12.07.2012 10

Did World War II end the Depression?

By David Nace — In the words of Franklin Delano Roosevelt, December 7, 1941 was a day that would live in infamy.  The Japanese attack on Pearl Harbor claimed the lives of 2,400 Americans and caused millions of dollars in damage.  Despite the horrific destruction that the attack caused, it may also have been the day that Japan saved the American economy.

America had experienced many economic downturns or panics, as they were once called, during its history.  The Panic of 1920 as the result of the end of World War I was as severe as the initial recession from the 1929 Stock Market Crash.  However, because Presidents Harding and Coolidge did not allow the federal government to intervene, the economy quickly recovered.

What turned the 1929 Stock market Crash into the decade long Great Depression were the interventions by Herbert Hoover and to a much greater extent, FDR.  Hoover passed the Smoot Hawley Tariff to protect American farmers and manufacturers from foreign competition, but it helped to bring world trade to a standstill.  He also encouraged employers not to reduce wages.  FDR ran for office in 1932 opposing Hoover’s interventions, but once in office his actions that made Hoover’s interventions look mild.

FDR immediately enacted the National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA).  The NIRA allowed manufacturers to form cartels to set prices for their products in exchange for unionization of their plants.  The AAA destroyed crops and livestock to keep agricultural prices high.  These bills helped to make union members and farmers key voting blocs for FDR.

These New Deal policies helped to get FDR reelected in 1936, but they resulted in wages and prices that were much higher than market conditions would dictate at a time when few people had money.  This resulted in very high unemployment throughout the 1930’s.  Just as today, FDR blamed the high unemployment, not on his misguided policies, but on rich people not hiring enough people, and raised their marginal tax rates, allegedly to help pay for his vastly expanded federal programs.

The result was an entire decade of high prices, high taxes and high unemployment.  It was the Japanese bombing of Pearl Harbor that finally ended the unemployment problem through the induction of 12 million people into the military.  Cost plus government contracts for military supplies allowed manufacturing plants to operate profitably at the high union labor rates that they had foolishly agreed to under the NIRA, before it was ruled unconstitutional in 1936.

If the policies that created the Great Depression sound eerily familiar, they should.  President Obama has followed almost the exact policies to reward unions and other key voting blocs for the last four years.  If it required the attack on Pearl Harbor and our subsequent entry into World War II to recover the last time these policies were used, what will it take for America to recover from another four years of similar policies?  When will the American public recognize that while resentment and envy may help to win elections, they are not the policies to build an economy upon?

David Nace, an Executive Vice President of a Pennsylvania construction and engineering company, is a Liberty Features Syndicated writer.

  • JanZizka

    Unfortunately, it would take much more than WW2 to end this Depression. The reality is we still manufacture a good bit here, however, much of it has been automated. Those jobs are not coming back! Also, when the war began we were not nearly as mired in debt as we are currently, nor on that note did we have the prospect of a near term timebomb like the Baby Boomer retirement tsunami draining Social Insecurity and the Mediscam programs. We also had some innate strengths, chiefly a population that was willing to actually do the hard work when the time came and loads of cheap energy. Also the end of WW2 gave us at least 20 years of abnormal prosperity levels as by its end we were the only industrial power not in some form of ruin and/or bankruptcy, true, we were at 120% debt-to-GDP but that was something we were able to retire because we weren’t a shambles. Outside of Europe, Japan, and Russia, much of the world was undeveloped and those areas were suffering after the carnage of the war. Today the opposite is happening, we in the West at large are de-developing, for lack of a better word, while much of the rest of the world develops at an ever more rapid pace.

    Look to today, we are already around 105% debt-to-GDP without a major war, we face a massive wave of Boomers retiring and amping that up further, our infrastructure crumbles as we foolishly prioritize the entitlements demanded of seniors and varying other special interest groups above any sort of government spending that might have a useful function, a big hot war will likely not result in a draft but mass kill events using nuclear and other weapons as warfare is also being automated. Fewer soldiers but those few need to be smart enough to use the new tools, the mass levy is no longer a really effective strategy. We have a population too soft and pampered to actually work by and large and our energy costs are climbing because of regulations killing the things that actually work in favor of fantasies of wind and solar power.

  • mwood13

    war does bring a good economy but only if all the weapons and supplies are made in America by Americans not overseas by people who hate us

  • Living standards if anything got worse with rationing during WW2 . It was only after the war and the defeat of such ideas as Truman’s nationalization of the steel industry that prosperity really took off .

  • Amazingly, a right wing venue where it is acknowledged that massive government spending can help the economy at the right time. Nearly everyone understands that FDR’s programs were bringing things back, then they did the same thing we’re doing now, which is to freak out about the deficit, and cut it back. Eventually, the war forced our hand. By the end, the economy was booming and we were able to retire the debt easily. We’re in a mess now that is going to take more than a little stimulus and then a lot of backtracking; you can see that by the austerity idea’s success in Europe. Not working, is it? We aren’t going to have jobs from the private sector until there are people to buy stuff, and there are not going to be people to buy stuff until there are jobs in the private sector. Guess what? The government needs to prime the pump by doing all the things we need to do, like repair infrastructure, develop energy sources that don’t increase global warming, educate our youth, and those people will have money to spend to buy things. Then the private sector will come back and we will be able to work ourselves out of the whole. If anyone really thinks that cutting back more on government employment is going to help jobs – help jobs by laying people off? – they have to think again. If anyone thinks the fat cats are going to “create jobs” when there’s no one to buy anything, they need to think again. So it’s not taxes that’s harming jobs; those billionaires can pay more taxes with no problem. This is a no brainer, if it were not for all the confusion about the sequence – jobs first, then the debt.

  • sandraleesmith46

    It wasn’t just the military build-up, but the increase in manufacturing jobs, especially of war materials; takes a lot of people to mass produce ships, tanks, planes, guns and ordinance for them, etc and we were essentially supplying not only our military , but the Brits and Soviets as well during much of the war {see “Lend Lease}, as well as losing them TO the war itself, so having to replace the ones lost.!

  • Public_Citizen


  • I can see that history and truth aren’t your strong points. WW II did not end the great depression. In fact, things were even worse during the war than during the depression. It was the post war consumerism that boasted the economy. Liberalism is a mental disorder.

  • WW II did not end the great depression. Due to rationing people actually lived worse off during the war than during the depression. And I’m not talking about the soldiers who fought so bravely. It was the post war consumerism that resulted in our booming economy.

  • kathyconserve

    Don’t forget that after the war, we were the greatest nation for manufacturing all that was needed to rebuild the other countries. We had not had bombing on our buildings and manufacturers, we were ready to go.

  • kw

    As others have pointed out, it was not the war that ended the depression. If that were true than big government does work, it just had to be more. It was the ending of many depression-era policies – both during the war by necessity and after the war by wisdom – that ended the depression. If those policies had not ended, the enormous debt incurred by WWII would have plunged us far deeper than we saw in the 30’s.

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