Bob Murphy has an interesting article in The American Conservative on WWII and Keynesian policy. He discusses the recent paper on the subject by Steve Horwitz as well (here, and forthcoming in the Independent Review). I think there's a lot you can get out of both, but you have to be careful with what you try to derive from them.
Murphy and Horwitz provide important clarification of the trends in living standards during WWII. Any of you that weren't snotty little brats and actually took the time to talk to your grandparents about their experiences know that WWII was a tough time to live. People were frugal, goods were often rationed, and times were lean to support the war effort. Living standards, in other words, were low.
But there was one thing your grandparents probably never told you: that they or anyone they knew was involuntarily unemployed during the war.
This is a critical distinction. I think think the articles linked above do a great job exploring the contours of private consumption in the early forties. Horwitz is especially good at providing a lot of the primary source material that drives the point home. But when we're talking about macroeconomic policy, it's important to keep straight why private consumption was so low during this time. We made a decision to help free Europe from fascism, and we decided to shift our position on the classic guns vs. butter tradeoff.
The macroeconomic policy debate is about getting the economy to operate at its full potential. The use of that potential is a question for free consumers and free voters.
If the monetary decisions of the early Roosevelt administration weren't enough, WWII was a stunning demonstration of the validity of Keynes's insights, only five years after he wrote the General Theory. Nothing in Murphy or Horwitz should be read to have refute that point. But facts are facts, people, and the facts are that we used that full employment economy for ends other than private consumption in the early 1940s. If you want to argue about whether that was a good choice or not, you can have that discussion but that is not a macroeconomic discussion.
There's an extended discussion of these points in Bob's comment section for this post.
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