Saturday, February 07, 2009

The Great Depression and how we got out of it..

There's been a lot of discussion about how to get out of the Recession and how we got out of the Great Depression.

A lot of focus is on the New Deal and Government spending. Others say it was the War that jump started the economy.

I've read some on it and I think there's a perspective you hear sometimes, but doesn't get enough play. The US economy in the late 30s was terrible and getting worse. The economy in the 40s was better by some measures. Sure, GDP went way up, but we were building tanks, planes and ships. Standard of living was terrible during the War as you would expect.

What happened to the economy when the War ended? In '46-'48 there was high inflation and then a bad recession hit with high unenployment. It appeared that the Depression might have come back. What happened then? The economy picked up as markets started opening world wide for US goods.

I'm no economist, but could it have been the case that it was the destruction of world-wide productive capacity (primarily Europe and Far East) during the War that accelerated the US economy out of the duldrums? Perhaps this continued until the bad economies of the late 60s/70s? Not sure what happened during the 80s/90s, but I think maybe we've been living on debt during that period and the basic realities of the economy haven't changed.

It's cautionary. If we have another Great Depression, will there be pressure for us to use our status as the only Superpower to start or encourage the start of a Great War? A War that would diminish world productivity to our benefit?