[rt]

Is what my history professor said in class today. He didn’t get further into it, but if he had, I’m not sure what I would have responded. I know the claim is wrong, simply because war, destruction, government spending etc. don’t lead to economic growth. During WW2, living standards were rather low because of rationing and wage and price controls. At the end of WW2, government spending was cut sharply and wage and price controls were abandoned. But without looking at other things, the situation is similar to that before WW2. Why was the US economy in a slump before WW2 but got out after WW2?
Are there any specific reasons? Thanks a lot in advance

[jmherbener]

After the war, the government was rolling back intervention, i.e., freeing markets and private enterprises, and returning assets, wealth, and income to the private sector. Before the war, the government was increasing government intervention, i.e., restricting markets and private enterprises, taking assets, wealth, and income from the private sector.

Robert Higgs’s articles on Regime Uncertainty in the G.D. and Reassessing Wartime Prosperity are essential reading:

http://www.independent.org/pdf/tir/tir_01_4_higgs.pdf

http://www.independent.org/newsroom/article.asp?id=138

[woods]

I also recommend this article by Burt Folsom: http://www.fee.org/the_freeman/detail/what-ended-the-great-depression/

[rt]

Thanks Tom and Jeff. I’ll try to read the material you mentioned in the near future!

[Author]

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