In his most recent article, Austrian economist Peter Schiff analyzes the old Keynesian belief that the so-called stimulus of war time spending can rescue economies and pull us out of depressions.
There is overwhelming agreement among economists that the Second World War was responsible for decisively ending the Great Depression. When asked why the wars in Iraq and Afghanistan are failing to make the same impact today, they often claim that the current conflicts are simply too small to be economically significant.There is, of course, much irony here. No one argues that World War II, with its genocide, tens of millions of combatant casualties, and wholesale destruction of cities and regions, was good for humanity. But the improved American economy of the late 1940s seems to illustrate the benefits of large-scale government stimulus. This conundrum may be causing some to wonder how we could capture the good without the bad.If one believes that government spending can create economic growth, then the answer should be simple: let’s have a huge pretend war that rivals the Second World War in size. However, this time, let’s not kill anyone.