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World War II Cured the Great Depression? Unlikely

Here’s a letter that I sent today to the Wall Street Journal:

To the Editor:

In his otherwise superb letter, Rolf Goehler repeats the dubious, if common, claim that World War II got America’s economy “going again” (Letters, October 22).

The official unemployment rate did fall (from 14.6 percent in 1940 to 1.2 percent in 1944), but it did so overwhelmingly because of military mobilization rather than because of improvement in the economy’s performance.  As economist Robert Higgs wrote about the war years, “Official unemployment was virtually nonexistent, but four-tenths of the total labor force was not being used to produce consumer goods or capital capable of yielding consumer goods in the future.”  So it’s not surprising that, according to Higgs’s estimates, personal consumption per capita in 1945 was only a paltry 2.5 percent higher than it was in the still-deeply-depressed year of 1940.

Regardless of WWII’s merits on other fronts, almost surely it was no great economic boon.

Donald J. Boudreaux

See Robert Higgs’s indispensable book Depression, War, and Cold War (New York: Oxford University Press, 2006).  The quotation in the letter is found on pages 63-64; the data on consumption are found on page 71.

Also note that personal consumption per capita in 1944, the last full year of WWII, was about two percent less than it was in 1940.