Tuesday, September 20, 2011

Broken Windows



It's a common belief that WW II brought America out of the Depression. It's true that a lot of people were put to work building tanks and bombs. This production however was not geared toward things that consumers needed. People were worse off because capital and labor was diverted away from the production of consumer goods.

The tax monies of of 60% of taxpayers funded the activities of the other 40% of the work force that was not producing things that consumers needed. This amounted to to a net loss of material wealth for the country.

No one during the war could buy a new car or house or major appliance since the government had forbidden their production. Things we take for granted today such as meat, chocolate, rubber tires even gasoline was very difficult for the average person to obtain.

It wasn't the New Deal or WW II that brought America out of the Depression. It was the long delayed return to free market activities that occurred after the war.

You'll often hear people talk about how good war is for the economy. If that were true the government should start bombing major American cities. Just think of how many people could be put to work rebuilding everything. And we could hire thousands of health care professional to care for the injured and dying. This is the Broken Window Fallacy (Just Google: Bastiat Broken Window).

Our country has been is a state of war — cold or otherwise — almost continuously since the end of WW II. These wars don't improve our economy — just the opposite. We are in hock up to our eyeballs to China to pay for our global military adventures.

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