1938 in 2010

By Paul Krugman

September 5 (Bloomberg) — Here’s the situation: The U.S. economy has been crippled by a financial crisis. The president’s policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections.

The president in question is Franklin Delano Roosevelt; the year is 1938. Within a few years, of course, the Great Depression was over. But it’s both instructive and discouraging to look at the state of America circa 1938 — instructive because the nature of the recovery that followed refutes the arguments dominating today’s public debate, discouraging because it’s hard to see anything like the miracle of the 1940s happening again.

Now, we weren’t supposed to find ourselves replaying the late 1930s. President Obama’s economists promised not to repeat the mistakes of 1937, when F.D.R. pulled back fiscal stimulus too soon. But by making his program too small and too short-lived, Mr. Obama did just that: the stimulus raised growth while it lasted, but it made only a small dent in unemployment — and now it’s fading out.

And just as some of us feared, the inadequacy of the administration’s initial economic plan has landed it — and the nation — in a political trap. More stimulus is desperately needed, but in the public’s eyes the failure of the initial program to deliver a convincing recovery has discredited government action to create jobs.

In short, welcome to 1938.

The story of 1937, of F.D.R.’s disastrous decision to heed those who said that it was time to slash the deficit, is well known. What’s less well known is the extent to which the public drew the wrong conclusions from the recession that followed: far from calling for a resumption of New Deal programs, voters lost faith in fiscal expansion.

Consider Gallup polling from March 1938. Asked whether government spending should be increased to fight the slump, 63 percent of those polled said no. Asked whether it would be better to increase spending or to cut business taxes, only 15 percent favored spending; 63 percent favored tax cuts. And the 1938 election was a disaster for the Democrats, who lost 70 seats in the House and seven in the Senate.

Most interesting!

Then came the war.

From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.

Had anyone proposed spending even a fraction that much before the war, people would have said the same things they’re saying today. They would have warned about crushing debt and runaway inflation. They would also have said, rightly, that the Depression was in large part caused by excess debt — and then have declared that it was impossible to fix this problem by issuing even more debt.

Agreed! The deficit per se was of no consequence. The risks were and remain inflation from excess demand, which is not an easy channel to use to generate what we call inflation in today’s world. Our CPI problems have tended to come in through the cost channel and propagated by govt indexation of one form or another.

But guess what? Deficit spending created an economic boom — and the boom laid the foundation for long-run prosperity.

Agreed. Though the way I say it, for a given size govt. and given set of credit conditions there is a level of taxes that coincides with full employment, and that level is generally well below the level of govt spending.

Overall debt in the economy — public plus private — actually fell as a percentage of G.D.P., thanks to economic growth and, yes, some inflation, which reduced the real value of outstanding debts. And after the war, thanks to the improved financial position of the private sector, the economy was able to thrive without continuing deficits.

What??? Here, sadly, Paul’s implication that the actual level of the govt debt per se matters, and that his bent that lower deficits are somehow ‘better’ shines through, keeping him in the camp of being part of the problem rather than part of the answer.

(Good article for MMT’s to earn some hearts!)

76 Responses

  1. My concern is that we are working up for something like a repeat. It looks like the GOP is going to take the House and possibly the Senate, too. There will be a brawl in the GOP between the tax-cut/deficit-be-damned wing and the fiscal conservatives who want to balance the budget, and there will be no new spending, for sure. On the other hand, the Dems will have enough votes to block GOP initiatives, and the president has the veto, of course, so gridlock is pretty much guaranteed, with the president pretty much a lame duck. The stim injection has peaked, and that doesn’t look good for demand improving with government powerless to act decisively. If the US falters further, this will impact the world economy negatively, and there is still a mountain of debt out there.

    On the geopolitical front, war with Iran is looking more and more likely. If the GOP takes the WH is ’12, war with Iran is a near certainty. If McCain had been elected, we would already be at war. War with Iran will ignite the tinderbox of the ME, and it’s anyone’s guess where that will go. Expect the militants to mount a takeover of Pakistan with the help of ISI allies, forcing a military coup in response. Israel is not going to be just sitting around watching, either. This could get very ugly and even go nuclear, heaven forbid.

    A storm is brewing. Hopefully, it won’t grow into a hurricane, but the odds aren’t looking good right now as far as the trending goes. Instability is increasing rather than stability. However, Intrade wagering is more sanguine. The Dem odds are improving, although still bad, and an imminent strike on Iran is rated low.

    Meanwhile, everyone is fretting over the growing deficit and national debt, taking their eyes off the ball.

  2. “If the GOP takes the WH is ‘12, war with Iran is a near certainty.”

    Really? And you know this how?

    I mean war with Iraq worked out so well for the GOP, I’m sure the rank and file will be lining up to do it all over again …

      1. I don’t believe everything they say. One has to learn to read between the lines. I am quite convinced that neocons really, really have Iran in their gun sights.

      2. In my experience nothing about war or peace is a near certainty. Regardless of what leaders say.

        “We have known for many years that Saddam Hussein is seeking and developing weapons of mass destruction.”
        — Sen. Ted Kennedy (D, MA), Sept. 27, 2002

      3. JCD, shortly after 9/11 I was predicting the likelihood that the US would invade Iraq. Once the troop build up commenced to “dissuade” Saddam, I marked it up to near certainty. The neocons had been planning this well before Bush took office and he appointed them to high places. It was a done deal.

        The plan was to take on Iran next, and Cheney pushed it all the time he way in office, but Iraq had gone sour owing to hubris, ineptitude, cronyism, and failure to anticipate resistance (as Gen. Shinseki had predicted). Basically, it was Dumbsfeld that got it wrong, otherwise the US would not be in Iran.

        If you don’t believe me, read what Tony Blair confirmed this week in an interview with Amanpour. Iran is still very much on the table, and the neocons still plan to reshape the map of the ME. They remain the dominant forces in GOP foreign policy.

      4. I take objection to your statement of near certainty.

        I think it’s a ridiculous statement to say that war with anyone is a near certainty in 2012 if anyone is president.

        If you’d like I’ll give you the option to make the following wager:

        Conditioned upon the GOP candidate becoming president in 2013 (otherwise no wager), I will pay you (our you choice of charity) 100 units of the nonconvertible fiat currency we can both agree upon if the US commences hostilities against the Islamic Republic of Iran. If not, I’d like you to pay my favorite charity 900 of the same units. I figure an implied probability of 90% corresponds reasonably well with ‘near certainty’.

        Whaddya say?

      5. JCD, sorry, I am not a gambler. If I think I have it right, I place my bets in the market place.

      6. JCD, my reply may seem offhanded. I should qualify this with my reasons. I regard gambling as a form of needing to be right. In my view this is antithetical to taking a position in a market, where it is absolutely necessary to shift positions as changing circumstances or fresh information call for it.

      7. “I regard gambling as a form of needing to be right.”

        I agree. That’s why I’m willing to wager on the point, and I guess why you’re not.

  3. Warren,
    I hear all the similarities between the 1930s and the present. And the massive WWII spending that ended the depression (agreed). I assume this is why people like Krugman and Bill Mitchell call for more govt spending. But what were tax rates back then compared to today? Today we have a payroll tax of 15% and marginal rates at 25% for people with very modest incomes. I don’t see how more spending is going to help over the long run if the govt continues removing income from consumers at those rates. Of course, unless we accept continuous govt spending at around 40% of GDP.

  4. Markg,

    Big picture, there is no difference between tax cuts and spending increases. They both stimulate the economy by adding money to the economy.

    Yes, on a targeted basis, specific tax cuts can have different immediate effects from specific spending increases, but long term, they amount to then same thing. So all the gyrations about whether to cut taxes or to increase spending are fruitless.

    Rodger Malcolm Mitchell

    1. Krugman, Infrastructure

      Beyond all that, the new initiative is a chance for me to air one of my pet peeves: the stupidity of the claim, which you hear all the time — and you’ll hear again now — that it’s always better to provide stimulus in the form of tax cuts, because individuals know better than the government what to do with their money.

      Why is this claim stupid? Because Econ 101 tells us that there are some things the government must provide, namely public goods whose benefits can’t be internalized by the market.

      So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? That’s not at all obvious — and anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.
      And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work.

      1. Kind of a bad example. There’s no reason why a road has to be built by the government, especially with the efficient electronic tolling systems that exist today. In fact, I think it would be great to privatize many of our highways.

      2. Doesn’t work, just like privatizing the Post Office doesn’t work because rural delivery is just not profitable and would have to priced differently or eliminated, for example. Pricing excludes too many people from services that are deemed necessary.

      3. Road are public good as long as you believe in freedom of movement.

        Private roads and “efficient” tolling systems are non-sense. Italy, Croatia etc. are real life examples.

      4. Tom: The political process can certainly provide for subsidies to be given to rural folk for roads, mail delivery, internet access and the like. But these things should be done out in the open, so that everybody knows who is getting what subsidy. Right now, these people are getting hidden subsidies. And on top of that you have the inefficiencies inherent in the political process itself.

        Sergei: I’m sorry, do you actually have a logical argument to make? A private road is not nonsense. Private roads exist, and you can successfully negotiate one in a car. Efficient tolling systems are not nonsense either. At certain points on the NJ turnpike, I can pay my toll without slowing down from 65mph.

      5. ESM, as you well know there is a parallel free route to the NJ Turnpike that poorer people have been using for decades to avoid the tolls. Toll roads, etc., lead to a two tier society like much of Latin American. I don’t particularly want to live like that.

      6. Not sure exactly what you’re referring to. Of course, it is almost always possible to take free roads in lieu of toll roads. The people who do this are known as shunpikers, and I think it is something of a game or an obsession. Perhaps you’re thinking of I-295, which runs roughly parallel to the Turnpike from the Delaware Memorial Bridge to just south of Princeton, NJ. Well that road is actually a good example of wasteful federal government spending. New Jersey was given an allocation of federal highway dollars after the Turnpike was completed, and it was a case of use it or lose it. I-295 is a great highway, but it is redundant except for the portions around Trenton and around Philly. It is underutilized too. I would often take it on my commute home from Philly to Princeton, and I don’t ever remember encountering heavy traffic unless there was road construction or an accident (which was rare).

        It’s kind of strange to dream up people who are so poor that they have to use free roads, yet they have the money to own, maintain, and gas up a car. It’s kind of like worrying about the people who have to fly coach on their way to a vacation in Spain as opposed to those who fly business class. The horror!

        I agree with you that life in a society with only two tiers would not be desirable. I want to live in a society with dozens of tiers to choose from in each area of the economy. The more the better.

      7. Reason Magazine had an interesting piece recently about DOT benefit-cost analysis for highway projects. Apparently, there are $175 billion a year in highway funding with a benefit-cost ratio greater than 1.0, Reason’s writer thought that was a over the top and argued the DOT should only fund projects with a 1.5 or higher ratio, that’s $137 billion a year of highway projects that meet that criteria.
        http://reason.org/blog/show/highway-spending-benefit-cost

        The DOT could save tens of billions of dollars if they utilize Bill Vickrey’s invention, congestion pricing. But why penny pinch for projects that already pay for themselves? We can worry about congestion pricing when the new highways start filling up.

        Obama’s plan is way low, even if every penny of his $50 billiion plan was put into highways (and nothing for rail or aviation) this year, once added to existing spending ($79 billion), he’d still be spending less than Reason’s constrained 1.5 ratio recommendation. And even that’s only if the President puts in $50 billion, year in, year out. Not very likely.

      8. ESM, it is ideological. Freedom of movement is one of the fundamental rights which means that I can go whenever and however often I want. It is my private business to have a car or not as well as my business to travel wherever I want. And freedom has “free” part in it. Pretty simple logic.

      9. Sergei,

        That argument is ridiculous. Most things in life are not “free” in the sense of costing nothing to produce or provide. If you demand to get a good or service for free (e.g. a road to travel on) you are actually restricting the freedom of others, since the labor of others was required to produce it. Freedom of movement properly means that the government cannot arbitrarily restrict your movement. Charging tolls commensurate with what the market will bear does not fit into that category at all. And even it did (which it does not), charging tolls is still far better from the standpoint of freedom than imposing taxes to pay for the roads instead.

      10. I see a contradiction in the view of those crying ‘free’ highways for all while also proclaiming the death of suburbia and demanding more be done to protect the environment. I also don’t see splitting society down the middle (if that’s what would happen with road pricing) as a good option.

        Aside: ESM, I sincerely feel you underestimate the negative implications of a highly segregated society, probably because you overestimate class permeability. It is in fact very low, especially in the US. If you’re stuck in the wrong class and excluded from the opportunities to upgrade (such as being able to commute), you have a recipe for poverty with all the crime, substance abuse and other things that come with it. A waste of human lives, if you ask me. Commuting is not like flying to Spain!

        Anyway, there must be more sensible things to do than vastly expand on the existing highway system, no? How about upgrading public urban spaces and facilities to make cities more hospitable places for all to live in? We need more architects and urban planners! 😀

      11. ESM, in the realm of political philosophy, the term “freedom” is relative and different cohorts subscribe to different versions, of this key concepts, some of which are dissonant concepts. George Lakoff has pointed out that this is a fundamental difference in the political and moral thinking for left and right in the US. The right sees “freedom” in terms of individual rights and responsibilities, and the left in terms of social rights and responsibilities. The right emphasizes individuality and the left emphasizes systemic relationships. These focuses result in different concepts of freedom.

        This has been a controversy for millennia. Historically, America is to the extreme on the side of individuality, and even the left in the US is very much to the right both historically and in comparison with much of the world today. As a result, much of the world sees Americans as selfish, where as Americans see them as oppressed and in need of liberation through re-education, economic and political pressure, and, if needed, military force.

      12. Oliver, the US economy is built on military Keynesianism, continued suburban housing development, and the petro-fueled automobile. Changing any of this would be a big wrench for the economy.

      13. I’d say allow those who partake in the status quo to continue to do so by maintaining current infrastructure (which involves a lot of deficit spending in its own right if done properly) but invest in projects that allow for a more sustainable future status quo (to the extent that that can be evaluated from the current perspective). Before WWII, infrastructure in most countries was pretty basic and so they built what they thought the future should look like – which sadly turned out to be rather wasteful. It’s the spirit not the exact same projects we should be emulating 60 years on, imo.

      14. “[Class permeability] is in fact very low, especially in the US.”

        That’s a pretty amazing comment coming from somebody who lives in the UK! Usually I hear from Europeans that Americans have “no class,” and I think they’re right in all senses of the word. :^P

      15. Privatization is not necessarily an improvement when you are talking about something where you only need ONE of it and not competition. Roads are an example where you only need ONE integrated system, having competing highways is a stupid waste of resources. This doesnt mean theres no role for private actors in the road development market but complete privatization, giving all roads in a particular state over to one private firm is not an improvement. Once they have that monopoly they will become as bad as all other monopolies and since they are private property what recourse is there? Privatization in the prison system is stupid as well. It sets up all kinds of bad incentives, prison companies lobbying for tougher laws to get more people incarcerated ( Arizona immigration law anyone??) Private companies have a tendency to view human capital as only a cost to them and dont see the benefit their employees provide to other companies as consumers. Govt employees since they are not driven by for profit motives tend to get better work conditions and treatment.

      16. Greg sez:

        “It sets up all kinds of bad incentives, prison companies lobbying for tougher laws to get more people incarcerated”

        While I agree that this is a problem both and theory and in practice, aren’t you ignoring the fact that government is a problem in this instance as well?

        Yes, corporations that provide goods and services to the government will lobby the government to consume more of those goods and services.

        But isn’t it the job of public servants to refuse to do so when it is not in the public interest? Who is more to blame, the defense contractor that lobbies the congressman to approve his weapon system, or the congressman that agrees to do so when it is not in the public interest (but it is in his best interest)?

      17. JCD

        I really didnt mean to vindicate govt in the scenario I presented. Your point is well taken that govt should be able to protect public interests. The reason they often dont however is we’ve been taken over by this idea that private decision makers are “purer” and less corruptable than govts. That govts should just stay out and let private interactions play out. So politicians get elected who believe these things (or at least are paid to say them) and they get elected on the coattails of big money interests.

        Money (private money) needs to leave politics. I see no other way to end the corruption. Warrens idea about having half of your donation to a candidate goes to his opponent as well is good but, to borrow a phrase of his, this is operationally the same as having fully public funded elections where all candidates get equal access to money and ad time.

      18. Greg sez:

        Money (private money) needs to leave politics.

        Well, my guess is that money will leave politics (and not before) politics leaves money.

        When elected and appointed officials have the power to affect the flows of enormous amounts of money (and they do), then those affected by that power will use money to affect that decision. It is thoroughly predictable and unavoidable consequence of government power. Any attempt to force money out of politics is doomed to fail, and will result in more corruption as long as political forces affect the allocation of wealth and income. To believe otherwise is the height of naivete.

        Also, I think you are confused on another point. I don’t think private decision makers are any ‘purer’ than government decision makers. In fact, I imagine most private decision makers are driven by their own understanding of self interest. I also think most government officials routinely act in what they believe to be the public interest. But that’s not the critical distinction. The critical distinction is that when public actors choose, they have recourse to force and taxation. Private actors do not.

        A self interested capitalist who chooses to benefit himself at the expense of his employees, shareholders or customers is ultimately subject to the willingness of those other groups to continue to cooperate with him.

        Government can resort to force to impose its will regardless of the willingness of individuals to participate.

        I would rather see most choices in the hands of self interested private actors constrained by the rule of law , as opposed to public minded government officials wielding the power of the state.

      19. JCD: the defense contractor that lobbies the congressman to approve his weapon system, or the congressman that agrees to do so when it is not in the public interest (but it is in his best interest)?

        Corruption is symbiotic. One feeds off the other. Contractors seek advantage and politicians seek campaign contributions.

        Get the money out of politics and shut the revolving door.

      20. JDC: I would rather see most choices in the hands of self interested private actors constrained by the rule of law , as opposed to public minded government officials wielding the power of the state.

        The problem is that the laws and regulations are written by people that have been “captured,” and the courts have been packed with corporatists.

      21. Tom Hickey

        “The problem is that the laws and regulations are written by people that have been “captured,” and the courts have been packed with corporatists.”

        Right. The framers kind of predicted this. That’s why they chose to create a government of limited powers. The thinking was that if the powers of the central government are severely proscribed to only those powers absolutely essential to the central government, the danger of factions capturing the government are reduced.

        Slowly but surely though the central government slipped out of the limits imposed upon it by the framers. Every step of the road was paved with good intentions. But at the end of the day the limits on the government were removed. So now when the corporatists (or whatever faction manages to rule the day) capture the government, there’s no limit on what they can do.

        I await the next well intentioned ‘reform’ with baited breath.

      22. TOm

        “Corruption is symbiotic. One feeds off the other. Contractors seek advantage and politicians seek campaign contributions.”

        True, but both rely upon the power of the state. Limit the state’s power, and you end the corruption. Increase the state’s power and increase the corruption.

        If the state has power, the money will come in. Shut the revolving door, and it will come in the window, or the soffit vents or through the floor boards … but it will come in.

        If you think otherwise, you are naive.

      23. “Corruption is symbiotic. One feeds off the other. Contractors seek advantage and politicians seek campaign contributions.”

        True, but both rely upon the power of the state. Limit the state’s power, and you end the corruption. Increase the state’s power and increase the corruption.

        The by far most common type of corruption is that of attaining quasi monopolist powers by buying and / or lobbying the regulators. That’s something that doesn’t get better if you take away the regulators. And if you have week automatic stabilisers, you create the need for large discretionary spending during downturns. Corruption is also mainly a social phenomenon that takes place no matter what size government you have. I’d say there are many factors that challenge the ‘small state’ mantra.

      24. JCD: you end the corruption. Increase the state’s power and increase the corruption.

        This is another fundamental difference between left and right. The notion that if the state would just go away, everything would be hunky dory is naive. History suggests otherwise.

        There have to be controls on both the government and the private sector. Achieving those controls is the political challenge.

      25. Right. Which is why I favor a government of limited powers. Not a world without government.

        Having the state go away is a straw man argument. I’m not in favor of it. but if you want to argue against it, feel free.

      26. Which is why I favor a government of limited powers. Not a world without government.

        Libertarians of the left (like me) agree with that. The devil is in the details.

        I think that the country has gone way overboard on security, for instance, effectively turning the US into a de facto dictatorship since the courts have pretty much refused to step in. YOu can now be disappeared, assassinated, or turned into a non-person at the lifting of a finger or stroke of a pen (dictat). This is scary stuff.

      27. Agreed. It is scary, and we must remain vigilant. Bear in mind though that things were much, much worse under Abraham Lincoln, Woodrow Wilson, and FDR (three presidents that are ranked among the best, although in my opinion the latter two were terrible), and eventually the pendulum swung back to greater individual freedom and less arbitrary state power.

      28. that things were much, much worse under Abraham Lincoln, Woodrow Wilson, and FDR

        Civil War, WWI and WWII. The so-called GWOT is a blip on the screen in comparison. The reaction borders on the absurd. If someone had written a novel about it, it would have been called implausible. This has been a naked grab for dictatorial power by both Bush and Obama.

      29. First of all, I would say that the danger of executive overreach today is a blip compared to those three other cases.

        Second, the citizenry is more capable of fighting oppression because of electronic communications and hundreds of millions of privately owned guns.

        Third, we live in a world where it is possible for a small group of terrorists to kill more American civilians than have been killed in all US wars to date.

        Finally, you are starting to sound like a Tea Partier. Although most of the focus of the Tea Party has been on government spending, I think government spending is really a metaphor for the expansion of government power.

        A vibrant opposition to the government is healthy for our society. I think we were in a much more dangerous place in Feb 2009 (or even Feb 2010) when it was considered politically incorrect by the elites and the mainstream media to not be enthralled with our new president. Thank goodness it is now becoming acceptable to oppose him and his policies.

      30. ESM, I was in activist during the ramp up of the Vietnam War. I was a grad student in DC at the time. I saw up close the power of “the man.” That has increased manyfold since then. At that time, the courts were pretty liberal and Justice Douglas was an outright leftist. It was the courts that saved us, and it was the courts that finally brought Watergate to a head and finished Nixon and cronies, a number of whom went to the pokey.

        Today, we have total information control, DHS, the Patriot Act, etc, and a court system the is partial to the government case that it needs ongoing emergency powers that justify suspend constitutional protections like habeas corpus. To me, that is an unprecedented escalation of state power owing to the combination of intelligence information and non-wartime emergency powers.

        Never before have war crimes like torture been permitted, let alone lauded, even in worst of times, like WWII, when such tactics were used against the Allies. The perps were tried and hung after the surrender of Germany and Japan. Today, they are protected by “state secrets.” It is disgusting that a constitutional lawyer like Obama is perpetrating this. He is becoming as deeply embroiled as Bush/Cheney and cohort.

        We are not “at war.” We conquered the Taliban and Saddam in a few weeks each. The rest is two botched occupations in the attempt to remake the region by installing “our people” regardless of how corrupt. There is no possible justification of calling this a “war.” It’s like the war on drugs — a farce.

        This is constitutional crisis to my mind. I would like to see them all sitting in the dock at the Hague.

      31. Oh, and lest you think that is the ranting of leftist, here is what Andrew Sullivan has to say about it today in The Atlantic.

        Most of the so-called “libertarians” on the right are so obsessed with “spending,” that they are blinded to the real danger facing the nation and world from neo-imperialism and neocolonialism. The criticism of this is not coming form the right, but the left, e.g., and people like Michael Hudson and Noam Chomsky have documented it in detail.

        Meanwhile, the so-called “libertarians” of the right are all worked up about the government taking their guns. What a joke.

      32. Andrew Sullivan? The resident gynecologist at The Atlantic? Give me a break. His man-crush on Obama has turned him into a caricature. He has been an intellectually dishonest cheerleader for the left for many years now.

        “Never before have war crimes like torture been permitted, let alone lauded, even in worst of times, like WWII, when such tactics were used against the Allies.”

        Are you kidding me? If you don’t think that our intelligence services tortured the crap out of people, or summarily executed people, or that the US military committed thousands of (what today are) war crimes in WWII then you are pretty naive.

        The only difference today (and it’s a good thing) is that lower level people generally will no longer do such things without the cover of getting official authorization. The White House had specifically to authorize the waterboarding of 3 people. During WWII, nobody would have even asked FDR to get his hands dirty.

      33. “Again, we run up against the difference in norms that define our ideological biases.”

        Huh? This is a non sequitur.

      34. JCD, you were able to parse that sentence well enough to discern that it was a non-sequitur? It’s been decades since I took a philosphy class, so I had no chance. :^P

      35. Tom Hickey sez:

        Never before have war crimes like torture been permitted, let alone lauded, even in worst of times, like WWII, when such tactics were used against the Allies.

        Then ESM sez:

        Are you kidding me? If you don’t think that our intelligence services tortured the crap out of people, or summarily executed people, or that the US military
        committed thousands of (what today are) war crimes in WWII then you are pretty naive.

        Then Tom Hickey Sez:

        Again, we run up against the difference in norms that define our ideological biases.

        This is not about a difference in ideology. This was a fact based response.

      36. JCD, we agree on the facts. Everyone knows that horrible things happen during war. Apparently you and ESM think that because some things are done during war time that are not permitted under law, like torture, that this makes it OK and we should just say it is OK. I don’t think so. Torture is morally wrong under any circumstances and just because “everyone does it” doesn’t make it right in my book. Apparently the folks that convicted Lt. Calley for the Mai Lai massacre thought so, too. Many people at that time thought that Calley was a hero. Many others saw him as a war criminal. Same now with the war crimes of Iraq and Afghanistan. It’s not the facts that are in dispute. It’s the norms.

        This is about value judgments based on a difference in norms. There is no factual disagreement here as far as I can see. We both seem to admit that war crimes were committed in previous and present wars. Our disagreement seems to be about how to judge this based on norms. Unless I am misunderstanding what you are saying.

      37. Ok, Tom, you are becoming very unreasonable.

        “Everyone knows that horrible things happen during war.”

        I felt compelled to point out that horrible things happen during war because you made the absolutely ridiculous claim that the behavior of the Bush administration in the GWOT was uniquely bad. Moreover, this wasn’t just a slip that you made. It is repeated ad nauseum all over the left-wing blogosphere, and it obviously sunk deeply into your brain. It is a dishonest, rhetorical trick designed to make the Bush administration’s actions seem worse.

        The fact is that FDR and Winston Churchill and Harry Truman and Nancy Pelosi (who had no objection to waterboarding when it was first brought up) and even Barack Obama (who continues a very aggressive policy of predator drone attacks) would have acted similarly.

        Maybe Tom Hickey wouldn’t have, and maybe ESM wouldn’t have, but then again, we are not the kind of people who are ruthless and egotistical enough to run for political office (successfully, that is, so I’m not referring to you Warren :^)).

        “Apparently you and ESM think that because some things are done during war time that are not permitted under law, like torture, that this makes it OK and we should just say it is OK.”

        No, I don’t think that. But I do think that there is a continuum of badness, and that waterboarding somebody is not as bad as beating them to a pulp. Furthermore, waterboarding somebody to extract critical real-time information about future attacks is not as bad as waterboarding somebody to extract a confession or as a form of punishment.

        I believe that the Bush administration went too far and broke the law in approving waterboarding. But at the same time, I do not believe that he is a monster because of it. I also don’t think he should be prosecuted for it.

      38. ESM: I felt compelled to point out that horrible things happen during war because you made the absolutely ridiculous claim that the behavior of the Bush administration in the GWOT was uniquely bad.

        It was absolutely uniquely bad in that the Bush administration justified it as legal, when it is patently a war crime under treaties signed by the US, which are part of US law. While I admit that a lot of bad stuff went down previously, it was never ordered at the highest level and justified as being legal. I happen to know how this is done. Nothing is ever said directly at the top but the signal is put out to get results and “don’t tell me how you did it, and if I get in a tough stop, you’ll have to take the hit.” No US president would ever have said that torture is OK when the US does it but not OK when others do it to us. Bush essentially did, and Cheney outright admitted it publicly, daring the Obama administration to prosecute him for it.

        There is also good reason to conclude that the Bush administration prosecuted an illicit armed aggression based on fixed intelligence and misrepresentation of facts. By the way, this is not just about waterboarding, which the US and allies considered torture in WWII. There was a lot of gruesome torture being perpetrated in CIA black sites around the world in addition to waterboarding. Moreover, people died, i.e., were murdered. This was indeed unique in US history, other than, of course, enslavement of black people and genocide against Native Americans.

        Thomas Jefferson had the gall to write “All men are created equal,” when he was a slave holder, his mistress was a slave, and he had children in slavery. Did he think that Ms. Hemings was not a human being and that his children were sub-human?

        And no, I am not defending the Democrats on this either. Thomas Jefferson had the gall to write “All men are created equal,” when he was a slave holder, his mistress was a slave, and he had children in slavery. Did he think that Ms. Hemings was not a human being and that his children were sub-human?

        Now Obama and his cohort are all complicit by essentially ratifying the Bush policy and making it precedent. Obama and his cohort are war criminals along with Bush and his cohort by obstructing justice, at the very least. They should all be tried in the Hague, in my view, and I hope that someday they will be.

        The reason I am irate about this is not only because I am convinced it is wrong. I also think that it contributes to undermining America and what it stands for. Now there is clearly a double standard, squared: It is OK for the US elite to break the law but not “the little people,” and it is OK for the US to violate international law but not other countries. That is corrosive, and the blowback is going to be fierce.

    2. I don’t live in the UK but I have lived in one of its former colonies. I’d say both the mother land and its spin-offs have similar attitudes towards ‘freedom’ and inequality. That’s why they’re lovingly lumped together as Anglo-Saxons by the Continentals. There are striking similarities across the oceans.

      1. Ah yes, Hong Kong. Now I remember. And you live in Switzerland now?

        Well, I certainly agree that there are striking similarities between the British and Americans (all good in my opinion!), but the most striking difference is the lack of class consciousness in the US (well, that and better food).

      2. Make that social mobility, not class permeability. My English abandons me at times. And I’m not trying to argue from any national standpoint, couldn’t care less. I do think social mobility is very serious though in that it separates ‘voluntary’ inequality from injustice. And after living on the continent for a while, I think the Anglo culture systematically ignores its importance. Not that it’s much better here in Switzerland…

  5. Krugman: “[it’s] discouraging because it’s hard to see anything like the miracle of the 1940s happening again.”

    I love this line. Too bad we won’t have a global conflagration which leads to extreme deprivation for four years and makes us think the economy is really good when we finally de-mobilize. Look I agree with everybody here on the need to run bigger deficits, but the idea that WWII was good for the US economically (obviously, even Krugman would admit that the carnage was a negative) is a myth.

    For four years, we had men traveling all of the world killing and being killed and women and children working in factories. For four years, we had price controls and rationing to create the illusion that there really wasn’t inflation, while the people endured a ridiculously low standard of living with equanimity. For four years, we had an inefficient command economy which thankfully was less inefficient at producing war materiel than the economies of our enemies.

    Yes, life seemed good immediately after the war. Some of the industrial capacity built up over four years was actually useful for increasing our standard of living. But mostly things just seemed good on a relative basis. Not only relative to how life had been from 1942 to 1946, but also relative to every other country on earth which had been shattered by war.

    1. Well, where would the US be without military Keynesianism. The US throws about 1T a year into military, black, and related ops. That’s a chunk of GDP.

    2. ESM

      I could not agree more with your comment.

      Very poor choice of words on Krugmans part. He may have been trying to point to the “miracle of the deficit spending” not the miracle of war but it didnt come off too well.

      Unfortunately almost everyone believes that WWII WAS good for us economically, which shows the dearth of economic thinking in most individuals. The broken window fallacy is alive and well.

      In our modern GDP, Dow level, house prices driven economic metric model, the broken window fallacy ISNT a fallacy. Anything which causes those things to improve in aggregate no matter the amount of human hardship is GOOD. There is no doubt that disaster relief is highly profitable and generates a high velocity of money exchange. Our health care system is exhibit A in that regard.

      1. It WAS good for us. The window was already broken, so we had to fix it whether we liked it or not. In the end, we came out of the war rich, the British came out of it poor, Russia came out of the war decimated… and our side won! It was even worse for the Japanese and Germans.

      2. Good?!

        400,000 US servicemen dead. We were responsible for the deaths of over 2 million Japanese alone. This was good?

        Massive global destruction. Our trading partners devastated and prostrate. Oh, and now we were forced to confront a super power with global ambitions in a 40 year struggle for liberty. This was good?

        Compared to what? I guess compared to surrendering to Nazi Germany and Imperial Japan it was good, but other than that I don’t know.

        No. WWII was *not* good for us. It is true that it could have turned out much worse for us. For other nations it *did* turn out much worse. When the war was over, Americans even felt good about what they collectively achieved, but it wasn’t good.

      3. Again, saying that there were things that improved as a result of the war is not untrue. Saying that economically the war was necessary and beneficial and “the thing” that brought us out of the depression……………… ehhhhhhh not so much. The type of spending and investment could have been done on something other than building war machines. We DO lack imagination at times, especially when listening to austerians, but hopefully we’re past the point of thinking of war as an economic growth engine.

      4. I think it is only with the passage of time and memory that such views as some of the above are expressed. Of course the war was not economically necessary. That does not mean that it was not economically beneficial, “good for us” and “the thing which brought us out of the depression” -which is still pretty much the universal & accurate belief, not a myth. People in the postwar economy were significantly better off than in the previous peacetime economy, which is the reasonable comparison, and many were even better off during the war. The political alternative, a world dominated by the Axis, would have been far worse, killed far more. We were hardly forced to confront the Soviets in the Cold War, accepting Stalin’s and Krushchev’s proposals to neutralize Germany a la Austria would likely have aborted it.

      5. Greg: hopefully we’re past the point of thinking of war as an economic growth engine.

        That hope involves a gigantic leap of faith, or credulity. Politicians know that a big enough deficit solves all problems and no one complains about deficits incurred due to war. It’s the magic bullet and it is another reason I am concerned about widening war.

      6. Calcagus

        Yes, the deficits we were willing to tolerate during wartime were what elevated our economy. My point is it was the deficits we were willing to tolerate. We must teach people that a “war” on unemployment should be declared and we should tolerate whatever deficits it takes.

        Tom, I share your concern.

      7. Assuming it was a war of necessity (granted, there are historians who say we could have negotiated peace Nazi Germany and Japan, I’m dubious of that), then the senseless loss of life was unavoidable. Whether our wartime economy was run poorly or (as was by and large the case) run wisely, the “butcher’s bill” had to be paid and for that we are all in the debt to the men and women of our Armed Forces who paid that price. Because the US economy was run wisely during the war, it meant that when peace finally came, the economy was like a loaded spring and there was a GDP boom (and one in babies as well).

        To use an analogy, imagine a doctor telling a patient he has a brain tumor and must undergo surgery immediately. If the operation is a success, to be happy for the patient for having a good outcome doesn’t mean we’re endorsing cancer or the senseless sawing open of human craniums. Only that a good outcome following brain surgery is better than a bad outcome (though I suppose reasonable minds could differ). :o)

  6. MAuer to me
    show details 2:18 PM (4 hours ago)

    He’s got his facts wrong for 1938. The recovery in 1938 was substantial, it didn’t take the war. These economists are lazy at best and not very smart at less than best and dangereous at worst. Auto production doubled by end of year, etc etc. Etc. Read appendix to Jesse Jones’ book for amount of infrafrutcure added in 1938 and 1939. More than Obama could do in 3 centuries. In fact the appendix has enough data for a doctorial dissertation on how the 1938 recession helped to win the war and by how much more quickly than otherwise would have been the case.

  7. mauer to me
    show details 7:07 PM (3 minutes ago)

    Look at the Jesse Jones book on his years at the RFC at the end. You won’t believe amount of roads, parks, etc. Compare to Obama announcement yesterday. In two years, jones did100 times more volume than Obama planning for six years. Infrastructure we now take for granted: parks, ball fields, airports, swimming pools, thousands and thousands would cost a trillion or more to do today. And then started buying strategic metals, materials plants, production facilities, etc. Way before the war. No one but me and one other guy I know who has studied this has connected the dots between the material accumulation and success at war effort. It is a story worthy of Hastings or equal.

  8. “Jones was in charge of spending US$50 billion (US$604 billion in today’s terms), especially in financing railways and building munitions factories … Jones, Jesse H. Fifty billion dollars;: My thirteen years with the RFC, 1932-1945 (1951) detailed memoir by longtime chairman”

    1. Haha, Jesse Jones, that guy kicked it old school. When he bailed out a bank or a corporation, his first condition was that the top three executives had to tender their resignation.

      One crucial element of the US’s industrial juggernaut during World War II was that civilian and military officials engaged in the sort of economic “indicative planning” that Jean Monnet used to great success in post-war France. As it happens, Monnet spent much of the war in Washington and played a critical role in US economic planning.

      The name of this remarkable Frenchman seldom appeared in the press or the on the radio during the defense build-up prior to Pearl Harbor and the all-out mobilization in the challenging months in early 1942 just after the United States entered the war. Yet until Jean Monnet provided the leadership during the preceding year for setting much higher goals for American armament production, the prospects were dismal for the successful defense of Great Britain and Russia.
      http://books.google.com/books?id=SqgQTJ9qtSIC&lpg=PA67&dq=Jean%20monnet%20unsung%20hero&pg=PA67

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