How did the war pull the world out of the Great Depression?

Hi everybody!

I am writing an economics paper and I was allowed to chose any topic I wanted that relates to economy. I decided to write about how the world got out of the Great Depression. After doing some research, it was clear to me that global war is great for profit. World War II opened opportunities for jobs, since millions of civilians became soldiers, it was a great excuse for governments to raise taxes and ask for war bonds, and most importantly it reversed the serious deflation that was going on in most countries. One of the points that I am trying to make is that the war was a great excuse for countries to start trading with each other again. I however do not really have any evidence to back this up so I searched WW2 Forums on Google with hopes that somebody can help me out.

My question exactly: What nations provided what products? Who was doing the spending? Who was experiencing deflation and who was experiencing inflation?

I hope you can help,
Anton (AKA Coolguy )

 

Hmmm...theres plenty of literature on this mate.
The greatest impact the war had in regards to the depression i think was employment. As today, Government revenue stems from taxes and economic stimulation, which in turn creates more employment, generating greater wealth allowing for greater growth and therefore employment. The war basically gave people something to do, created jobs that werent there in peace time. As for the "trading of goods" - money was generally lost in these exchanges, done for the war effort than for profit (although there are plenty of distasteful examples of profiteering). People wouldnt trade for that level/margin of profit these days put it that way. Large companies generally did well out of the war, employed millions and set there countries up industrialy afterwards...As i said, plenty written on the subject.

 

Hey CAC, thanks a lot for the reply. If you have sources to provide that would be great. =) This goes for anyone who is replying.

Also, I understand that inflation is caused when a nation has too many physical bills, therefore reducing the value of each bill. When international trade occurs, a nation gets rid of all of these excess bills therefore raising the value of the dollar (or respective currency). So, my question really is, who did the buying and who did the spending?

 

This link is going to take much more time to read and double check than you might have to spend, however it is very comprehensive as to causes and relief from the Great Depression. Inflation, as far as I can figure out is caused when too many "currency or even hard coin" units are chasing too few products. Inflation happens outside of paper currency systems as well as inside of them.

Both inflation and deflation can occur when the products for sale and the "money" available to the society are out of "balance". At any rate...

Goto:

Great Depression, Collapse of governments

 

... is true, war stifles capitalism, and stifles trade, or at least its global aspects. Much of the war's foundation resulted from German and Japanese attempts at "Autarky" - economic self-sufficiency in raw materials vs. trade.

The economics of WW2 was dictated by what had gone on the previous decade – World Economic Depression. A case could be made for arguing that much of the international crisis of the 1930s was caused by the search for more secure and sizable sources of raw materials following the collapse of an open world economy in the 1929 slump. International trade had been severely stifled by the Depression.

The high dependency on overseas supply led some governments well before the war to pursue strategies of “Autarky”, or self-sufficiency, by means of which domestic production would be expanded either through exploiting domestic natural resources more fully, or by finding a synthetic substitute. From the mid-1930’sHitler wanted to build up a blockade-free “Autarky” economy through a program of import-substitution and foreign expansion; for example the synthetic fuel program was a genuine success.

In 1938 Germany was still almost completely deficient in 20 out of 26 strategic materials. Germany, lacking a sufficient Navy for commerce/trade protection and susceptible to blockade, was forced to look to the Continent – Hitler didn’t understand seapower anyway. Britain, not only had the naval power to keep open supply lines to its empire and the USA, but the British Empire, as a whole had adequate stocks of 19 out of the 26 key materials and was a major supplier of at least 9 for the rest of the world – although it didn’t have near the largest industrial base, it was the most self sufficient “Autarky” economy in the world. Plus Britain could blockade and threaten Germany’s non-Continental trade.

With the outbreak of hostilities in 1939 Germany's worst expectations were fulfilled: the Allied blockade denied it access to overseas markets almost entirely. Economic warfare was initiated across the world to deny resources to Germany, and from 1940 to Italy as well. Germany was forced to operate within“Interior Lines”, Britain and the Royal Navy were not. The U.S.S.R. produced 6.1% of the world’s bauxite, 17.3% of the chrome ore, 19.5% of the iron ore,41.3% of the manganese ore, 10.9% of the crude petroleum, 10.6% of the coal,and 15.8% of the phosphates –all key strategic raw materials. “Autarky”economics of the day demanded actual control of those materials – foreign trade could not be relied upon, Germany could not use sealanes. In economic terms“Lebensraum” in Central and Eastern Europe was designed to compensate for Germany's limited supply of raw materials by engrossing through conquest the sources and other commodities in the east, racial issues were secondary.

Allied trade was stifled as well, but for very different reasons.

 

Just to prevent oversimplification for a subject volumes of books have been written about.....first of all it is not as simple as who did the buying or who did the spending. The stock market fell in the 1930's(a subject you can look up)....a few "NEW DEAL" (look this term up) programs were designed by government to help get out of the depression but that did not work......however it prevented starvation and undue hardship on many so there was a big benefit to the country with these programs. Much of our infrastructure was improved.(terms you can look up) As a second thought to consider....it was also a world wide depression so the markets in other capitalist countries were suffering from this depression. Ten years or more of economic difficulty was experienced by most of the people in the U.S. and elsewhere. War started first in Europe but we began to help them with shipping before we entered the war----some ship building began and people had a little work and some money to take home and invest.........as we got into the war more things were needed and many people began to work and a lot of money changed hands as there were jobs. This changing hands the money did make people a little more comfortable but our people were mostly concerned with providing goods and troops for the war and just worked very hard at their jobs for that purpose. You could say the government spent money but at the same time people began to have money too so it began to compliment both parties and the money changed hands more often. This changing of hands with the money is very necessary to keep our economy working. Some lessons of economic recovery can be learned from your study....however there are many things not the same today so we may not always experience recovery of our economy by making war goods and production. For example, the government has yet to really pay for the last two wars. We have spent for them but we have not paid for them. We print new and more money than we did during those years as well and that changes things also. Hope this helps as there is no easy way to jump into an in depth subject such as this. It is probably the Federal government that spent most of the money for the war effort in this recovery.....so you could say the spenders and the buyers were mostly the Federal government-----however the by product of this was the workers and corporations that made money or were paid for their work at these production companies. This is probably an oversimplified picture of the recovery from the Great Depression....you must study more as your project will only begin your study of this subject. I say good luck and hope you can get excited about it.....it is very interesting.