The thinking behind this post began as a comment over at Jeff Id’s blog The Air Vent
within a guest-post by Mr. Leonard Weinstein on the relevance of the factors that allowed the United States civilian economy to emerge from the Great Depression and the command economy of World War II with such extraordinary vigor in the years following WWII, and how this is relevant to the current administration’s economic policy.  It is Mr. Weinstein’s view that the Obama Administration is making the same Keynesian mistakes that the Roosevelt Administration made in the 1930’s under the Second New Deal that may have actually prolonged and deepened the Great Depression, which is more of an Austrian view of economics.

This of course was in complete in contradiction to Keynesian economic theory which at the time was predicting another depression and massive unemployment – which obviously did not occur – the US in 1946 experienced the greatest surge in economic growth, 30% that year, that it ever has, before or since.

The BIG THREE factors as put forward by Mr. Weinstein are:

There were three major factors that ended the Depression:

1. The destruction during the war of most of the industrial capacity of most of the major industrial powers (including in Europe and Japan), but not including the United States, left us with a near monopoly on production of major items. In fact, many of the factories greatly built up their capacity for the war, and the increased capacity was used to advantage after the war. This advantage lasted several decades, and gave us a long head start on establishing markets.
2. A pent-up needs for automobiles, appliances, and many other items developed due to the manufacturing plants converting to manufacturing supplies for the war. After the war, the conversion back allowed huge amounts of sales of these items. This lasted long enough to establish many businesses solidly.
3. The GI bill allowed huge numbers of military personal to buy homes, and even more important, go to college. The large increase in well-educated people resulting had a major effect on the level of technology that could be developed. The middle class grew to a much larger percent of the population, and consumer buying increased greatly.

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