It Was More Than The War That Saved The Economy After The Great Depression

Paul Krugman

Photo: NYtimes.com

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 favour an activist approach to a depressed economy. Christy Romer is very much on the same wavelength.

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, and as Christy says,But World War II has something to tell us here, too. Because nearly 10 million men of prime working age were drafted into the military, there was a huge skills gap between the jobs that needed to be done on the home front and the remaining work force. Yet businesses and workers found a way to get the job done. Factories simplified production methods and housewives learned to rivet.

Here the lesson is that demand is crucial — and that jobs don’t go unfilled for long. If jobs were widely available today, unemployed workers would quickly find a way to acquire needed skills or move to where the jobs were located.


Read the rest of this article at The New York Times.

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