Market Correction

22 October 2008

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

In his otherwise superb letter, Rolf Goehler repeats the dubious, if common, claim that World War II got America's economy "going again" (Letters, October 22).

The official unemployment rate did fall (from 14.6 percent in 1940 to 1.2 percent in 1944), but it did so overwhelmingly because of military mobilization rather than because of improvement in the economy's performance. As economist Robert Higgs wrote about the war years, "Official unemployment was virtually nonexistent, but four-tenths of the total labor force was not being used to produce consumer goods or capital capable of yielding consumer goods in the future." So it's not surprising that, according to Higgs's estimates, personal consumption per capita in 1945 was only a paltry 2.5 percent higher than it was in the still-deeply-depressed year of 1940.*

Regardless of WWII's merits on other fronts, almost surely it was no great economic boon.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

* Robert Higgs, Depression, War, and Cold War (Oxford University Press, 2006). The quotation is found on pages 63-64; the data on consumption are found on page 71.

21 October 2008

Editor, The New York Post

Dear Editor:

Richard Epstein explains how the "Employee Free Choice Act," supported by Sen. Obama, will impose especially large burdens on small businesses - a fact at odds with Sen. Obama's pledge to promote such enterprises ("A Labor Dilemma for President Bam," Oct. 21). By raising employers' costs of hiring American workers, this Act will also increase off-shoring, another phenomenon that Sen. Obama loudly deplores.

The general lesson here is that politicians are akin to faith-healers. Both pose as wizards reciting crackpot recipes with charming words. The faith-healer dupes his customers into believing that he will suspend medical reality; the politician dupes voters into believing that he will suspend economic reality. Both are frauds.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

20 October 2008

Editor, The Washington Times

Dear Editor:

Your equating George W. Bush with FDR is spot-on ("Franklin Delano Bush," October 20). Both presidents recklessly increased government's role in the economy - a move that proved (in FDR's case) and will prove (in Bush's case) to do nothing but saturate the economy with such uncertainty as to frighten away entrepreneurs and investors.

But popular history will almost surely remember Bush, not as a second FDR, but as a second Herbert Hoover. The myth will be hatched that Bush was a staunch free-marketeer who was succeeded in the Oval Office by a charismatic saint whose hyperactive interventions saved the economy (even though precious little evidence of economic salvation will appear in the data). History will forget Bush's interventions just as it has forgotten Hoover's - as it has forgotten that Hoover signed the largest tariff hike in U.S. history; as it has forgotten that Hoover tried to create jobs by deporting hundreds of thousands of Mexicans; as it has forgotten that Hoover signed the Emergency Relief and Construction Act, the Federal Home Loan Bank Act, and created the Reconstruction Finance Corporation; as it has forgotten the Fed's flawed response to economic anxiety during Hoover's term.

History will repeat itself, blaming capitalism for a problem caused and intensified by government interventions.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University