War and the Economy

A common presupposition about the relationship between economy and war is that war stimulates the economy. The economic situation in America during World War II shows us that this is not the case.

During WWII, 40% of the labor force was employed by the army, producing weapons, machinery, etc…. The remaining 60% was left to make up for the lost production of consumer goods* by the 40%, on top of what it already had to produce. If it didn’t do this the standard of living would go down. This is not a healthy, booming economy.

An argument that is used to say the economy improved during WWII is that the rates of unemployment fell. The reason for this is that the unemployed were now employed by the army or drafted into the army. Therefore, there were no more unemployed people.

War does not make the economy better. In reality it reduces jobs, productivity and therefore the standard of living of a country.

 

*e.g. milk, socks, toothbrushes, TV’s, cars. Not producer goods, which are machinery used to produce cars, factories, etc….