Quote:
Originally Posted by shakran
Well then we must all be hallucinating this crappy economy, because we're in the middle of 2 wars, war production is high, and yet the economy's in the crapper. If the war pulled us out of the Great Depression then why are we in a major recession despite having been at war for 8 years?
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WWII is very different from our current war in terms of the scope and impact on our economy. If I recall WWII in terms of people, production and spending was consuming well over 25% of our economy. No war since as come close to that.
-----Added 19/2/2009 at 02 : 58 : 32-----
Quote:
Originally Posted by ratbastid
It was actually the post-war era when the real results started showing up on the street, economically speaking. By then there were LOTS of factors coming to bear on the economy well beyond simple government expenditure. In that sense, it's not really accurate to say that war spending was what ended the Great Depression. At least, it's an oversimplification.
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During the war government spending was extremely high in order to support the war. After the war the normal economy greatly benefited from war time innovation and productivity gains. It was this application of spending in the private sector that gave us long lasting prosperity.
We can dance around the central question all day long but at the root Keynesian people won't address the question of - when does government spending begin to have a negative impact on economic growth? There simply is no free ride with government spending.