20th
The folks at the Huffingtonpost.com have made much of this exchange between George Will and Paul Krugman on “This Week” last Sunday. From their perspective, Krugman, the newly-minted Nobel Laureate gave Will a very public and embarrassing lesson in Great Depression economics. But Succinctly, Krugman is almost entirely wrong.
Will’s account of the great depression is consistent with the work of scholars like Robert Higgs (Regim Uncertinity), Richard K. Vedder, Lowell Gallaway, and Amity Shlaes. As Vedder and Gallaway put it, “the great depression was very significantly prolonged in both its duration and its magnitude by the impact of new deal programs”. FDR’s schizophrenic economic policy (“bold persistent expirmentation”) sought to artificially raise commodity prices and create jobs by systematically destroyed foodstuffs while thousands starved.
While modern scholarship is doing a great deal to overthrow Great Depression mythology, the persistence of one particular fallacy is extremely disappointing. Will and Krugman both err in their assertion that World War II ended the Great Depression, and Krugman even refers to the conflict as “an enormous public works program”. The fallacious belief that war and natural disaster can actually improve overall economic circumstances has been with us for generations. And while Frédéric Bastiat and Henry Hazlet have both ably refuted it “broken window fallacy”, it persists, zombie like.
There is a very fundamental difference between the productive economic activity that creates wealth – and the sort of activity that destroys human life, decimates essential infrastructure, and robs individuals of their wealth and productive capacity. Hungry people don’t generally eat ammunition or use it for shelter, and it’s certainly challenging to clothe children with the remnants of a home destroyed by a hurricane or flood. Energy invested in waging war, building bombs, or cleaning up after a flood is not wealth creation.
