Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-25T18:17:43.810Z Has data issue: false hasContentIssue false
  • English
  • Français

Wartime Socialization of Investment: A Reassessment of U.S. Capital Formation in the 1940s

Published online by Cambridge University Press:  10 June 2004

ROBERT HIGGS
ROBERT HIGGS
Affiliation:
The Senior Fellow in Political Economy at The Independent Institute, 100 Swan Way, Oakland, CA 94621-1428. E-mail: rhiggs@independent.org
Get access Rights & Permissions [Opens in a new window]

Abstract

During World War II, the U.S. government displaced private investors. According to NIPA data for the period 1942–1945, net private investment was negative $6.2 billion, and net government investment was positive $99.4 billion. Although economists have credited this government investment with various contributions to wartime and postwar economic growth, the bulk of it had little or no value beyond its immediate contribution to winning the war. This episode dramatically exposes a fundamental but false assumption that underlies official data on capital formation: that all expenditures for durable producer goods or munitions form genuine capital. There are circumstances which make the consumption of capital unavoidable. A costly war cannot be financed without such a damaging measure …. There may arise situations in which it may be unavoidable to burn down the house to keep from freezing, but those who do that should realize what it costs and what they will have to do without later on.

Ludwig von MisesMises, Interventionism, p. 52.

Type
ARTICLES
Information
The Journal of Economic History , Volume 64 , Issue 2 , June 2004 , pp. 500 - 520
Copyright
© 2004 The Economic History Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Catton Bruce. 1948 The War Lords of Washington. New York: Harcourt, Brace and Company
Cochran John P. “Sound Money and the Business Cycle.” Address delivered to the Austrian Scholars Conference, Auburn, AL, 15 March 2003. Available as Mises.org Daily Article for 24 March 2003, at http://mises.org/articles.asp.
Cohen Stan. 1991 V for Victory: America's Home Front during World War II. Missoula, MT: Pictorial Histories Publishing Company
Connery Robert H. 1951 The Navy and the Industrial Mobilization in World War II. Princeton, NJ: Princeton University Press
Director of War Mobilization and Reconversion. 1945 Problems of Mobilization and Reconversion (First Report to the President, the Senate and the House of Representatives, 1 January 1945). Washington, DC: Office of War Mobilization and Reconversion
Dirks Frederick C. 1946 “Postwar Capital Formation and Its Financing in Manufacturing and Mining Industries.” In Private Capital Requirements (Postwar Economic Studies, No. 5). Washington, DC: Board of Governors of the Federal Reserve System
Edelstein Michael. 2000 “War and the American Economy in the Twentieth Century.” In The Cambridge Economic History of the United States, edited by Stanley L. Engerman and Robert E. Gallman, vol. 3, 329– 405. New York: Cambridge University Press
Edelstein Michael. “The Size of the U.S. Armed Forces during World War II: Feasibility and War Planning.” Research in Economic History 20 (2001): 47– 96.
Eiler Keith E. 1997 Mobilizing America: Robert P. Patterson and the War Effort 1940–1945. Ithaca, NY: Cornell University Press
Field Alexander J. 2003 “The Most Technologically Progressive Decade of the Century.” American Economic Review 93 (September): 1399–413.Google Scholar
Foss Murray F. 1963 “The Utilization of Capital Equipment: Postwar Compared With Prewar.” Survey of Current Business 43 (June): 8– 16.Google Scholar
Gordon Robert J. 1969 “$45 Billion of U.S. Private Investment Has Been Mislaid.” American Economic Review 59 (June): 221–38.Google Scholar
Gordon Robert J. 2000 “Interpreting the ‘One Big Wave’ in U.S. Long-term Productivity Growth.” In Productivity, Technology, and Economic Growth, edited by Bart van Ark, Simon Kuipers, and Gerard Kuper, 19– 65. Boston: Kluwer Publishers
Hayek F. A. 1935 “The Present State of the Debate.” In Collectivist Economic Planning: Critical Studies of the Possibilities of Socialism, edited by Friedrich A. Hayek, 210–43. London: Routledge & Kegan Paul
Hennings K. H. 1987 “Capital as a Factor of Production.” In The New Palgrave: A Dictionary of Economics, edited by John Eatwell, Murray Milgate, and Peter Newman, 327–33. New York: Stockton Press
Higgs Robert. 1987 Crisis and Leviathan: Critical Episodes in the Growth of American Government. New York: Oxford University Press
Higgs Robert. 1992 “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s.” This JOURNAL 52, no. 1 41– 60.Google Scholar
Higgs Robert. 1993 “Private Profit, Public Risk: Institutional Antecedents of the Modern Military Procurement System in the Rearmament Program of 1940–1941.” In The Sinews of War: Essays on the Economic History of World War II, edited by Geofrey T. Mills and Hugh Rockoff, 166–98. Ames: Iowa State University Press
Higgs Robert. 1997 “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War.” Independent Review 1 (Spring): 561–90.Google Scholar
Higgs Robert. 1999 “From Central Planning to the Market: The American Transition, 1945–1947.” This JOURNAL 59, no. 3 600–23.Google Scholar
Hooks Gregory. 1991 Forging the Military-Industrial Complex: World War II's Battle of the Potomac. Urbana: University of Illinois Press
Hutt W. H. 1979 The Keynesian Episode: A Reassessment. Indianapolis: Liberty Fund
Janeway Eliot. 1951 The Struggle for Survival: A Chronicle of Economic Mobilization in World War II. New Haven, CT: Yale University Press
Jones Jesse H., with Edward Angly. 1951 Fifty Billion Dollars: My Thirteen Years with the RFC (1932–1945). New York: Macmillan
Keynes John Maynard. 1936 The General Theory of Employment, Interest and Money. New York: Harcourt, Brace & World
Kuznets Simon. 1945 National Product in Wartime. New York: National Bureau of Economic Research
Kuznets Simon. 1961 Capital in the American Economy: Its Formation and Financing. Princeton, NJ: Princeton University Press
Lane Frederic C. 1951 Ships for Victory: A History of Shipbuilding under the U.S. Maritime Commission in World War II. Baltimore: Johns Hopkins Press
Leebaert Derek. 2002 The Fifty-Year Wound: The True Price of America's Cold War Victory. Boston: Little, Brown
McCartney Laton. 1988 Friends in High Places: The Bechtel Story: The Most Secret Corporation and How It Engineered the World. New York: Simon and Schuster
McLaughlin Glenn E. 1943 “Wartime Expansion in Industrial Capacities.” American Economic Review 33; supplement (March): 108–18.Google Scholar
Mises Ludwig von. 1935 “Economic Calculation in the Socialist Commonwealth,” translated by S. Adler from an original German publication of 1920. In Collectivist Economic Planning: Critical Studies of the Possibilities of Socialism, edited by Friedrich A. Hayek, 87– 130. London: Routledge & Kegan Paul
Mises Ludwig von. 1998 Interventionism: An Economic Analysis. Irvington-on-Hudson, NY: Foundation for Economic Education original ed. 1940.
Mises Ludwig von. 1947 Planned Chaos. Irvington-on-Hudson, NY: Foundation for Economic Education
Novick David, Melvin Anshen, and W. C. Truppner. 1949 Wartime Production Controls. New York: Columbia University Press
Ohanian Lee E. 1997 “The Macroeconomic Effects of War Finance in the United States: World War II and the Korean War.” American Economic Review 87 (March): 23– 40.Google Scholar
Polenberg Richard. 1972 War and Society: The United States, 1941–1945. New York: J. B. Lippincott
Rockoff Hugh. 1984 Drastic Measures: A History of Wage and Price Controls in the United States. New York: Cambridge University Press
Rockoff Hugh. “The Paradox of Planning in World War II.” Cambridge, MA: NBER Historical Working Paper No. 83, May 1996.
Smaller War Plants Corporation. 1946 Economic Concentration and World War II. Washington, DC: GPO
Smith R. Elberton. 1959 The Army and Economic Mobilization. Washington, DC: GPO
Twight Charlotte. 1990 “Department of Defense Attempts to Close Military Bases: The Political Economy of Congressional Resistance.” In Arms, Politics, and the Economy: Historical and Contemporary Perspectives, edited by Robert Higgs, 236–80. New York: Holmes & Meier
U.S. Bureau of the Budget. 1946 The United States at War: Development and Administration of the War Program by the Federal Government. Washington, DC: U.S. GPO
U.S. Bureau of the Census. 1975 Historical Statistics of the United States, Colonial Times to 1970. Washington, DC: GPO
U.S. Council of Economic Advisers. 1970 Annual Report of the Council of Economic Advisers. Washington, DC: GPO
U.S. Department of Commerce, Bureau of Economic Analysis. National Income and Product Accounts Tables. Available at http://www.bea.doc.gov/bea/dn/nipaweb/TableViewFixed.asp.
U.S. Department of Commerce, Office of Business Economics. 1954 National Income, 1954 Edition. Washington, DC: GPO
U.S. War Production Board. 1945 American Industry in War and Transition, 1940–1950. Part 2. The Effect of the War on the Industrial Economy. Document No. 27; 20 July. Washington, DC: U.S. War Production Board
Wasson Robert C., John C. Musgrave, and Claudia Harkins. 1970 “Alternative Estimates of Fixed Business Capital in the United States, 1925–1968.” Survey of Current Business 50 (April): 18– 36.Google Scholar