Monday, November 10, 2008

World War II was NOT a fiscal stimulus!!!

Paul Krugman has a timely column for one reason: the right, which never liked the characterization of FDR as one of the greatest presidents, and who have always sought to dismantle many of FDR-initiated programs, is now all the more in a hysteria over another FDR-style government intervention in the economy.

What really caught my attention in the op-ed was Krugman's honesty in assessing FDR's record. Particularly, this sentence: "What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs."

When I was at Calstate, one course that I taught was "Economy and Society", which was to convey economic ideas to the teacher-prep majors. I would routinely ask them something like, "hey, it looks like WWII was good for the economy. so, does it mean that whenever we fall into an economic rut, we ought to just start a large-scale war?"

It always got them thinking, and they would start providing all kinds of responses. Until somebody pointed out that there was severe rationing. and then somebody else would point out the enormous loss of life and property we suffered, and the world suffered.

In other words, I wish Krugman hadn't written that sentence, or phrased it that way. It was not the fiscal stimulus of WWII, but it was literally blood all over the place that re-started the economy. I mean, everybody on the planet knows that Krugman is a progressive liberal, and there is no way he meant to minimize the loss of life and property. But, it is also the unfortunate aspect of economics that loss of lives--in millions--becomes a mere economic footnote, and not the main story. The main story in economics is always only economic growth.

I have a love-hate relationship with economics. Which is why I systematically stayed away from a PhD in economics itself, but did read up on it .... and continue to ....

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