It gets repeated over and over again ad nauseam, even by professional economists, despite being absurd on its face.
The famous economist Paul Krugman, for example, repeats this fallacy often. Indeed, he has built a career pretending something magical happens economically when government consumes what the participants of an economy are producing — so much so, that he repeatedly states that even enormous death and destruction brings benefits. Like this —
https://en.wikipedia.org/wiki/World_War_II_casualties
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| American corpses sprawled on the beach of Betio Island, Tarawa Atoll, 1943. Over 100,000 Americans died in the Pacific War. |
.jpg "Killing of Jews at Ivanhorod, Ukraine, 1942, by German army mobile killing units.") |
| German soldiers killing Jews at Ivanhorod, Ukraine, 1942. A woman shields a child with her body as soldiers take aim. |
Consider the images above — of dead U.S. Marines on a beach in the Tarawa Atoll, where 990 Marines died after 76 hours of intense fighting to secure the island, or of German soldiers executing Jews — as you read this sickening blog post by the famous Nobel Laureate, Paul Krugman, regarding the 'lovely war' —
http://krugman.blogs.nytimes.com/2011/08/15/oh-what-a-lovely-war/
http://archive.is/wOgMl
Oh! What A Lovely War!
World War II is the great natural experiment in the effects of large increases in government spending, and as such has always served as an important positive example for those of us who favor an activist approach to a depressed economy. Christy Romer is very much on the same wavelength.
It’s especially relevant because in the 1930s, as today, many wise heads insisted that unemployment was structural, that many of the unemployed could not be gainfully employed no matter how much demand increased. Then demand actually did increase, and as Christy says,
Oddly, however, people on the right have taken to claiming that World War II actually weakens the case for stimulus. One line, due to Robert Barro, is that it shows fiscal expansion failing because private spending actually fell. Duh. As Christy says, there was consumer rationing — spending was forced to fall. Also, something she doesn’t note, there were severe restrictions on private construction, which meant that investment not related to the war effort was also forced to fall.But World War II has something to tell us here, too. Because nearly 10 million men of prime working age were drafted into the military, there was a huge skills gap between the jobs that needed to be done on the home front and the remaining work force. Yet businesses and workers found a way to get the job done. Factories simplified production methods and housewives learned to rivet.
Here the lesson is that demand is crucial — and that jobs don’t go unfilled for long. If jobs were widely available today, unemployed workers would quickly find a way to acquire needed skills or move to where the jobs were located.
...
Nothing shakes the faith of a true believer.
Why is it so appealing to believe that there is some upside to building things at great expense, that can only be used to kill and destroy, and then have armies of millions of people go and kill and be killed with those things?
Notice how stupidly some professional economists attempt to justify this absolutely insane thinking.
How many people actually believe that a reduction in unemployment that is caused by conscripting millions of men into the military, and then killing many of them, builds the case for government 'stimulus' during peacetime?
Of course, if you eliminate a large portion of the workforce, and then the government takes on a massive debt to pay anyone who is willing to work to build war equipment, unemployment will go down and the gross domestic product (GDP) will go up, while the quantity of consumer goods and the quality of life go down.
And how many people actually believe that the consumer rationing that was necessary, because of the shortages caused by the massive consumption of resources for the war effort, is not obvious proof that the consumption of resources for the war (the government 'stimulus'), in and of itself, made the economy worse, even for those not involved in the fighting?
Krugman contemptuously dismisses the painfully obvious point that World War II weakens the case for stimulus, by claiming that private spending was forced to fall by rationing, while completely missing the obvious cause of the shortages that made rationing necessary — the destructive government 'stimulus' required by the war.
Of course, rationing reduced consumer spending, but if government spending during the war 'stimulated' the economy in a helpful way, as so many professional economists pretend, rationing in the face of shortages would not have been necessary.
The shortages were necessarily caused by the 'stimulus' that consumed resources for the war. The war 'stimulus' began in late 1940, and rationing wasn't necessary until 1942 — well after the 'stimulus' for the war had begun. Certainly, rationing was not needed at any time during the depression prior to the war 'stimulus'.
https://archive.is/eA7Qg
https://archive.is/6ltUn
Krugman is just reversing cause and effect here by trying to pretend that rationing would have been necessary had there been no reduction in productivity. Again, this is absurd on its face — without a fall in the production of necessary goods, there is no reason to ration.
And notice these other paragraphs from the Christina Romer article Krugman quotes above, where she also attempts to treat rationing as the fundamental cause of reduced consumption, rather than a necessary result of the reduced productivity caused by the war 'stimulus' —
http://www.nytimes.com/2011/08/14/business/economy/from-world-war-ii-economic-lessons-for-today.html
http://archive.is/pD7u7
The Hope That Flows From History
By CHRISTINA D. ROMER
Published: August 13, 2011
...Military spending didn’t begin to rise substantially until late 1940. Once it did, fiscal policy had an expansionary impact. Some economists argue that the effect wasn’t very large, as real government purchases (in 2005 dollars) rose by $1.4 billion from 1940 to 1944, while real G.D.P. rose only $0.9 billion.
But this calculation misses two crucial facts: Taxes increased sharply, and the government took many actions to decrease private consumption, like instituting rationing and admonishing people to save. That output soared despite these factors suggests that increases in government spending had a powerful stimulative effect. Consistent with that, private nonfarm employment — which excludes active military personnel — rose by almost eight million from 1940 to 1944.
...
The contradiction should be obvious to anyone, so why is it not obvious to a couple of professional economists, and one who is a Nobel Laureate?
If, in Romer's words, 'output soared' as a result of government spending for WW II, why was rationing necessary? This directly contradicts Romer's following statement that 'government spending had a powerful stimulative effect.' The effect was obviously powerful, but it certainly wasn't 'stimulative' — unless the goal of 'stimulus' is to reduce the quality of life.
The government 'stimulus' to support the war effort did exactly what any reasonable, honest person without an agenda driven bias would expect — it made life worse overall, by directing massive investment and productivity to a destructive end.
That employment and gross domestic product (GDP) went up during the war only shows that more people were being paid to do something. Arguing that this proves government spending is helpful economically is just a crude begging the question fallacy — that is, the critical question is: 'what was accomplished by the spending that increased GDP and employment, and did living standards go up — or were the vast majority made worse off?'
To make this painfully obvious point even more obvious, notice that it costs money to run a concentration camp and execute prisoners, and the cost to taxpayers to purchase this 'service' will be counted in the measure of GDP, since regardless of how destructive an expense is, and how many are hurt, it is still a purchase of goods and services by government.
To those that would respond: 'well of course, the war buildup had to reduce the production of consumer goods and cause shortages — that doesn't mean a government stimulus isn't effective.'
That response is nonsense — it directly contradicts the Keynesian argument for such spending.
Keynesian economists are consistently unambiguous in their claims that any government spending is beneficial, however pointless, so long as it creates demand. That rationing was necessary during one of the largest government spending programs the world has ever seen — the war buildup that began in 1940 — is devastating to the Keynesian case. It proves that government spending has no special power to improve the quality of people's lives — when that spending is directed toward waste and destruction, the quality of life goes down, even while GDP is growing.
Those who doubt that Keynesian economists claim that any spending is beneficial, need to read this absurd quote from Keynes, in his 'General Theory of Employment, Interest, and Money' (see Chapter 10, part VI) —
https://archive.org/details/TheGeneralTheoryOfEmploymentInterestAndMoney_201707/page/n151/mode/2up
If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
And here is Paul Krugman, in usual form, praising this lunacy —
http://krugman.blogs.nytimes.com/2009/04/14/time-for-bottles-in-coal-mines/
http://archive.is/MhWF1
Or, consider this equally ridiculous quote from Krugman, as he parroted Keynes again in supporting government stimulus spending in August, 2011, with his explicit statement that the spending be on something that would help no one —
http://krugman.blogs.nytimes.com/2013/05/09/the-moral-equivalent-of-space-aliens/
http://archive.is/6peXy
http://www.youtube.com/watch?v=nhMAV9VLvHA
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better [off].
Krugman acknowledges that private productivity went down during WW II, but he has to try to reverse cause and effect by pretending that the rationing and spending restrictions in place during the war were not caused by the shortages that resulted from the war 'stimulus' — he has to do this, in order to use the war as the basis for an argument that a government 'stimulus' is always a net economic gain, and that people should be eager to give responsibility for their lives to government.
This is what sells to the public, and this is what gives corrupt economists power — as long as people believe in these nonsensical fallacies, they will keep looking to charlatans like Krugman for answers.
Such is the conscience of the self-proclaimed and so-called liberal, Paul Krugman.
But Krugman is mistaken if he thinks he is leading the public on these issues — he is pandering to vice, not enlightening the ignorant, so it is public vice that is in control of this message, not Krugman.
In her novel 'The Fountainhead', Ayn Rand gives a beautiful description of someone coming to the realization that they have spent their life deluding themselves that they could control the popular sentiments of a largely ignorant public —
“Stand here, he thought, and count the lighted windows of a city. You cannot do it. But behind each yellow rectangle that climbs, one over another, to the sky - under each bulb - down to there, see that spark over the river which is not a star? - there are people whom you will never see and who are your masters. At the supper tables, in the drawing rooms, in their beds and in their cellars, in their studies and in their bathrooms. Speeding in the subways under your feet. Crawling up in elevators through vertical cracks around you. Jolting past you in every bus. Your masters, Gail Wynand. There is a net - longer than the cables that coil through the walls of this city, larger than the mesh of pipes that carry water, gas and refuse - there is another hidden net around you; it is strapped to you, and the wires lead to every hand in the city. They jerked the wires and you moved. You were a ruler of men. You held a leash. A leash is only a rope with a noose at both ends.”
Could anything shake the faith of a true believer like Paul Krugman?
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