Government Spending and World War II
Today’s government spending mirrors our government spend during World War II...
Economic spend seems to be a topic that is en vogue. As we come out of the pandemic having increased government spend, and with President Biden’s stimulus and infrastructure plans set to further increase our government’s spend to levels not seen since World War II, it seemed an appropriate time to take a look back at the United States output during the last world war.
Looking back on World War II, it was not the lethal effectiveness that won the war for the Allies. In fact, if you look at the Eastern Front, for each German soldier lost, three soldiers from the Red Army were killed. Not only is this a testament to the effectiveness and experience of a German soldier, it further demonstrates the impact the Allies ability to master military production had on the outcome of the war. Victor Davis Hanson puts it quite simply, “World War II was won by the greater natural wealth, production, and capital of the Allies1.”
When you look specifically at what the United States was able to do in terms of production in World War II, the numbers are astounding. So astounding in fact, that it demonstrates a significant lack of understanding of US potential from Germany and Japan. A miscalculation that would ultimately cost them the war.
The United States demonstrated unprecedented growth and expansion during World War II. Though military expense in percentages of GDP went from a mere 1.4 percent to 45 percent between 1939 and 1944, the eventual GDP output would reach nearly $2.6 trillion (in 2016 dollars). To put that in perspective, during that same time period, the British, Germans, Italians, Japanese, and Soviets produced roughly $3 trillion. Government spending in the United States rose almost 400%.
Not surprisingly, the unemployment numbers in the United States improved dramatically during the war. In 1940, the unemployment rate was estimated to be near 15 percent and by 1945, it had fallen to a mere 1.9 percent2. The working force famously included nearly eight million women.
Whether it was the lifeblood of war, fuel - of which the United States produced 90 percent of Allied aviation fuel, equipment like trucks - of which the US produced seven times more than the Third Reich, or ammunition - of which an astounding forty billion rounds were produced, the United States’ private enterprise, along with robust government support harnessed their assembly-line principles and mass-produced their way to victory. It served as a lesson - production beats killing. The Third Reich may have been far more effective at killing more people, but the Allies, and most notably the United States were far better at producing the material necessary to secure victory.
Recommended Reads:
The Second World Wars by Victor Davis Hanson
The German War: A Nation under Arms, 1939-1945 by Nicholas Stargardt
Hanson, Victor Davis. The Second World Wars. Reprint, Basic Books, 2020.
”The American Economy during World War II.” EH.Net, 10 Feb. 2008, eh.net/encyclopedia/the-American/economy-during-world-war-II.