Crisis and Liberty: Lecture 7

WWII was the most terrible, most deadly war of all mankind. As early as 1919 WWII was seen as inevitable because of the destructive details of the Versailles Treaty. In 1939, when WWII began, less than ten percent of Americans wanted anything to do with another war.

Roosevelt’s objective was simply to retain power. He was no ideologue. The 1940 easy German invasion of France made the pro-war argument stronger. By the 1941 attack by the Japanese on Pearl Harbor, the US had greatly beefed up its military. The draft was begun in 1940. Local civilian boards did the dirty work. Draft evasion carried a fine of $10,000. Ten million men were drafted. Many voluntarily joined to avoid infantry duty.

Through War Powers Acts, the President acquired dictatorial-like powers. Price controls of ordinary goods and services were enacted with the usual consequences of scarcity and bad quality. Prices were not the result of market rationality. Ration booklets were issued to every man, woman, and child. Counterfeiting boomed. Key commodities – steel, copper and aluminum – were controlled. 300,000 airplanes were manufactured in five years.

Private investment almost disappeared because of the high risk of making contracts with government. Government invested about one hundred billion dollars, including bases and training grounds, weapons and ammunition. This war boom is a gigantic fiction. Government output should be subtracted from GDP.

The tax system that had been created for the government to fund the war turned out to be a wonderful way to fund a welfare state once the fighting was over. Marginal tax rates reached 72%.

WWII gave us the legacy of people thinking that federal governments accomplish amazing things. Confidence in government was never higher.

Bibliography (PDF): Mises.org/CLBib

Lecture 7 of 10 from Robert Higgs’ Crisis and Liberty: The Expansion of Government Power in American History.