural allies in the region until…) took China…”The Good War”-my ass!

  2. I hope someone sets up a book-bomb website for Tom’s new book “Meltdown: A Free-market Look at Why the Stock Market Collapsed, the Economy Tanked, and the Government Bailout Will Make Things Worse”

  3. I think Krugmans point is missed. The point is that government spending helps the economy because it puts money into the hands of workers, who, as was shown in the post war years, began to spend the money once goods became available. Because of the increase in government spendng, the workforce increased, and they could not really spend the money because of the limited availability of goods, almost enforced saving. hey then spent the money as goods began to bec ome available, thus causing the boom in 46
    Poor people spend higher percentage of the money that they get than rich people do when they get an increase in money, simply as they have a greater desire to improve their material and social status. This money funds new businesses in the service and “luxury” markets and thereby increases the economy.

    War is simply a means to an end. It is a convenient way to scare the population into accepting things they would not normally allow you to do. I.e scaring the elite and upper middle class into accepting higher taxes. it is the lefts version of Naomi Kliens disaster capitalism. War is not the only way to do this, and to accomplish this you need a “great war” so that a large percentage of the population is involved in it. Al Qaeda aint gonna cut it.

    To be honest tho the same thing could be accomplished by a national project on the enviroment, where the kinds of resources which could be used on a great war, be used to find ways to overcome the countries environmental problems including, cleaning up polluted areas, sorting infrastructure issues, the oil problem, national parks, etc

  4. I’m sorry Kenny, the government stimulus that you speak of whether through war or other measures will just create another bubble. Where would the government get the money for this new spending, certainly not all of it would be in tax increases. The only way the the government can do this is by running the printing presses which is the reason for this economic collapse. Government cannot create wealth out of nothing.

  5. I don’t agree, initially the government would be subsidizing the project, but as the benefits of the project, such as improved technology, additional marketable products, etc became apparent the US would be the world leader in a sector that the rest of the world would need desperately. The founding principle of mercantilism is find a product that people need and sell it. This income would thus be plowed back into the market.

    This would have to be supplemented through taxes of specific groups of high earners, and possibly a carbon tax system, thereby giving additional impetus to environmentally unsound businesses to clean up.

    This combined with some movement of cash from the military industrial complex to the project would easily pay for the project.

  6. Do you really think that the government can magically produce all this money without causing rampant inflation? Even if the money is being spent on something that years down the road will be a useful product or technology, inflation will have made the economy infinitely worse long before those products begin to boost it. Henry’s right – the government can’t create wealth – any attempt at it will only send us spiraling into truly frightening inflation.

  7. Kenny, I don’t follow. You’re saying we don’t need all the investment that savings make possible, and that we instead need to spend that money and consume our seed corn to become prosperous? Savings is bad and spending is good? Then how do we increase our productive capacity? All our resources are going into consumer goods instead of into additional capital, or even capital maintenance.

    And why would we assume that the government’s preferred outlets for the money will make any sense? Why should they make any sense when they don’t have to pass a profit-and-loss test? Had Japan listened to its government’s “industrial policy” gurus, they would never have produced cars and supercomputers.

    Consumption never needs to be encouraged. Overconsumption is what we have right now. We need saving and production in order to lift ourselves out from under the consumption-fueled debt crisis.

  8. “The founding principle of mercantilism is find a product that people need and sell it. This income would thus be plowed back into the market.”

    This is one of the worst defenses you could have come up with. Mercantilism? Come on, mercantilism was a terrible system as has been shown time and time again both by experience and by simply following its tenets to their logical conclusions, which are absurd. Lets leave mercantilism to the dustbin of history shall we.

  9. Kenny, you’re inconsistent. You say, “…some movement of cash from the military industrial complex to the project would easily pay for the project.” But according to you, that should give us a de-stimulus as less money is now spent on the military-industrial complex. Since spending in and of itself is what you’re after (since it puts money in workers’ pockets), why would shuffling money around like this necessarily help? Wouldn’t it all be a wash?

    Time to go back and re-examine all these Keynesian premises. They make no sense.

  10. Patrick J. Buchanan’s recent article covering trade, investment and the economy ( in the American Conservative ) is dead on…He was right ( about Iraq-aka Gulf War I-and trade policy) and the rest of the Republican Party was wrong..Somehow that doesn’t help us now..We’re in for more paper shuffling in a false, non-productive economy..And somehow I think the neo-cons will get the next war they want regardless of who the current occupant of 1600 Pennsylvania Ave. is.

  11. Kenny,
    The govt cannot prime the pump on the economy. They cannot bring any new goods into existence. They only have a printing press. They can increase the supply of dollars which can lead to a temporary boom in certain industries that receive the dollars first. However without a commensurate increase in the number of goods in existence the price of dollars simply decreases as the supply of dollars goes up, prices rise. Read “What is seen and what is not seen” by Frederic Bastiat. Pay particular attention to Bastiat’s Broken window fallacy.

  12. Whether or not the U.S. govt. can ‘prime the pump’ with Federal Reserve debt notes, it sure doesn’t help that U.S. government policies actively encourage jobs to be moved offshore. Just so you libertarians know, moving a job to China has nothing to do with “free trade.” “Labor arbitrage” is not “trade.” It’s “labor arbitrage.” The mercantilists have a point. Whoever has the highest proportion of factories per population size wins the wealth game in the end.

  13. You’re not going to have much wealth created by free trade if you’re not manufacturing anything to trade. If your manufacturing base is gutted, good luck with trade, because you import manufactured goods in return for raw materials which places you in the 3rd world – or in return for debt, which doesn’t last long.

  14. Tom,
    the movement ogf money from the military industrial complex would see the loss of some value intwernally, but as much of this money is spent externally, there will be a stimulus as this money is used insude the US.

    This would not pay in full for the required changes. I see the main problem in the economy at the moment is that much of the money is stagnating, that is to say, that when you have a movement of wealth to the elite in society, the money is used and circulated less, thus not funding as many families, enterprises and businesses as it qwould if it was fully fluid. By the government mixing up the bowl a little, by moving the demand away from military to enviromental issues, you make the existing Military industrial complex diet, to reduce reduce in size from its bloated current state, and encourage new business and ideas from people in the enviromental sector.

    The money to pay for this does not neccesarily need to be printed, as i have suggested some could be taken from reviewing tax policy on the most financially static areas of the economy, and also on the contibutors to enviromental damage. You also tighten import laws to make this mandatory for all importers as well. Secondly as i have mentioned before you move some money, particularly that which is being spent externally, from the MIC to this new project.

    This would mean that inflation would be avoided as you were not simply borrowing to pay for this project.I believe this project could be done with a stimulus of 3-7 trillion dollars, which would still be cheaper than anther bailout plan in 20 years time.

  15. Franco, I completely agree with you, and the purpose of this project would be to reinvigorate the manufacturing and export market, by opening up market which is not fully explioted at the moment.

    Free Trade is a myth, it always has been. Trade is controlled by people with money, by advertisers and educators, by lobbyists, vested interests, media and corporate money, and always will be. Mercantilism has never really died, it just evolved into corporatism.

  16. Tom, movement of money is what keeps economies allive, money which remains is unproductive. The more money is moved, the more oppertunity there is for each individual to participate in the economy, and fund further growth. Sustained growth can only be acheived by the growth in economic power in all strata’s of a society, if not we simply get a bubble of stored wealth, which is taken off the market and produces no growth

  17. Sorry to make another point but Tom, you said that “We need saving and production in order to lift ourselves out from under the consumption-fueled debt crisis.” What can we produce for world markets that is going to be cheaper than can be produced in China, or where i live in India. The only way you can do this is by reducing costs so much that you will put large sections of the american public into the level of poverty evident in these countries. For example, i work in the service sector in India, serving american and UK consumers and Businesses. My colleagues are paid around 200 dollars a month. To make The US as cheap to an international and even domestic market would reduce most communities, within the US, to poverty

  18. Kenny, babe, that’s why you need investment — to make our own workers physically productive enough to justify the high wages to which we’ve become accustomed. What you’re calling for would squander trillions on projects no one would voluntarily pay for, and thereby deprive the private sector of what it needs to grow more productive and make workers more prosperous.

    “Spending” per se is not what creates wealth. Saving, capital investment, and production do that. If I empty my pocket, that doesn’t create wealth. What will I spend tomorrow if all I do today is spend? Production must precede consumption, and it’s production we don’t have. All we have is excessive spending and debt. Taxing the private sector and diverting the proceeds to some horrific state-run boondoggle is the oldest trick in the book, but it doesn’t create prosperity. Only stagnation.

    If people choose to spend less, the market adjusts to that. People are enhancing their utility by increasing their cash balances. That is ipso facto a good thing, and all the stimulus packages in the world can only introduce discoordination, capital consumption, and relative impoverishment. Let the malinvestments of the boom, brought about by Fed manipulation, be shaken out, let rational asset and factor pricing reassert itself, and employment will resume. Just as in 1921. On the other hand, in 1929, when the government did exactly what you’re calling for, depressed conditions went on for a decade and a half.

  19. “… Pharasaical Zionists terrorized the Brits out of the Holy Land ( along with approximately 750,000 Palestinians in April/May 1948.”

    At least that’s what the antisemitists would have you believe. The actual history is quite different.

    The actual history looks more like this:
    1) Muslims invade Jewish homeland. Turn it into an apartheid state. Some Jews leave and some stay.
    2) Muslims persecute Jews for over a thousand years. Muslims being big antisemites. In fact it’s written right into their religion.
    3) Jews persecuted all over the world by antisemites.
    4) Some Jews see the writing on the wall in Europe decide they need to migrate back to their homeland to try to set up their own state that will protect themselves, as the non-Jewish ones never had.
    5) They migrate to what is now Israel, and buy land there. Yes, buy.
    6) Local Muslims believe that only Muslims can rule over Jews not vice versa. Had already, for more than a thousand years been running government this way.
    7) Some local Muslims hatred for Jews is so great that they start terrorizing Jews who are buying land, and other muslims that are selling them their lands. Furthermore, they get the British to ban the sale of land to Jews.
    8) At that point the Jews who had lived there for at least two thousand years before Muslims, and the newly arrived Jews are not happy. Again they are being treated as subhumans.
    9) Some of these Jews decide, enough is enough, and decide to resist the British, since it was now clear that the British were not running the government in the interests of all citizens of the country, as if they all were equal.
    10) Some Jewish groups decide to bomb a hotel that housed British troops. They warn of the bombing ahead of time. Then set off the bomb. (Unlike the Muslims who like to give no warning because they want to kill innocents).
    11) The Jews manage to drive the British out.
    12) Muslims in there antisemetic rage amass troups on their borders, and inform local muslims to evacuate so as to make the genocide easier to accomplish.
    13) Some Muslims, and Christians leave.
    14) Invaders repelled and destroyed.
    15) Invaders take out their anger on their own Jewish populations and millions have to flee to Israel. No compensation made for the land or property they left behind.
    16) Israel set up, but will not allow the Muslims who fled back in for fear they will act as a fifth column in future attacks. Jews set up funds to reimburse Muslims for land titles that they lost.
    17) Displaced Jews allowed full citizenship. Displaced Muslims put in refugee camps by other Muslims, and not allowed to resettle.
    18) Jews set up government where Muslims are allowed to be elected and Muslims have full citizenship.
    19) Foreign Muslims doing everything in the power ever since to keep the conflict going. Everything from keeping “Palestinians” in refugee camps, to invading, to suicide bombing, to manufacturing fake videos.

    Now I have left out bad things that small factions on both sides of this have done. However, when the Jewish side commits crimes at least they try to reign the criminals in where they can. I see next to no concessions on the Muslim side.

    Meanwhile the Muslims are committing atrocities not only against Jews, but against other Muslims who want to make peace, or Christians who get in the way.

    Remember this is not a scholarly article. It’s a comment on a blog. The intent was to show that the ignorant one sided sentence I was critiquing was far from the truth. Thus I only included things that would tend to undermine that sentence. The Jews are not completely blameless but the blame runs more 5% Jewish and 95% Muslim. It is not 100% Jewish the way the sentence fragment would have you believe.

  20. You’re both talking about using tokens which represent debt as the only medium of exchange. That’s what we do now, that’s why we keep having crashes… our only ‘money’ is debt tokens, so to keep the economy going, we have to keep expanding debt, eventually debt expands too far and there’s a crash. More debt tokens is not the answer, and neither is letting a crash happen so we can get back to business as usual.

    What you’re debating is “Should the drunk have another beer and avoid a hangover for a time by getting drunker, or should have a hangover now so he can go back to drinking tomorrow.”

    NO. The problem is the alcoholism, which is the monopoly debt tokens have on the medium of exchange (money). This is the reason for the “business cycle,” we tolerate an unstable economy so debt issuers can have stable profits.

  21. I can’t see how investment will keep US workers productive enough to justify their high wages. The same level of investment will keep Asian workers just as productive at one dollar per day wages. You can never compete with slavery or near-slavery on a level playing field and expect to get paid high wages.

    And Asian countries have a lot more cash to invest, not having gone off into US-style debt-driven economic fantasy land.

  22. Franco, then why doesn’t all production shift to Asia immediately? Why has such a small percentage done so?

    Moreover, how did labor ever come to enjoy the standard of living it does? According to you, labor can be ever more productive,a nd yet still receive the same remuneration. Why wasn’t this counter-intuitive proposition operative in the past? In other words, why did Western workers grow so rich? (And no, it wasn’t labor unions.)

  23. Western workers grew rich because the West industrialized first, and used that capacity to colonize and dominate Asia, which also had to deal with Communism and other problems that kept them non-competitive – for a time, but not forever.

    Also, it was easy for the US to be number one when it was sitting on a sea of oil and the rest of the world was self-destructing with mass war and Communism. Saudi Arabia never matched US peak oil production of 12 million barrels a day. That was like free money under the ground. What is now? 5 million barrels a day? Two billion $ leaves the country every day to pay for oi? (that number has been fluctuating wildly lately)

    US workers wages have been going down slowly and steadily in inflation-adjusted terms since 1970, the year US oil production peaked, despite all the rises in productivity. Families may look like they’re richer because of the entry of women into the workforce and stratospheric debt levels.

    Workers can be more productive and yet easily get paid less if the competition from low-wage countries is fierce.

  24. Franco, workers are also consumers, and by any measure, workers need to work far fewer hours than they did as recently as 1950 in order to earn the money necessary to buy a whole array of necessities (and luxuries). Moreover, what worker in 1970 had a cell phone, a laptop, or any of the other veritable miracles we now take for granted?

    Yes, if we slashed and burned and started abolishing government institutions and removing the sources of the state’s predation on productive people, workers would be wealthier still. I agree with you there.

    Incidentally, you leave out the obviously interesting question about what it was about the West that made it industrialize first. Was this just a random event that had no explanation, or might there have been institutional factors that accounted for this?

  25. And yes, workers can get “paid less,” but if the supply of goods increases sufficiently, they can still earn higher real wages in terms of what the money they earn can buy them. That’s the mechanism by which wages have risen over the past 200 years. It’s also why an abundance of consumer goods is not a terrible scourge to be avoided — what if we suddenly discovered a machine that could produce them all for free? You’re saying that would be a bad thing for workers? We should promptly destroy this machine?

  26. Tom, I think you want to make a point about why the West rose. Feel free to make it. It could be just a variation on why Rome rose, why Arabia rose, why 8th century China rose. Things rise, things fall, everything moves on.

    As for the stuff money can buy, sure it’s nice, but it’s kind of empty – what are you going to do – pile crap in your closet and stare at it? IPods are nice. I remember when people used to get together on Sunday nights in people’s kitchens and sing – that was nice too. Going from community singing to diddy-bopping around with IPod buds in your ear and a list of crap to buy and hoard is maybe why the West falls.

    As for the machine that makes things for free – go for it – I’ll guess I’d dutifully lug the things home, pile it in a corner of my garage and feel warm and secure for 30 seconds. I wouldn’t admit it in public, but materialism turns into frantic greed pretty quick after your basic needs are met. Doesn’t strike me as a good reason for a civilization to survive.

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