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What the World War Two "Reset" Did to Solve the Great Depression

by Roger Bourke White Jr., copyright August 2012


The 1930's were a frustrating time for the US and much of the developing world. In spite of the best efforts of Presidents Hoover and Roosevelt (FDR) in the US and other national leaders around the world, the economy just would not recover! It would not grow as it had in the 1920's and 10's.

To this day many liberal-minded historians and economists praise FDR for not letting things get worse, but the harsh reality is: He and the New Deal programs his supporters enacted all through the 1930's didn't fix the growth problem.

What did fix the problem, somehow, was World War Two. It ushered in six decades of boom. This essay is about why that happened. Why did the war change circumstances enough to bring on a boom?

This is important because the acrimonious political dialog and slow economic growth we are experiencing today in the 2010's bears a lot of resemblance to America's experience in the mid-1930's. We may be able to learn from that experience. We may learn what it is going to take to end the slow growth of the 2010's.

What it will take is a change in "national attention" (national priorities).

The 1930's: The Decade of Fairness

When the stock market crashed in 1929 and the economy started to unwind, things were different than when the previous "bank panic" had struck the US in 1907. One change was the Federal Reserve was now in place. Another was the trauma of World War One had changed the public's attitude towards what social actions the government should get involved in. An example of that change was US citizens voting in Prohibition in 1920. Before that enactment what a person drank was not the federal government's business. It was, in fact, so not the government's business that Prohibition had to be enacted as a Constitutional Amendment, the 18th, not a simple law.

As the Prohibition enactment indicated, the US's citizens feeling about what the government should be involved in had changed in the post-World War One era. So as the economy unraveled first Hoover, then Roosevelt, got the government involved in fixing the economy. Both of them were quite vigorous for their day, but history as it is told today holds that Hoover wasn't vigorous enough, so Roosevelt gets praised and Hoover gets blamed.

But praised or blamed, neither one got the economy growing again. What did that was America's entry into World War Two. Why did that solve a problem that a decade of Hoover and New Deal intervention could not?

The Change of Priorities

War time brought a dramatic shift in America's national attention. The chronic question of the 1930's -- the issue of who was going to decide how business in America should be conducted -- was put on the shelf. What replaced it was the question of how to defeat the Nazis and Fascists.

Starting with Mussolini's declaration of dictatorship in 1925 and picking up pace dramatically with Hitler's election in 1933, Italy and Germany had transformed themselves from an economic laughing stock and an anarchic basket case into nations that had their acts together and were threatening to aggressively spread that act throughout Europe and the world. In 1939 Germany started World War Two by invading Poland and... poof!... completely conquering it in six weeks (with Russian help). The world, including America, had something new, big and scary to worry about.

The New Priority: Productivity

The new priority became productivity. In the first war years the US was going to have to become the Arsenal of Democracy, as Roosevelt described it, and produce a lot of military hardware for those opposing the Nazis and Fascists. After Pearl Harbor in December 1941, the US would be sending millions of soldiers into the fight as well as tons and tons of hardware.

This was a huge change in what the American economy would be producing and where Americans would be working. Roosevelt was able to adapt to this dramatic transition in national attention. In a dramatic change of policy he called upon America's business leaders to help meet this new challenge, and he succeeded in getting them to do so. He then lead America through this war time as he had in peace time, and for good or ill died a few months before the war ended. It fell to Harry Truman to lead America and the Democrats through the post-War transition.

In sum, the big change between the Great Depression era and the World War Two era was a change in national attention. Before the war started the attention was on how American business should be run, and after the war started it transitioned to how to win a war against scary Nazis and Fascists.

The Post War Era: Back to Business as Usual? (Another Depression)

A miracle happened after World War Two: America didn't slip back into another Great Depression. That this might happen was a huge concern for all business people and workers of America as the war ended. The worrisome question of the day was, "Why shouldn't it?"

There were millions of soldiers that had to be integrated back into the civilian labor force, the Arsenal of Democracy had to be transformed from swords back to ploughshares, there were secret enemies conspiring to take over America. In sum, there were a whole lot of reasons why Great Depression Two could have happened.

...Instead America experienced a Cold War and sixty years of boom that brought us to the 2010's.

Whoa! What happened?

The Change in National Attention

The reason for the boom was the change in national attention. America stayed worried about growing and defending rather than returning to worrying about being fair. Part of that was because of the success of the rapid transition from producing military to civilian goods -- Americans of the 1950's did feel like life was a whole lot better for them than it had been in the thirties and forties, and they recognized that increasing productivity was responsible.

Americans also had Russians to worry about. This was Cold War times, so there was a big, real external threat that kept bipartisan cooperation high and bickering low.

The worry about fairness was far from forgotten. There was still a lot of worrying about fairness in these decades, but that worry consistently took second place to the worrying about growth.

Now in the 2010's the worry about fairness has moved to first in line again, and national growth is suffering again -- 1930's deja vu!

Solving the Growth Problem

So, solving the growth problem is simple to say, "We Americans must put worrying about fairness into the second slot, behind worrying about growth."

Implementing that simple statement will require a similar kind of "attention resetting" that America experienced with the onset of World War Two. This resetting doesn't take a war to make it happen. In fact, a war is rarely a good tactic: Witness the acrimonious results following World War One and the War on Terror. What is needed is some issue big enough that it will capture the nation's attention and solving the issue will require America to do a lot of growing. Then we will grow again.


An "attention reset" is the solution to America's current growth problem.


--The End--


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