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Friday, August 5, 2011

That Post WW II Boom

As I said here, Russ Roberts challenged me at Beckworth's blog.  You can see it there.  This is my response, hoisted there and plopped down here.

Well, I have to say that pointing to that one infamous quote - which I have seen numerous times now - and saying - "See how wrong that is!" is 20-20 hindsight, cherry-picking, and pretty shallow. If Samuelson was generally faulty, there should be many quotes to pick apart. I hear crickets.

Since Roberts is going after Krugman, he ought to take a look at his predictive abilities, rather than dragging up a 70-year idea enunciated by someone else. That is changing the subject.


Re: demobilization, I just did a quick google search to make sure what I thought I know wasn't off base.

I came up with these.




At any rate, it's awfully hard to put a robust economy story together with the real GDP data in a way that makes sense.

1941-01-01    1371.5     17.1%
1942-01-01    1623.5     18.4%
1943-01-01    1887.9     16.3%
1944-01-01    2040.2     8.1%
1945-01-01    2016.6    -1.2%
1946-01-01    1798.2   -10.8%
1947-01-01    1784.8    -0.7%
1948-01-01    1864.8     4.5%
1949-01-01    1854.2    -0.6%
1950-01-01    2016.5     8.8%

Negative growth 4 years out of five, starting in '45.


I'd love to see data on the 7.5 million new jobs.


I checked FRED again, and returned.

Also from FRED, PAYEMS series. (All Employees: Total nonfarm)


.                      (thousands)
Jan 1, 1946       39839
July 1, 1947      43742

OK 3.9 million. This would be more impressive, though, if the previous 18 months hadn't seen the loss of about 2 million jobs.

July 1, 1944     41904.

The job additions from Jan, 1946 finally totaled about 7.5 million in Jan, 1951 - way on the far side of the 1948-9 recession.

1951-01-01      47289


 Roberts started with "the release of 10 million people into the labor market with demobilization," which became 7.5 million NEW jobs over 18 months, which actual data showed to be 3.9 million over 18 month, and 7 million over 5 years. And they weren't all new jobs.  Two million jobs had been lost in the previous year and a half.  Roberts acknowledges the effects of the GI bill and women leaving the work force with little more than a nod.  Those niggling little details don't fit the Libertarian narrative particularly well.

With a few seconds on the Google, I found this:

Unemployment almost disappeared, as most men were drafted and sent off to war.  The government reclassified 55% of their jobs, allowing women and blacks to fill them. First, single women were actively recruited to the workforce. In 1943, with virtually all the single women employed, married women were allowed to work.

Isn't that something.   Seems there was a bit of a labor shortage.  They even allowed women and blacks to work -- freaquing amazing!  But further, as the war ended, unemployment went up

From the same source we get these population figures (Civilian noninstitutional population)

So, from 1945 to 1946, the civilian population increased by 8.98 million.  Of these, 3.66 million entered the work force, while 5.3 million did not.  From '46 to '47, civilian population increased by another 2.9 million, the workforce by 2.65 million, and the non-workforce by 300 thousand.

OK - the Truman administration did a pretty reasonable job of redeploying GI's into the work force.  Credit it where it's due.  But this data in no way refutes the original Krugman statement Roberts was ridiculing:  "Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record."

In fact, the post WW II "experiment" is essentially irrelevant to Krugman's point.  It is, as I said above, Roberts changing the subject.  And if this fact is not immediately obvious, I suggest you ponder it at your leisure.

Well, I learned a few things about the post WW II period during this exercise, and that's pretty valuable on its own.  I didn't learn anything new abut Libertarians, though.  With them, it's the same old same old, all the time.


The Arthurian said...

Eh, you're just mad at Russ Roberts because he spelled your name wrong!

But seriously, good post. I had to go back and read your previous (again) and back more to the Beckworth and again to the Cafe, to get the gist of it all. But you put some work into this, that's clear.

BadTux said...

It's their insistence upon living in an alternate universe of their own choosing with facts that they create out of thin air that annoys me the most. One of my hobbies is the auto industry. I like cars. I like old cars. I like learning about the history of auto companies. For example, the Packard Corporation. So. What happened to auto companies in the aftermath of WW2? Hint: It was mixed nuts at best. Most auto companies didn't even get production restarted until the 1947 model year because of having to re-purpose their factories from war use, and there was a severe shortage of capital due to the cessation of huge infusions of federal money into the economy that made it especially problematic for small manufacturers to get production restarted. Many of the smaller manufacturers had been financially ruined by the war, where politics meant that the big contracts went to the big guys even for things that the small guys had invented. Of the dozens of auto companies that had struggled to survive through the 1930's, only a handful survived the post-war recession, and of those only three had the scale and political contacts to really thrive -- Studebaker and Packard merged and eventually ceased production, Nash and Hudson merged and struggled on for another thirty years as American Motors Corporation never getting any traction, and Chrysler, GM, and Ford remained as the only "real" car companies left standing. (Note that I am omitting specialty companies such as Willys-Overland with their Jeep and the Checker Taxicab Company because their limited-production specialty vehicles were in different markets altogether from the general automotive marketplace).

In short, what I see looking at automotive history is that post-war America looked very different from pre-war America. Most small manufacturers had been bankrupted by the war and did not even manage to restart production much less survive the post-war recession, most large manufacturers had been enriched by the war and survived the post-war recession with little trouble. In short, the war served to further the consolidation of American industry into a few giants, something which people at the time didn't really question because those economies of scale were what had allowed the U.S. to become the "arsenal of democracy" during the war and it was considered thus de facto "good". But now that we know the eventual consequences... can we really consider that to be a desirable economic outcome?

- Badtux the History Penguin

Jazzbumpa said...

Art -

Thanks. Yeah - this took me a few hours.

Tux - Great insights. Part of the reason post WW II America was so different from the pre-war version is the passage of decades. That sounds like a foolish tautology, but the war interfered with the natural order of things in a pretty dramatic way, and the catch-up process caused a lot of temporary dislocations.

Re: industrial consolodation. I think the natural process of capitalism is to evolve into corporatism. Business people hate competition, and consolodate to pre-emt it. This moves in the general direction of monopoly, and exacerbates wealth and income inequalities.

Hence the need for progressive taxation, regulation, and most especially anti-trust laws. All the things we no loner have. thanks in part to Libertarian ideologues.