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It's been funny to watch Paul 
Krugman no longer say the New 

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Deal brought us out of the 
Depression. 

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He conceded that it led to the 
double dip recession of 1937. 

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However, it was the demand that 
was stimulated with the Second 

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World War which brought us out 
of the Depression. 

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That's why today we need things 
like Joe Biden's Inflation 

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Reduction Act. 
That's why the Cares Act with 

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Donald Trump was so important, 
because demand has to be 

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stimulated. 
What if anything is wrong with 

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this idea? 
Well, absolutely everything. 

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And and again, this is one of 
those things where not just the 

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left gets it wrong, but even a 
lot of conservatives will say, 

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you know, like they'll be mostly
on the right track saying the 

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the New Deal did not get us out 
of the Depression. 

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Correct. 
Great. 

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Then they'll say World War Two 
did. 

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If you say that, I mean, in 
addition to being wrong, you're 

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just handing the whole argument 
to the other side. 

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You're saying, well, Roosevelt 
did some domestic spending, but 

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if he had done more spending 
like we had in the war, then it 

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would have worked. 
You sure that's the argument you

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want to make? 
So thankfully, the guy who 

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really started us all thinking 
on this, or we've been thinking 

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about it, but who really, really
did the charts and graphs and 

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the numbers is Robert Higgs. 
And he had an article in, I 

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can't remember, it was a journal
of economic history or something

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like that. 
But the the main title of the 

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paper is Wartime Prosperity with
a question mark. 

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And I don't offhand recall the 
subtitle, but you read that 

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article and you say, ho, whoa, 
wait a minute. 

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Yes, everybody is, is 
misunderstanding this. 

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And so he's showing on the 
graphs that, yes, nobody denies 

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that if you seize resources from
the public sector, from the 

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private sector, you siphon them 
away from private consumers and 

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then you go blow it on 
something. 

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Yeah, OK, It will create that 
thing like we know that. 

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But the point is that thing 
doesn't contribute to consumer 

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welfare. 
When private entrepreneurs spend

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money, they have a profit and 
loss test which tells them if 

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they are in in some way 
contributing to consumer 

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welfare. 
The the state does not have that

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feedback mechanism. 
So it's expenditures have to be 

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arbitrary. 
It's expenditures are 

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politically determined, not 
determined on the basis of 

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consumer preferences. 
And so during the war, that's 

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when you have the, the worst of 
this. 

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Now, you may say, well, we 
needed to fight the Japanese. 

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That's it. 
Or, you know, whoever we're 

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fighting, that's, that's beside 
the point. 

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That's a completely separate 
point. 

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The, the, the point we're saying
we're arguing is, was this a 

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source of prosperity for the 
average American? 

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Not whether it was necessary to 
win the war or any of that. 

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That's, that's a completely 
different thing. 

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Did it bring about prosperity? 
And he goes and looks and says, 

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look, when you when you siphon, 
you know, 10 million men out of 

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the economy, the ones who have 
the the most work experience, 

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who are the physically 
strongest. 

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And you siphon off you like 40% 
of GDP or whatever into the 

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waging of the war. 
And the official numbers tell 

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you the society got more 
prosperous. 

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You know something's wrong with 
those numbers, right? 

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Like if today I took all the 
able bodied men and sent them 

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away or lined them up by and 
executed them by firing squad, 

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and then we saw that all the 
economic indicators said the 

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economy was now doing better, we
would know something's wrong 

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with the indicators. 
And of course they were because 

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they're treating public sector 
spending like it's 

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indistinguishable from private 
sector spending. 

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So he goes through and and and 
analyze. 

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So then also says you're not 
factoring in all the deprivation

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people suffered by the rationing
during that time. 

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That's rationing is not 
prosperity. 

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So he says the real prosperity 
came in 1946 when you got after 

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the demobilization, you started 
to get normal economic activity 

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again and the expectation of the
private sector that no wild 

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disruptions of the ordinary flow
of commerce would be taking 

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place. 
That's when the prosperity 

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occurs. 
Now, by the way, there's a very 

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provocative article in the old 
Review of Austrian Economics by 

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Richard Vetter and Lowell 
Galloway called the Great 

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Depression of 1946. 
And that's tongue in cheek 

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because of course, there was no 
Great Depression of 19461946 was

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probably the single most 
prosperous year in all of 

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American history. 
So what do they mean the Great 

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Depression of 1946? 
They mean this is what happens 

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when you blindly just read some 
numbers off a piece of paper. 

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Because if you read the numbers 
off the piece of paper, the 

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numbers don't look very good for
1946. 

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But that's because the, the, 
the, the, the public side of the

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spending has, has collapsed 
because they're not waging the 

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war anymore. 
And so some indicators of, of 

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prosperity look bad, but that's 
not bad. 

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Like employment was great, 
production was great, consumer 

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goods production was great. 
That's what you need to look at,

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like things that involve the 
welfare of the people. 

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And if you look at that, you 
realize there's no depression in

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1946. 
You have to be a dope to think 

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that you're you're looking at 
the numbers all wrong, as we had

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been during World War 2. 
And I love what you said earlier

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about using time price as a 
better indicator rather than 

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GDP. 
So yes, 400,000 American deaths 

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and giving half of Europe to the
Bolsheviks did not stimulate the

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economy. 
You make the excellent case 

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here. 
Hey you all, it's fundraising 

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00:05:22,520 --> 00:05:24,960
time again at the Libertarian. 
Institute we. 

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Try not to do this to you too 
often, but business is business 

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after all. 
I got a great group of guys and 

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a gal at the institute and I got
to pay them, so just go to. 

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Libertarianinstitute.org/donate 
to pick your price and help out.

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We've got some great kickbacks 
too. 

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Books and shirts, great ones. 
That's Libertarian institute.org

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Donate and thank you all very 

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much.