Moon of Alabama Brecht quote
February 16, 2009

Krugman Is Wrong On WWII

Paul Krugman is planting a very dangerous idea:

If you want to see what it really takes to boot the economy out of a debt trap, look at the large public works program, otherwise known as World War II, that ended the Great Depression. The war didn’t just lead to full employment. It also led to rapidly rising incomes and substantial inflation, all with virtually no borrowing by the private sector.
Since nothing like that is on the table, or seems likely to get on the table any time soon, it will take years for families and firms to work off the debt they ran up so blithely. The odds are that the legacy of our time of illusion — our decade at Bernie’s — will be a long, painful slump.

How will people read the above? "Even Krugman says we need another war. Let's start now!"

But was WWII really a 'public works program' that ended the debt trap? Krugman displays a graph at his blog to justify his opinion.

It shows private debt at 240% of GDP in 1932 while public debt was about 40% of GDP. The private debt came down to a 100% of GDP in 1941 while public debt stayed under 50%. When the U.S. entered WWII private debt came down further to 70% of GDP and public debt went up to 110%.

So most of the necessary debt deflation that followed the big debt bubble of the late 1920s had already taken place when the U.S. entered the war. The argument that WWII was a 'public works program' that ended the Great Depression is false.

Most of the necessary healing of U.S. private balance sheets had already taking place before the war started, Simply continuing FDR's civil public works policies for a few more years would likely have had the same result with regards to private debt than the war had.

To characterize WWII as an alternative to a 'long, painful slump' is ludicrous. The years between 1930 and 1941 were certainly already a 'long, painful slump'. The war years were certainly long and painful for those who got wounded, maimed and had to flee from their homes.

What Krugman does in his column is giving people a very bad idea based on very shallow thought.

Posted by b on February 16, 2009 at 8:13 UTC | Permalink


Krugman is proof that (even Nobel prize winning) economists don't necessarily communicate very well.
As the right hates him and the left don't seem to be listening either, his comments don't have that many ramifications, do they?

Posted by: waldo | Feb 16 2009 9:43 utc | 1

mercy me. that's got to be the worst of krugman.

Posted by: annie | Feb 16 2009 9:51 utc | 2

I think Krugman (in the past) has also used the WWII analogy with the caveat that it would be better to spend the money on public works projects rather than just spending the money to blow things up. It's true no such caveat appears in the current article so I assume it's either oversight or a sly editorial manipulation by the paper to juice the readers. If so, then Krugman should make a stink over it.

Posted by: anna missed | Feb 16 2009 10:10 utc | 3

anna missed, i was looking for the snark feature. war as public works program?

well, it is. but still..he almost sounds like he's promoting it (tho he wouldn't be!). very bizarre.

Posted by: annie | Feb 16 2009 10:29 utc | 4

Correct me if I am wrong here, but intuitively seems that WWII supported the US economy by virtue of US having the only unscathed infrastructure post-war (and of course being victorious). This created ready markets (Europe, East Asia) for exporting both good and debt (Marshall plan). It is a version of the dictum that among the blind the one-eyed is king...

If that is even partially the case, then the argument that a simple public work project that does not involve blowing up someone else's infrastructure might not do the trick.

Posted by: balkanid | Feb 16 2009 10:31 utc | 5

Krugman is rehashing a meme that has been heard a thousand times by Americans; but there is a potent passage from Lincoln's second inaugural address to act as an antidote to such poison.

Neither party expected for the war the magnitude or the duration which it has already attained. Neither anticipated that the cause of the conflict might cease with or even before the conflict itself should cease. Each looked for an easier triumph, and a result less fundamental and astounding. Both read the same Bible and pray to the same God, and each invokes His aid against the other. It may seem strange that any men should dare to ask a just God's assistance in wringing their bread from the sweat of other men's faces, but let us judge not, that we be not judged. The prayers of both could not be answered. That of neither has been answered fully. The Almighty has His own purposes. "Woe unto the world because of offenses; for it must needs be that offenses come, but woe to that man by whom the offense cometh." If we shall suppose that American slavery is one of those offenses which, in the providence of God, must needs come, but which, having continued through His appointed time, He now wills to remove, and that He gives to both North and South this terrible war as the woe due to those by whom the offense came, shall we discern therein any departure from those divine attributes which the believers in a living God always ascribe to Him? Fondly do we hope, fervently do we pray, that this mighty scourge of war may speedily pass away. Yet, if God wills that it continue until all the wealth piled by the bondsman's two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said "the judgments of the Lord are true and righteous altogether."
There is something about the imperial hegemon that has a lot to do about "wringing their bread from the sweat of other men's faces" I bolded the scriptural quote Lincoln used:"Woe unto the world because of offenses; for it must needs be that offenses come, but woe to that man by whom the offense cometh."

A "public works project" that is in effect a war of choice, would surely be a project capable destroying and burying those who are responsible for starting it.

Posted by: Copeland | Feb 16 2009 11:58 utc | 6

There was one more aspect of WWII that is hard to pin down in economic terms: people were willing to work longer and harder, and to defer part of their earnings (by buying War Bonds) because they believed in the cause that they were supporting.

That applied not only to the US military economy, but to the economy as a whole. There was rationing, but few essential shortages, because people were producing more and consuming less.

I cannot see anything like that on the horizon for the USA or the world as a whole.

Posted by: ralphieboy | Feb 16 2009 12:27 utc | 7

I'm still fuzzy this morning, but I think these problems are hard to pin down because much of today's problems are due to paying down interest on yesterday's debt.

WW II is a strange bird. One of the reasons america benefited so much was that the rest of the industrial world had been bombed to pieces and didn't have a capable infrastructure to produce like america could. If I remember correctly, there was a bit of an economic struggle for a couple of years after the war as the country assimilated the returning soldiers and productions was shifted back to peacetime wares.

Trying to compare today's economic problem with the Great Depression is silly. The times are so different now, the world's economy so interconnected that nations who are political enemies suffer the same financial fate at the hands of financiers. Wars only help the money lenders and the munitions factories. A good war might give the undertaker some extra business too, but all in all they are a losing proposition for the majority of the people. The way we benefit most from wars are from applying technological advances made during wartime to peaceful applications afterwards.

Now I might like a WWII type response to poverty in the world. Or maybe bringing running water and clean sewage practices to the furtherest reaches of the globe. One of my world traveler buddies is convinced world peace could be had for the price indoor toilets in every home. Of course he doesn't take into account the fighting that results from members of a household locking themselves the bathroom for long periods of time when others are in dire need.

I'd support about anything rather than another war. Even building another tower of babble...

Posted by: David | Feb 16 2009 13:19 utc | 8

Not only was the US post-war economic power due to the fact it was the only major industrial nation that hadn't been bombed like hell, the fact that all other industrial competitors were ruined, their people maimed or killed, and their factories bombed was the only reason why there wasn't another great depression after 1945. Because the massive imbalance in industrial capacity which caused the 1929-30s great depression was partly due to the previous massive overcapacity of US industries, and that was even worse after WWII.

Posted by: CluelessJoe | Feb 16 2009 13:41 utc | 9

I have to voice a qualified objection to what you are saying on the following basis: It has long been treated as common knowledge throughout the US educational system (and particularly in the US economics discipline) that World War II brought the US out of the depression. To acknowledge that is NOT to be an advocate for war (I, for one, am a pacifist). I must say that calling WWII (and any war, for that matter) a "public works program" is a poor choice of words. It is, in my view, an acknowledgement of the true sad state of capitalism in the US at the time that a war effectively jump-started the economy (and it is equally stressed in our schools that it was due to the unique position of the US not having suffered the direct destructive effects of the war). However, I think Krugman would be the first to admit that it is not the war as such but the reconstruction that produced the desired "keynesian" effect on the economy. The term "war economy" may or may not have been coined by the left, but students of Kondratiev waves sought to tie periodic wars to the periodicity of such long waves. I must disagree with that since it leads to the inevitable conclusion that capitalism intrinsically needs war to survive. I therefore agree with you when you say:

Simply continuing FDR's civil public works policies for a few more years would likely have had the same result with regards to private debt than the war had.

I think, however, that the civil public works programs would have likely had to be continued for many instead of a few years in order to achieve the same effect (Hey, I have no problem with that!). The bottom line for me (and I assume for you as well) is a revindication of Keynesianism, not militarism.

Posted by: D. Mathews | Feb 16 2009 13:52 utc | 10

Just to back up my very first assertion, this is from the Library of Congress.

Posted by: D. Mathews | Feb 16 2009 14:10 utc | 11

Krugman is a mouthpiece and a shill for the Plutocracy. He has to know he's lying about half the crap he proffers. I believe he's there to manage the downside, meaning the Plutocracy doesn't want the educated liberals and progressives to become radicals and challenge their status quo. Krugman plays the Good Shepherd, in this regard. He's the cynic, but a "there's light at the end of the long-hard tunnel" is his final message. All the while, the sheep's wool has been sheered and will never grow back.

What Krugman fails to report is that we have been a War Economy since WWII. It never ceased. Quite the opposite, in fact. It's grown into a behemoth Military Indistrial Complex that is Ultra-National. For this reason, a war can no longer bail us out, as if it ever did, because it's no longer an exceptional event leading to a "new" economy. It already is our economy, and it's failing. Also, note that neither Krugman, nor any of the other mainstream economists, including Roubini who is now mainstream, are advocating austerity when it comes to defense spending. No, the austerity will come in the form of rendered entitlements and public works. Obama will accomplish what Bush never could have, and that will be the dismantling of Social Security and Medicare. We will be told there is no other choice, and the "believers" will go right along in lockstep. "Just trust him," they will say, and so they will, and so he will....betray that trust...time and time again.

Posted by: Obamageddon | Feb 16 2009 14:15 utc | 12

Krugman's rather broad hint is an excellent one; however, this time let's fool 'em good, and land at Pas de Calais.

And we won't stop at the Elbe River. And we'll take all the pictures in color this time!

Posted by: Antifa | Feb 16 2009 14:17 utc | 13

I think most economists would agree that defense spending is not an investment in productive capacity. As such, it is a poor substitue for sound investments in infrastructure, which is required for increases in GDP. You wouldn't know that from Faux News, of course, which is pushing more defense spending--"it's as good as any other spending. And DOD has lots of needs."

Further, I think Krugman would argue that the economy did not fully recover before WWII because Roosevelt did not apply enough stimulus in the 1930s. His efforts in this regard were blocked by Republican budget balancers.

However, Krugman should quickly dispel any misinterpretations of his position to avoid being trapped in the right wing spin machine.

Posted by: JohnH | Feb 16 2009 15:15 utc | 14

Let us take it step by step.
• Which side of the WWIII Krugman wants America to be on? As I remember, the WWII did have rather “odd” effects on the Germans and the a bit over 56 million war casualties.
• Assuming that he wants to add the Nobel Peace Prize to go with his economics one, he must like to be on the side of the good guys.
• Afghanistan does not look plausible. I know the Taliban and Al-Qaeda are not exactly what you would like your marriageable son or daughter (I am covering all orientations) to have a cup of coffee with. But the problem is even the NATO members are dragging their feet to cough up their fair share; and how much can you rely on near bankrupt Britain?
• So who will stand for Hitler? Bush Jr. has already used up Saddam. Will the world like to mess up with Russia or Iran or Korea or ….?
• If yes, what is the excuse (sorry, I meant to write “reason”)?
• Freeing the people.
• In other words regime change!
• See Krugman is a neo-con

Posted by: TutuG | Feb 16 2009 15:36 utc | 15

What unfortunate wording, really horrible.

Why did WWII “work”? on TPM café, answer by Krugman.>here ..

Examining the direct spending of the Stimulus package:>here, from>this site which also tracks TARP, it seems to me that Obama is not inspired by a ‘war’ economy (although defense gets 12 billion, it is mostly building infrastructure, see a breakdown by Departments>here) nor by Roosevelt, or only vestiges thereof; so all the comparisons are lame.

Roosevelt reformed the system - he created the SEC and FDIC, Social Security and the National labor Relations Board. The times were right for that. He dealt with 25% unemployment. Faced by failure of credit they have proposed only the lending of more money, he said in his inauguration address, 1933. Obama?

Then, a war economy, with its push to manufacture and sacrifice. A different beast .. Obama cannot muster that kind of drive... (Btw, Krugman forgets that the US is at war, if undeclared..)

The Stimulus P is reads like regular Gvmt. spending, just extra tacked on in billions of dollars, often in plain round numbers. Very unwise, most imprudent.

It is a democratic jamboree...huge amounts for education and health etc., the only ‘growth sectors’ in the US at present... Deficits don’t mata, heh.

I read 13 billion for Education for the Disadvantaged. Insane. The Educ system as is is inefficient, hopeless, does not create social advancement at all, - not its fault one might say... Nevertheless, it is a racket, built on hopes of the poor.

Obama is deeply conservative, he is a mid 20th-century man using outdated recipes. A creature of Wall Street. In cahoots with the Predator class. The rest is tinsel thrown up to keep the ppl quiet.

Posted by: Tangerine | Feb 16 2009 16:08 utc | 16

Balkanid and Clueless Joe get it right. And I'm sure Krug isn't advocating a WW III. Krugman is to mainstream economics what Robert Reich was for awhile to mainstream politics -- a reasonable voice on the progressive SIDE of the spectrum (i.e. still within the capitalist frame of reference.) I dont mind the existence of such voices, since there is currently no revolutionary alternative to be confused or coopted by them.

Posted by: senecal | Feb 16 2009 16:31 utc | 17

Even if Krugman is right in saying that WWII helped steer us out of depression, he's wrong in assuming that any kind of war has the power to do this. In yesterday's war against nazi-fascism, unlike today's war against Islamic terrorism, our enemy was more clearly defined, thus making it a more winnable kind of war for us. And unlike those who were conducting the war against nazi-fascism, those who are conducting the war against Islamic fascism are profiting mightily by not winning this war, but by keeping it alive and well.

So it's my opinion that accelerating the war against Islamic terrorism is more likely to steer us into a depression than out of one. I think that once Krugman realizes that the war on terror is the engine behind the military industrial complex, just as the war on drugs in the engine behind the prison industrial complex, he'll quickly come to the realization that today's wars, unlike the one from the past, do more harm than good to the rest of the economy.

Posted by: Cynthia | Feb 16 2009 16:35 utc | 18

If ww2 brought us out of the depression, we should be doing just fine right now.

Posted by: ben | Feb 16 2009 19:47 utc | 19

The problem here is, there is no such thing such as Islamic fascism. There is medieval regimes controlled by Western world. In reality and by the very facts there is Zionist fascism/apartheid regime, institutionalized in client-state of Israel and supported by every US administration.

Just as Neslon Mandela said:
US threatens world peace, says Mandela

This article is from 2002, but it hasn't lost a bit in accuracy.

So Cynthia you opinion despite lot of words and efforts to obfuscate situation, is way of real state of things.

Posted by: Balkanac | Feb 16 2009 20:51 utc | 20


Your Excellency,

Along side the US new administration's leadership, selecting you as
the special envoy for the two neighboring countries, Afghanistan and
Pakistan, is a vital step towards creating a better life, resolving
the on-going problems in the region and providing a peaceful
environment. In order to have successfully completed this mission,
your Excellency, we hereby assure you of our promising support and
sincerely provide to you our suggestions.

1. In addition to not being capable of fulfilling its responsibilities
and missions, the current administration is fueled-up with system
corruption, drug trafficking and mafia involvement.
Therefore, our country, region and the world needs a stable and firm
international community and a trustworthy administration. To reach
this goal, which will strengthen peace and stability in Afghanistan
and the entire region and meanwhile take a worry off the world, we are
pleased to share with you what we have in mind.

2. Holding pure and honest elections and providing voting
opportunities for all the eligible and those Afghans who have the
rights to vote to receive their voting cards so they can desirably
vote in the elections.

3. Carrying out sincere and truthful efforts in the terrorists'
whereabouts in the region
and making a strategy amid the presence of the US, Afghanistan and Pakistan.

4. Launching reconstruction projects, focusing on economical
development and running programs literally in the war hit parts.

5. In order to create firm security and socially develop, obtaining
tribal and religious leaders' trust and maintaining a positive

6. Carrying out a successful fight against drugs, managing farmers'
exchange-salary projects and modernizing agricultural expertise

7. Providing suitable conditions for self-desire returnee refugees to
the country with honor.

8. In order to strengthen industrial development, make ways for
investment and expand trading ties, creating an independent market
with all the required norms and conditions of that of an international

9. Holding peace talks with those oppositions who promise peace,
stability and development of the country.

10. In order to maintain social justice in the country, carrying out a
serious but honest fight against the drug traders and handing them
over to the international courts for prosecutions.

Posted by: shah loam | Feb 16 2009 20:58 utc | 21

The underlying idea of the quote cited is that the US can not escape this crisis without a serious external impetus. WWII offered an excuse to transform the US economy into a centralized planned economy. Resources were allocated efficiently and intelligently for the purpose with relatively little profiteering.

I'd cut Krugman some slack because even though he is full of himself and too glib most of the time, I don't think he does it to support the current setup. He's an academic at heart and does better than most in using his celebrity status to push the discussion into areas not usually discussed in polite company. I don't agree with much of what he says, but I think he writes well. Reading between his lines, I believe he is pacing his expositions to the ability of most people's gradual acceptance of how bad a situation they are in.

Anyway, he's not advocating WWII.2

The prospects of Russia (Putin), China and other countries which have central control of their economies look a lot better than the US in dealing with the banks and industry. I think that you could probably plot a fairly smooth curve of countries problems and the sacredness of their free-market for bankers and capitalists. The fact that nationalization is deemed too foreign to even discuss (until recently) shows how infantile the level of discourse is.

I don't think that Krugman can come out and say that we should have a planned economy. This is of course the problem with capitalist economists- Only private planning for the future offers them employment. The academics only argue about the past. If there is only one instance of a time as bad as this one, focus only on that instance instead of realizing how many ways this is nothing like the past.

Posted by: biklett | Feb 16 2009 21:32 utc | 22

The interpretation that the New Deal was not enough to get America out of the Great Depression is historically respectable. The Second World War was helpful only in that it prompted the type of non-stop and intense public investment necessary to repair the damage to the economy.
However, it's important to look at ww2 in its context. There were no piles of rubble here.
We don't need another war, or any external crisis.
If anything, we need to re-negotiate every international commitment we have.
What we need is
1. commitment to the genuine redistribution of wealth on the basis of the belief that
2. democratic republicanism and social justice can and must co-exist.

Posted by: crasmane | Feb 16 2009 22:12 utc | 23

The US role in WWII fell into two distinct parts: in the first, from Sept '39 to Dec 41, the US economy simply hoovered up orders, cash paid until it ran out, from Britain and its allies. Most importantly it poured its production through Canada and invested heavily in Canadian branch plants. This period gave the economy a tremendous boost which was matched by 'preparedness' contracts for US Defense.
Among the additional advantages of this arrangement were the transfer, at no cost, of such advanced technologies as the jet engine and the Tube Alloys project which was the groundwork for the atom bomb.
Then there were the advantages gained in negotiations with Britain, these included dictating terms of both the postwar financial system and Free Trade. Themn there was the Cold War...

Posted by: ellis | Feb 17 2009 3:35 utc | 24

A big difference between WWII and later conflicts, in particular the Cold and the Gulf Wars is that the gov't came down on war profiteering.

That is what I have read anyway and I may have been snookered by people trying to make Truman look good -- but it does seem reasonable also from what Gen Butler said several times in War is a Racket that war profiteering is not only an evil companion of war, but it fattens up monsters that feed on the public after the war is over.

I'm thinking of how fat corporations after the civil war, through the power of their great wealth, got themselves recognized as judicial persons, thus turning corporations into essentially immortal beings lacking the morality that even the worst of humans can sometimes show.

Posted by: Chuck Cliff | Feb 17 2009 9:56 utc | 25

The profiteering is also a serious liability in any situation.
I've never seen the profit motive improve efficiency.
I wish Americans would stop confounding greed with innovation.

Posted by: crasmane | Feb 17 2009 12:31 utc | 26

There's been plenty of innovation in squeezing profits from US workers: Elimination of overtime pay by designating almost everyone as 'exempt' employees, new anti-union tactics, switching from pensions to 401k, reducing employer's contribution to health care, etc.

Innovation doesn't need to be progressive.

Posted by: biklett | Feb 17 2009 17:30 utc | 27

I find Krugman's thoughts to be shallow in general. One doesn't need war to bring about good economic environments and policies. It was after WWII that America's middle class grew by leaps and bounds and this was in a large part because of the strong union movement that pushed up wages for not only union members, but politically, the unions also pushed for a high minimum wage for non-union workers. If wages are relatively high for non-union workers, then, as was their thinking, there would be less reluctance for employers to hire higher paid union workers. (I remember that my initial wages and raises as a beginning salaried engineer were based relative to the union wages from the workers in the plant.) The rural areas were never that prosperous before the great depression so those people didn't suffer that much more during the depression. And the rural independent farmers were never organized except as coops for feed and fuel though they did often share expensive machinery amongst them on a local level. The farmers prided themselves on their independence. As a result, with such independence, the Americans saw the small independent farmer become almost an extinct species. And as time progressed, there was a general shift to the south by manufacturing corporations and other corporations/firms that had a large number of employees/workers due to lower wages there and the availability of non-union workers. Same with foreign investment, trade, and manufacturing. And with President Reagan on since, America's economic policies have been a disaster for the American worker. It has been quite clear that the FIRE elite (those few elite from the financial, insurance and Real Estate sectors) now rule America.

There was a good documentary about our current melt-down by PBS Frontline which aired last night and is available here. Krugman was featured in a few clips of course. He is what I would call the darling of the young left. He is often featured on Rachel Maddow's new show on MSNBC, and the way she swoons over him one would think twice if she is/was really a lesbian. Where I once enjoyed Olbermann/Maddow criticizing the Bush regime, I now find these shows disgusting in the same/opposite way I find Rush Limbaugh disgusting, that is this 'Obama can do no wrong' attitude.

Posted by: Rick | Feb 18 2009 13:45 utc | 28

I thought the Frontline Meltdown show was horrible- a typical PBS/NPR gloss which only serves to re-enforce the myths of the crisis. We see lots of big buildings and close-ups of politicians and wall street heroes and are supposed to believe that we are being shown the inside story. Mostly blame subprimes and spend two seconds on credit default swaps.

Posted by: biklett | Feb 18 2009 18:01 utc | 29


Yeah, perhaps good is not the right adjective here. The show was only 1 hour and incomplete for sure, but it did (indirectly) illustrate the stupidity and dictatorial power of our financial elites in government. I didn't see it try and portray anyone as a hero though.

Posted by: Rick | Feb 18 2009 22:04 utc | 30

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