The New Deal and Recovery, Part 20: The Phantom Depression

George SelginIt was supposed to be a  debacle.As the Second World War drew to a  close, the nation’s leading economists feared that, once the armed services demobilized, at least 8 million men and women, perhaps many more, would be unemployed. That meant an unemployment rate of 12 percent—almost as high as the rate before Hitler raided the Low Countries, setting off the “ wartime boom.” If their forecasts were reliable, they meant that the postwar economy could end up being no closer to recovery than the prewar economy had been.A Worst ‐​Case ScenarioOf course, such dire predictions weren ’t unconditional. Most of those economists had a “worst case” scenario in mind—one in which, inAlvin Hansen ’s words (1943, p. 5), the government chose to “just disband the Army, close down the munitions factories, stop building ships, and remove all economic controls,” without compensating for these steps by substantially increasing its spending on public works and other employment‐​generating programs.But this “worst case” scenario is just what played out in fact. The governmentdid“just disband the Army”: thanks toOperation Magic Carpet, despite the large number of military personal serving overseas, within ten months after V ‑J day more than 8 million of the 12.2 million military personnel on active duty that June had been discharged. By mid 1947, only 1.5 million—a million fewer than the military had planned on—were still enlisted.And the g...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs