I am sort of a newb when it comes to Austrian theory, and am trying to understand this Keynesian stuff.

I understand that government has to take from one part of the overall economy when they borrow money to "spread the wealth". What exactly did we do in WW2? The video says that's when we really recovered. But we borrowed money then, right?

Regardless, we did take it from other parts of the economy. So how did we recover? I'm just trying to understand here.

I like the blog BTW.
 

B,

I haven't actually listened to this, but Bob Higgs is truly the best guy on the planet to answer your question. I'm assuming they get to it during the interview.
 

B - I believe Higgs slipped there. The economy didn't return to pre-depression levels til the 1950s.

WWII spurred production, because Europe was buying goods. This got the credit flowing, and the production infrastructure was co-opted for other things.
 

And by "Higgs" I mean Dan Mitchell.
 

The Blackadder Says:

Mitchell is correct when he says that overall output had returned to 1929 levels by 1940, though as Higgs points out, this hardly means there was a full recovery, as increases in population and productivity should have left output far above 1929 levels.

What you're probably thinking of is the stock market, which didn't reach its pre-crash high again until the mid-1950s. But this is somewhat misleading, as the stock market was pretty clearly over valued prior to the crash. Based on eyeballing this chart, it looks like the stock market had returned to 1928 levels by 1937, only to fall again, returning to the 1928 level in 1946 or thereabouts.
 

Actually, I think one of the reasons WWII ended the Depression is quite simple: two of the economically most productive regions of the world were completely demolished, creating new demand for stuff that otherwise would not have been needed. There was a huge demand for investment, so the economy could absorb all that additional money. Also, the hyperinflations and currency reforms before and after the war had removed a lot of money from the economy, increasing the value of each additional unit. The economy ‘recovered’ inevitably.

I would like to know how things would look if we were able to calculate the value of the damage done in WWII – in terms of destroyed property, destroyed human capital, etc – and inflation adjust it, and then subtract it from the post-war economy and establish the point at which current wealth in real terms was greater than the wealth that was destroyed, also in real terms.

We also have to take into account that more than a billion people did not compete with the relatively capitalist world, and hence consumed far fewer resources that were then available to the rest (I’m not sure about my train of thought here, I may be missing something).

So, what we would need to recover the American economy is some massive property destruction in Europe. Then there would be renewed demand for our goods and products. Of course, a massive destruction of property in North America and Europe would be good for the Chinese.

Last economy left with productive capacity wins – if not too many people were killed during the destruction of property elsewhere, and if the destruction does not take too long.

Am I missing something?
 

Regarding stock-market recovery: those are nominal values. Take inflation into consideration, and it took much longer.