Archival Evidence for Higgs on WW II and the Great Depression

Steven Horwitz

Our friend Bob Higgs has done amazing work on the history of the Great Depression.  I'm sure most of our readers are familiar with his paper on "Regime Uncertainty" that is a huge contribution to understanding the length of the Great Depression.  Sometimes less well-known, but equally important, is his paper on why World War II did not get us out of the Depression.  In that paper, Bob argues that the traditional macroeconomic aggregates don't tell us the real story because the variety of wartime controls (from conscription's effect on the unemployment rate to how wage and price controls distort measures of GDP) cause those aggregates to diverge even more than they might usually from the underlying economic reality.  Bob also tries to look at some different aggregate data to show that, for example, household consumption during the war was flat to slightly falling.  He argues that the wartime controls and rationing make it hard to believe that the war was a time of economic growth and recovery in any meaningful way.

What Bob doesn't do in that paper is to look in more depth at the lived lives of Americans during the war to see if it supports his argument.  One of my current students has decided to take that project on.  Mike McPhillips is a history major and an econ minor (though he's actually minoring in "Horwitz") who took my "Great Depression" seminar last fall and worked on this idea for his term paper and is now extending it as an indepedent study this semester.  He recently spent some time looking at microfilm of local newspapers during WW II and found an absolutely fascinating series of ads by the Canton Electric Light and Power Company that shows the deterioration of consumption and living standards between 1942 and 1943.  These ads ran in the very same spot in the local paper pretty much weekly during the war.  Below is a selection of these ads with brief commentary below each one from me that narrates the story I think they're telling.

 

This is from March 17, 1942.  Note the language of "still" and a "fairly good supply" and "while they're still available."  Already it's clear, four months into the war, that buying consumer appliances is a perhaps tenuous proposition.

Two months later, May 12, 1942, "now is the time to buy" because "production has stopped" and only the supply in stock is available.  Again, if recovery from the Depression means the war made the lived lives of Americans better off, it's hard to see how that idea gets any support here.  And we can already see how Bob's consumption measures might actually overstate the real situation for families.

An ad in July of that year reveals that electric ranges could not even be sold for a period of time and that they were then available for sale again. They were still no longer being produced but ones in stock could be sold.  Presumably during the "no sale" period, the existing stock was being refitted or turned to scrap metal for war purposes.  This is an interesting application of Austrian capital theory.

On November 3, 1942, the company has given up altogether on trying to sell consumer appliances and is warning its customers to take good care of the equipment they currently own because the repair or replacement of the motors in those heating devices is pretty much impossible.  An ad two months later simply encouraged people to keep all of their electrical applicances in good repair.

This is a point Bob makes in his original article:  the wartime controls forced people to try to extend the lives of their capital and consumer goods longer than they normally would because replacements were hard to find.  This presumably led to excess investment in maintenance and I would imagine there was a large and expensive black market in these parts.  All of this reduces the real well-being of households.  Again, how this period constitutes a meaningful recovery from the Depression is something of a mystery.

Ads in the months to follow then shifted to encouraging people to buy war bonds, as the company became part of the war propaganda effort.  The last ad below illustrates the point where the restrictions on consumption and their effects on well-being meet up with the war propaganda effort.

 

This November 16, 1943 ad brings a nice spin to the "Freedom Fries" of the post 9/11 period as well as our more recent debates about violent metaphors (food as a weapon? really?).  However, its relevance to the story here is that the electric appliance company has totally stopped even worrying about its major product and is instead encouraging people to cut back and scrimp on their food usage as part of the war effort.  It's hard to see the table of contents, but it indcates four things people should do:

1.  Produce as much of your own food as you can (the losses from giving up on comparative advantage and the division of labor are clear here).

2. Conserve as much food as you can. 

3. Share your food.

4. And Play Square with your food (perhaps a reference to following rationing laws and guidelines).

What is clear is that food items were relatively more scarce for consumers and that this was imposing significant costs on families.  In other work Mike has done, he has found plenty of other similar evidence of how the wartime controls and rationing negatively affected the well-being of American families as resources were diverted to the war.  If recovery from the Depression means an improvement in the economic well-being of the average American, the wartime economy does not fit that description.

As I pointed out in a recent Freeman piece, there are still plenty of folks today making the argument that World War II got us out of the Depression and that we should be using that as a model for our current doldrums.  Higgs' work gives us the case that WW II didn't help and probably hurt.  If Mike continues to find stuff like he's found, we'll have additional "on the ground" evidence for the ways in which WW II significantly worsened the economic situation of most Americans.  Calling war a recipe for recovery is itself a recipe for disaster.

I'm hopeful that what Mike eventually produces out of this will be something that he and I can co-author and get published somewhere.

 

Comments

[Daniel Kuehn]

On the "food as a weapon" - is this likely to be a question of saving grease for the war effort and that sort of thing?

If it is then "freedom fries" isn't the best comparison. Freedom fries is a vague jingoistic finger in the eye to... well, to France essentially. Democratic, developed, ally France.

The sorts of cutbacks that Americans went through in the forties may have had jingoistic elements, but I'd venture to say the target was considerably more legitimate.

[Robert Higgs]

Steve, I applaud you and Mike for compiling this evidence. I guarantee that you can continue to find such evidence for as long as you care to continue searching. I have seen countless such examples, spanning not only a host of consumer goods and services, but many forms of producer goods and services. For example, it was very difficult to obtain lumber during the war years for any purpose other than construction of war-related projects (e.g., war plants, shipyards, barracks, etc.). Oh, yes, somehow the contractors who built the concentration camps for some 110,000 people of Japanese ancestry managed to obtain lumber, though not enough, apparently, to build anything more than glorified shacks for the prisoners to inhabit in the designated desolate areas surrounded by barbed-wire-topped fences with armed-guard towers. One is tempted to conjecture that these people's consumer well-being declined just a tad. BTW, my June 2004 article in the J. Econ. Hist. presents additional relevent evidence along these lines (this piece also appears as chap. 4 in my book Depression, War, and Cold War).

[Richard]

What we really need is an Austrian book on the 1937 recession as this is constantly used by Keynesians as evidence of the need to maintain government spending.

[Steve Horwitz]

Actually, what we really need is a modern version of *America's Great Depression* that takes into account the scholarship and evidence on the GD that has been done since Rothbard wrote it. Such a book should be rooted in the relevant scholarship (and by not just Austrians) but accessible to the layperson. Think the Shlaes book but more comprehensive yet not as technical as I suspect Scott Sumner's book will be. And it needs to be more hefty than Bob Murphy's PIG version (which, btw, is really quite good).

Murray gave us the model. It's time to update it.

[Heshter Sez]

Thanks a lot for this. I frequently listen to the sports radio station AM 1400 from Ogdensburg and for several years now I've been trying to use the number and type of ads to guess what was going on in the northern NY state economy. About 5-10 years ago, it seemed like there was almost nothing on except advertisements for credit based purchases of houses, cars, etc. plus a few ads for credit counseling.

Then around 3-5 years ago the economy seemed to hit rock bottom and there was practically nothing on except government-sponsored PSAs, either fascist "click it or ticket" and selective-service scaremongering or welfare-promoting ads extolling the joys of food stamps and FEMA. Often there was dead air between show segments.

Since about 3 years ago I have the impression that there has been something of a turnaround in the North Country because now there are very few PSAs and there is a wide variety of ads for automobiles, furniture, restaurants, etc.

Perhaps an analysis of newspaper ads from the last decade would be a good illustration of bubble/crash and (putative) recovery of this very typical rural corner of the USA ...

[Richard Ebeling]

The shortages and declines in living standards should not come as too much of a surprise.

After all John Kenneth Galbraith was in charge of the Office of Price Administration (OPA), that meticulously regulated prices and rationed virtually every durable and non-durable consumer item, with ration coupons and certificates.

Since production was re-directed into war-related output, the greater scarcities were inevitable. But those scarcities could not be translated into higher prices due to those controls. So, instead, shortages were everywhere at the controlled prices, and the far more limited supplies had to be rationed by someone and by some standard, and that someone was "Uncle Sam" and its bureaucrats.

There were huge black markets in food items, women's stockings (there would be scenes in "homefront" movies made in Hollywood saying it was "unpatriotic" to buy silk stockings on the black market, silk that should go into military parachutes), automobile tires and gasoline (look carefully at the front windshield of automobiles in movies made during the war, and you'll see the gas ration sticker in the lower right hand corner -- you'd want an "A" sticker to be eligible for the largest monthly ration of gasoline).

You can find articles in, say, "Life" magazine during the war years showing the FBI and local law enforcement hunting down black marketeers in tires or meat, or . . .

During the period of price controls in the 1970s in the U.S., Erich Schiff wrote a very good monograph for the American Enterprise Institute on the experience of price controls and rationing (and its consequences) in America during the Second World War.

Richard Ebeling

[Jim Rose]

I am surprised that popular outlets such as movies and television are not a source as well.

For example, the British television classic Dad’s Army, which was about a home guard platoon in 1940 and 1941, routinely discussed rationing and pervasive shortages.

Dad’s Army was an ensemble sitcom made in 7 series from 1968 to 1977 and was one the greatest British television comedies of all time. The local black-marketeer was a leading member of the platoon.

One of the most common lines appearing in almost every episode of Dad’s army when someone complained about shortages and declining quality was “there is a war on, you know”

[Peter]

Good news! I hope the study will be available for the public when it's finished.

[Current]

If you haven't seen any "Dad's Army" I recommend it, it's very good. It was made in the mid 60s and has quite a lot of digs and petty chauvinism and a lot about the black market.

But, remember that those who say that WWII ended the Great Depression are talking about the US, not Britain. I think it's largely accepted that living standards fell in Britain.

[Brian A. Pitt]

Analytical history. I love it!

[The Cuttlefish of Cthulu]

"Oh, yes, somehow the contractors who built the concentration camps for some 110,000 people of Japanese ancestry managed to obtain lumber, though not enough, apparently, to build anything more than glorified shacks for the prisoners to inhabit in the designated desolate areas surrounded by barbed-wire-topped fences with armed-guard towers."

It pains me to see someone whose work I admire as much as Higgs' make statements like this.

http://www.amren.com/ar/2003/01/index.html

What does Prof Higgs think of the treatment of German civilians and POWs after the war?

[Steve Horwitz]

Let's see...

Well-known site for xenophobes and racists, or Bob Higgs?

Gee, that's a toughie. A real toughie.

Don't give them traffic by hitting the link folks.

FWIW: http://en.wikipedia.org/wiki/American_Renaissance_%28magazine%29

[Greg Rehmke]

I have been invited to give a talk at a FEE summer seminar (for high school age students) on the Great Depression, and am reading Benjamin Roth's "The Great Depression: A Diary" (recommended I think by Megan McArdle).

I look forward to drawing from Bob Higg's books and articles and recommending them to students.

[Pierre Desrochers]

Steve, if you have an interest in food rationing during WWI and WWII, may I suggest the USDA special collection of wartime posters on the topic http://www.good-potato.com/beans_are_bullets/ ? I've been using this material a lot in my classes and public lectures against locavorism, essentially arguing that locavores will bring us "wartime" prosperity...

[Robert M. Stanley]

There are other factors that need to be taken into consideration. For example, even at the height of the Dust Bowl, the remaining farmers were so over-productive, that when the Depression deflation struck, wheat was near worthless and corn was burned for fuel, while people were starving.

The initial response to this was the creation of the Federal Surplus Relief Corporation to destroy vast amounts of food, such as six million pigs, and redistribute some of the rest to the starving.

This was only finally addressed with decoupling the currency from specie and increasing market liquidity by printing money, causing currency inflation. But in effect, since then, American agribusiness has been semi-nationalized (with the fascist (literally) economic model), of a tightly controlled and heavily subsidized public-private partnership.

The saying of the time was "You could buy a pound of hamburger for a nickel, but nobody had any nickels." A currency shortage deflation.

Alternatively, in 1933, the creation of the Tennessee Valley Authority and other such electrification projects caused a massive overabundance of cheap electricity.

Thus electrical companies went to lengths to provide appliances of all types to consumers.

This overabundance was solved after the war by the astounding energy demands to produce enriched uranium and plutonium, consuming almost 50% of American energy production for many years.

Oil overproduction was likewise a major problem. In 1930, the largest oilfield to date was discovered in East Texas, and was mostly worked by "wildcatters", with no production controls. While this helped Dallas during the Depression, governor Sterling had to intervene because overproduction threatened to crash the price of oil.

Eventually the federal government took over and limited production--during war rationing.

So there was, or could have been, food, electricity, and fuel in abundance, even at the peak of the war years.

So the biggest shortages were in machines and parts, and labor, because so many of the men were gone.

[Current]

"This overabundance was solved after the war by the astounding energy demands to produce enriched uranium and plutonium, consuming almost 50% of American energy production for many years."

I find that very difficult to believe do you have a cite for that 50%?

[Aidan Walsh]

Although it is a different war and a different country, Edwin Cannan's letters, reviews and articles during and after the First World War may also be of interest. He noticed how people became very focused on the growth of nominal incomes, redistribution, steady and regular incomes and visible production of war materials. He struggled to convince people that the war was wasteful, that Britain was ultimately 'living on capital' and become poorer through the war. He sums it up in a review article quoting a London cleaning lady: 'The war has made many a happy home'. (An Economist's Protest. 1927. King & Son, London. page 178.)

[Robert M. Stanley]

It takes about 10 kilograms of nearly pure Pu-239 to make a bomb. Producing this requires 30 megawatt-years of reactor operation, with frequent fuel changes and reprocessing of the 'hot' fuel.

Hence 'weapons-grade' plutonium is made in special production reactors by burning natural uranium fuel to the extent of only about 100 MWd/t (effectively three months), instead of the 45,000 MWd/t typical of LWR power reactors.

[Robert M. Stanley]

It takes about 10 kilograms of nearly pure Pu-239 to make a bomb. Producing this requires 30 megawatt-years of reactor operation, with frequent fuel changes and reprocessing of the 'hot' fuel.

Hence 'weapons-grade' plutonium is made in special production reactors by burning natural uranium fuel to the extent of only about 100 MWd/t (effectively three months), instead of the 45,000 MWd/t typical of LWR power reactors.

Oak Ridge was soon unable to produce the amounts of plutonium needed, with energy from the TVA, so the new facility at Hanford was brought on line. From 1956-1965, its peak operational years, the amount of energy produced and consumed to make weapons grade plutonium was staggering.

[Current]

Robert Stanley,

Perhaps, but *how* do you know all this? What's your source?

[Hume]

Everyone knows that the Libyans supply plutonium. Common knowledge on the streets, ask the Doc.

[Peter Sidor]

Greetings, what happened to the promised study from Mike McPhillips? When can we expect it?