Now everyone knows that World War II ended the Great Depression. Of course, private consumption fell during WWII and the vaunted Keynesian multiplier seemed to only work for the defense industry. Someday, perhaps, people will understand that when a war takes over most of the industrial sector, you don’t get much stimulus. And it’s not hard to reduce unemployment when you force a huge chunk of the male working-age population into the army.
When the war ended, all the Keynesians predicted disaster and a horrible depression because of the cuts in government spending and men coming home from Europe and the Pacific. Well, when that didn’t happen, people should have known that there isn’t a simple relationship between government spending and prosperity. But somehow, people didn’t learn that lesson.
via Notable – WSJ.com.