Military Keynesianism Gone Haywire: Paul Krugman Pines For World War ... Based On Ginned-Up Reasons

[stockholmer]

As I have repeatedly documented, http://www.washingtonsblog.com/2010/10/idiot-washington-post-calls-for-war.html influential Americans are lobbying for war in order to save the American economy - what is often called "military Keynesianism".

For the first couple of years that I wrote on this topic, commenters more or less said, "That's crazy, no one is calling for war to stimulate the economy".

When allegations surfaced that Rand Corporation was lobbying the Pentagon to start a war to save the economy, http://translate.google.com/translate?u=http://news.sohu.com/20081030/n260330741.shtml Washington Post hack David Broder started promoting war as an economic panacea, http://www.washingtonpost.com/wp-dyn/content/article/2010/10/29/AR2010102907404.html and former Goldman Sachs analyst Charles Nenner and economist Marc Faber started predicting a major war, http://www.washingtonsblog.com/2011/03/former-goldman-sachs-analyst-joins-marc.html people started paying more attention.

And well-known economist and writer Paul Krugman has argued for years that World War II is what got us out of the Great Depression. For example, Krugman writes today http://krugman.blogs.nytimes.com/2011/08/15/oh-what-a-lovely-war/ in the New York Times:


World War II is the great natural experiment in the effects of large increases in government spending, and as such has always served as an important positive example for those of us who favor an activist approach to a depressed economy.

But Sunday, Krugman went over-the-top by more or less calling for a major war ... and manufacturing a false justification for starting one, if need be:

snip

---------------------------------------------------------------

Robert Higgs interview on this very subject


http://dissentradio.com/radio/11_06_07_higgs.mp3



Robert Higgs, senior fellow at the Independent Institute and author of Crisis and Leviathan, discusses his cherished yet under-appreciated chapter 3 in Crisis and Leviathan, about the rational ideological motivation of collective action; beating back the pervasive myth that war stimulates and improves the economy; how the increase in US GDP following massive post-WWII cuts in government spending undermines Keynesian economic theory; and why there is no such thing as free money: government spending is either derived from direct taxation or by debasing the dollar.

[indurancevile]

1. there's no such thing as free bankster money either, and they create money all the time.

government spending doesn't debase the dollar unless it's spent on non-productive activities.

[nadinbrzezinski]

2. You know what is sad?

I think there will be a war... but not precisely to save the economy and I will differ from Paul Krugman... WW II did not save the economy. In fact the mini depression of 1947... no it wasn't called that way... is my "proof."

What WW II did though is finish the industrialization of the US... and it was forced down our gullets. If anything it was a marvelous experiment that worked, in central planning... one of those little secrets of WW II.

But I think a war is coming for similar functional reasons as WW II... and I suspect it will be China and the US, with Russia playing on the sides, It may start in Paki\India or the middle east, but sadly it is coming... and it is the kind of war most people alive today have no concept off. Total wars are far from fun.

[LiberalFighter]

3. I support a war

against the Chamber of Commerce, Perry, Bachmann, Beck, Windbag, etc.

[Kennah]

11. Same here, but I want Spec Ops, guys who understand discretionary warfare.

4 with corn dogs to lure.

4 to trip.

4 to tickle the shit outta them with feathers--whole chicken held in reserve, just in case.

Anyone know if Seal Team Sixty Nine is available?

[Yavin4]

4. Today, War Buildup Has Little Keynesian Value

WWII's buildup had a lot of Keynesian Value because we were going from 0 to full war time buildup. Since WWII, we've been spending trillions on defense, and now we have surpluses all over the place. For example, we're not even using entire classes of fighter jets in Iraq and Afghanistan.

[Odin2005]

5. *FACEPLAM*

[MannyGoldstein]

6. Krugman called for a war? Got a link?

That doesn't make sense.

[joshcryer]

12. He basically made the analogy that we need an alien invasion to fix everything.

His point was that even if there wasn't an invasion and it was all faked, everything would be fixed.

[LuvNewcastle]

7. 1984 the movie was on tv today and I thought about

this subject. It seems to me that capitalism, at least unfettered capitalism, depends on the overproduction and wastefulness of wars. And judging by the way this country is headed politically, I think we're going to see a more obnoxious kind of capitalism than we're used to.

[LAGC]

8. What was it George Orwell wrote in 1984?

"Perpetual war is the most efficient way of destroying the product of human labor."

Instead of more war, we should invest resources on such a massive scale towards infrastructure projects, like really making renewable energy take off.

There's nothing wrong with more government spending, just let it be productive not destructive of the products of human labor.

[lib2DaBone]

9. k/r Good article. And once again it comes back to the supply siders...

.. the Supply Siders.. drunk on Jesus juice and insisting (since 1980) that tax cuts and Corporate welfare will create jobs. 30+ years of supply side failure..and still the Repukes don't get it.


Krugman hits it again... DEMAND needs to increase. "It’s especially relevant because in the 1930s, as today, many wise heads insisted that unemployment was structural, that many of the unemployed could not be gainfully employed no matter how much demand increased. Then demand actually did increase".

[Kennah]

10. He was calling for another "War Of The Worlds"

[joshcryer]

13. Here's the video:

http://www.youtube.com/watch?v=3jzvMGuRXvs

Forgive the nutter source.

Though I did laugh at the Alex Jones joke...

[markpkessinger]

14. Here's the link to Krugman's piece -- it is NOT a call to war!

If the OP had actually bothered to read Krugman's piece ( http://krugman.blogs.nytimes.com/2011/08/15/oh-what-a-lovely-war/ ), stockholmer would have realized that Krugman was making a point about the stimulative economic effect of government spending on a massive scale. Many people, of many different political persuasions, have made the point that it was WW II that ultimately ended the Great Depression. The difference between the way this point is argued by left- or right-wingers is that right-wingers try to use that point as a means of arguing that FDR's "New Deal" didn't help the country recover. But actually, it did help, but the gains were subsequently undone in 1937 when FDR followed the advice of conservatives who were wringing their hands over the deficit, plunging the country right back into the throes of recession. If anything, what happened to the economy as a result of the WWII mobilization vindicates the Keynsian concept of government spending in the context of a liquidity trap economy, and that's the point Krugman was making; he was not, in any wise, cheerleading for war, and the suggestion that he was so cheerleading is a dishonest representation of what Krugman was saying.

The following table shows the annual percent change in GDP from 1930 through 1945, and the numbers are hard to argue with:

Year GDP percent change based on current dollars

1930 -12.0
1931 -16.1
1932 -23.2
1933 -3.9
1934 17.0
1935 11.1
1936 14.3
1937 9.7
1938 -6.3
1939 7.0
1940 10.0
1941 25.0
1942 27.7
1943 22.7
1944 10.7
1945 1.5

Source: U.S. Dept. of Commerce, Bureau of Economic Analysis

Notice the growth from 1933 (the year FDR took office) until 1938, when the focus shifted to addressing the deficit. Then look again at the astronomical growth in the years 1941-1944. The data support Krugman's argument pretty solidly, I would say.

[stockholmer]

18. you apparently missed the 2nd part, as GDP surged AFTER a huge DECREASE from WW2 spending levels

Your data stops in 1945, the last major military expenditure year. Look at 1948 versus 1945. Government spending in 1948 was less than ONE THIRD what it was in 1945, yet the GDP was well over 10% GREATER. This thoroughly disproves the military Keynsianism thesis. If simply racking up trillions in debt by increasing government spending to prime the pump (a central tenet of Keynsianism), the the USA should see tremendous GDP growth now, not the utter anemic rates is is. In fact, adjusted for inflation, the US GDP is in utter contraction.


http://www.presidency.ucsb.edu/data/budget.php


US Federal Spending vs US GDP (in Billions of Dollars)

1944 $91.3...................$209.2
1945 $92.7...................$221.4
1946 $55.2...................$222.6
1947 $34.5...................$233.2
1948 $29.8...................$256.6
1949 $38.8...................$271.3
1950 $42.6...................$273.1
1951 $45.5...................$320.2
1952 $67.7...................$348.7
1953 $76.1...................$372.5
1954 $70.9...................$377.0
1955 $68.4...................$395.9

[dawg]

20. You totally miss the point.

Keynesians don't want fiscal stimuluts to last forever. They want it just long enough to allow the economy to reset itself and break the vicious cycle of layoffs that reduce demand that slows business that leads to layoffs that reduce demand .....

If GDP continued to grow, even after the stimulus was withdrawn ......... then it worked!

[stockholmer]

21. "Keynesians don't want fiscal stimulus to last forever"- that may be true in a purist sense, but

nowadays (the last 30 years), there is no way you will get a Keynesian to EVER condone a pullback in spending of any substantive level, let alone the pullback you saw from 1945 to 1948. The mid 1990's to 2000 (era of the one year mythical "Clinton Surplus" wherein there was no decrease in spending, the debt increased, and an accounting parlour trick shifted debt to intra governmental transfers to claim a fraudulent surplus, even as the GDP roared) and the 2nd half of the 1980's (when non-military spending exploded faster than the deplorable Reagan military budgets) are perfect examples.

[markpkessinger]

15. Here's the link to Krugman's piece -- it is NOT a call to war!

If the OP had actually bothered to read Krugman's piece ( http://krugman.blogs.nytimes.com/2011/08/15/oh-what-a-lovely-war/ ), stockholmer would have realized that Krugman was making a point about the stimulative economic effect of government spending on a massive scale. Many people, of many different political persuasions, have made the point that it was WW II that ultimately ended the Great Depression. The difference between the way this point is argued by left- or right-wingers is that right-wingers try to use that point as a means of arguing that FDR's "New Deal" didn't help the country recover. But actually, it did help, but the gains were subsequently undone in 1937 when FDR followed the advice of conservatives who were wringing their hands over the deficit, plunging the country right back into the throes of recession. If anything, what happened to the economy as a result of the WWII mobilization vindicates the Keynsian concept of government spending in the context of a liquidity trap economy, and that's the point Krugman was making; he was not, in any wise, cheerleading for war, and the suggestion that he was so cheerleading is a dishonest representation of what Krugman was saying.

The following table shows the annual percent change in GDP from 1930 through 1945, and the numbers are hard to argue with:

Year GDP percent change based on current dollars

1930 -12.0
1931 -16.1
1932 -23.2
1933 -3.9
1934 17.0
1935 11.1
1936 14.3
1937 9.7
1938 -6.3
1939 7.0
1940 10.0
1941 25.0
1942 27.7
1943 22.7
1944 10.7
1945 1.5

Source: U.S. Dept. of Commerce, Bureau of Economic Analysis

Notice the growth from 1933 (the year FDR took office) until 1938, when the focus shifted to addressing the deficit. Then look again at the astronomical growth in the years 1941-1944. The data support Krugman's argument pretty solidly, I would say.

[Confusious]

16. Pretty pathetic hit post

If you think an alien invasion is a call for war well, I don't know what to say.

[Pholus]

17. "Nothing shakes the faith of a true believer."

Krugman nails another one. His last sentence has multiple applications, it seems, given the OP.

[Renew Deal]

19. He was talking about preparing for an alien invasion the other day.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x609580