Consumer demand ended Depression

Contrary to the commonly held belief expressed by Kenneth Sessa (4/5, Letters), what ended the Great Depression was not the government spending that fueled the war effort. Although it did provide employment for millions both in the military and at home, there were still shortages and rationing throughout the war years.

The spending that ended the Great Depression was from the pent-up consumer demand that had developed during the war.

Once the soldiers started coming home, getting married, buying houses and buying cars, then the American economy rebounded and decades of real gross domestic product growth occurred.

Steve Barnes
Waverly, Kan.

Comments

[whispering_to_kc]

"As to whispering's assertion that "recovery started in 1932" ..."

GDP bottomed in 1932 and it then turned up. GDP improvement turned up even steeper in 1940 when FDR's rearmament started and GDP was back to "normal" by 1942.

As noted by "KC Educator", employment improved with GDP.

It's fact, not "assertion". You can look it up, you know.

[Engineer]

Jim
The third and fourth paragraphs of your 5:28:16 post pretty well outline FDR's policies which totally failed to bring the depression to an end. On the other hand, much of Bush's spending was for social programs which you maintain are stimulating. I see you are worried about people "wasting" some of the money they have earned. But isn't this "wasting" spending and didn't Obama tell us that spending is stimulus? Just how much of one person's earnings is it fair to take to give to another?
As to whispering's assertion that "recovery started in 1932"; if so, it was an unnoticeable recovery to those living through the period. You will find that unemployment never got below 14.3% until 1941 when it was 9.9%. The highest rate was 24.9% in 1933, up from 23.6% in 1932. WWII revived industrial activity and gave people reason to invest and take risks. This freed the economy from the restraints FDR had imposed upon it.

[NoMoreMrNiceGuy]

I would liek JIM to explain where all of the jobs that are related to the entire coal industry and petro-chem industry are going to work when we go "green"?
The railroads will go bankrupt, nearly every skilled trade will have significant shrinkage, not to mention the huge tax deficits we will encounter when these woerks and their industries are no longer. No worries, everyone will still be entitled to a house of teir choosing, an electric car that you can fit maybe 2 people in and go 40 miles efore having to recharge on a grid that is already overtaxed and on the brink. everyone will have healthcare alhgough their waot for a simple tonsilectomy will be 8 months, oh and let's not forget the free condoms.
Obama's plan is nothing special, just more wasteful spending on pork projects like every other politician. I swear people are simply in denial about this clown. JIM obviously does what for a living?

[Smarter Than You]

Jim, it brings a tear to my eye that you have learned something from me. On Feb. 16th I posted:

2008, that showed a slight rise in GDP and a 2009 that projects a reduction in GDP of 2%. For perspective compare that with reductions of 9% in 1930, 8% in 1931 and an additional 13% in 1932. Unemployment is currently at 7.6%. Our “transparent and accountable” perspective then focuses of a rate of 25.2% in 1932. By the way, for those of you keeping score at home, the current “crisis” most closely resembles 1982 when GDP contracted 1.9% and unemployment hit 10.8%.
Posted by: Smarter Than You | Feb 16, 2009 6:16:55 PM

Sorry if the use of actual statistics confused you. Here’s some more information that you may have missed on Feb. 24th:

"Historically, stimulus packages have failed. Bush 2008. Japan in the 90’s. Henry Morgenthau, FDR’s Treasury Sec., concluded these types of stimuli don’t work."

In fact, Jim, you’re promoting a short term high that would be the economic comparison to a heroin fix as a cure. Three different decades where stimuli have failed have been offered.

I do like your back door “investing in things we’ve needed” comment. If only it were true. There are some worthy projects hidden amongst the pork, but that hardly justifies the stimuli as passed by the Dem’s in power.

By the way, the 1982 crisis was eventually solved by tax reductions. Just saying. . .

[Jim]

STY,

Before "congratulating" others for doing economic research, you might do well to do some yourself.

The premise of this whole exercise if faulty to begin with. The problem is comparing today to the 1930s/1940s in the first place. Ours is a very different economy than theirs was. And we're already at war.

One of the areas where the comparison does hold up is the depressed demand in the economy. Right now, there is very little demand, but plenty of supply. As supply sits waiting, the people who make and sell those goods are having to decrease their productivity because of that demand problem. That costs jobs. The people who lose their jobs lose a lot of their buying power, further weakening the demand side of our economy. And because the credit market isn't exactly wonderful, our demand problem isn't going to turn around overnight.

That's where the government can step in and do some real good, by investing in programs and infrastructure that are proven stimulus. The government can create the demand short-term to do what it can to stem the losses of jobs and get productivity moving again, while simultaneously investing in things we've needed for a long, long time.

Obama's spending plans aren't perfect, but they're better than throwing it all away on more tax cuts for rich people and corporations who haven't been using it to create more jobs like we were told they would.

See, some of us actually pay attention to this stuff, rather than just sit on the sidelines and snipe like a 10 year old.

[Smarter Than You]

Well, Jim. while we're enjoying the hilarity maybe you care to tackle how Obama's spending is similar to the spending during WWII that ended the depression? The WWII spending was for the military, which was a huge portion of the Bush spending.

While some of us think you foolish, don't you tire of proving it?

[Jim]

STY,

While your smug condescention is always charming, your simplistic approach to this question is embarrasing you. To simply say spending won't solve the problem and then justify it by equating Bush and Obama's spending ignores the whole point. Bush's spending priorities had very little to do with fixing the economy or investing in things that the country needs and can use long-term. Much of the shortfall also came from his tax cuts. Equating the two doesn't work as an argument if you bother to put two seconds of thought to it.

The fact that you say all this while lecturing someone else about intellectual honesty is hilarious.

[Smarter Than You]

While I congratulate you on doing some economic research, the elephant in the room is that Bush had a record deficit. . .so spending didn't prevent or solve the problem. The government sent out stimulus checks, again without much success.

Obama won. I just wish the “P.R.esident” was intellectually honest enough to admit the aims of his proposals and not try to hide his agenda under the guise of “fixing the economy.”

[KC Educator]

whispering_to_kc

That was an excellent comment. I might add that another measurement of recession/depression is the unemployment rate. 5% unemployment is considered from an economic sense full employment. In 1942 the unemployment rate dropped below 5%. It remained that low for subsequent years. You were right on the mark.

[NoMoreMrNiceGuy]

Viet brings some very good points to the front. Today we have a society of entitlement, instant gratification. They have demand and many of us live well beyond our means. 90% of homeowners as an example continue to pay their mortgages as agreed.
The answer is bike paths, pedestrian walkways, ATV parks, more foodstamps, tax credit for individuals that do not contribute enough to the coffer as is and consumers continuing to spend above their means. Maybe if consumers would not have been equally as greedy as lender, realtors and the politicians, we would not have 90% of us paying for the minor 10%.

[viet-vet1970]

Pent-up consumer demand was a big factor that brought America out of the Great Depression. But other factors were just as important.

One important factor was the enormous savings Americans had built up by buying war bonds. Consumer demand would have been impotent without the money to buy goods.

And it was very important that America was the only industrialized nation not devastated by the war. There was worldwide demand for American-made products.

[whispering_to_kc]

The Great Depression (as measured by GDP) bottomed in 1932 and the recovery began. After a little recession hiccup in 1938, the start of America's rearmament in 1940 boosted the recovery and the USA had returned to full, normal GDP by 1942. The Great Depression was over by 1942.

You can look that stuff up, you know.

Kenneth was right. Steve is wrong.

[Engineer]

Steve, baby, there was plenty of "pent up" demand during the Depression itself. I experienced a good deal of it myself. But people had little ability to exercise the "pent up demand". Instead, at times, they went hungry.