What's wrong with our economy?

Interbane · Fri Nov 05, 2010 3:38 pm

I cannot watch videos where I'm at. What are the facts?

etudiant · Sat Nov 06, 2010 2:48 pm

In fact, wars are generally good for economies. Many argue that the social spending the government did only prolonged the depression. What actually brought America out of it was WWII

That war is good for an economy is an old saw that has been around for a while. It is understandable, because the spending on war gives an immediate and visible boost to an economy.

But there is little in redeeming value in military expenditures. Other projects, like transportation infrastructure for example, having multiplying effects because they add value by helping and enabling other elements of economic activity.

Historically, many countries have been dragged down by military expenditures. The two world wars, for example, were instrumental in Britain’s decline as a major power.

There is one counter-intuitive example of note however. The US position after WW2 was not so bad. Why? Due to the ravages of the great depression, the latest in a series of booms and busts that typified capitalism, and the horrors of war, many in the world demanded better treatment. And in many cases in that time period, they got it. The New Deal’s reforms were taking hold, and countries like the US, Canada, and Britain had truly progressive tax systems. The result was a large middle class, the key to what many economists consider a healthy and sustainable economy. People did well despite paying off large war debts.

Social spending does not expand economies it is merely a transfer of wealth, it doesn't create anything of value. That's why governments generally can't spend themselves out of recessions. Of course, if they do manage to do so they create inflation. So ... only an expansion of an economy can cure a recession. To expand an economy you have to have more investment so you have to cut taxes. It isn't rocket science.

Well, it’s not rocket science, but it is economic science, and there are some leading figures in that field that would debate that statement, such as John K Galbraith, or John Maynard Keynes.

JulianTheApostate · Sun Nov 07, 2010 1:07 am


	stahrwe wrote: In fact, wars are generally good for economies. Many argue that the social spending the government did only prolonged the depression. What actually brought America out of it was WWII Social spending does not expand economies it is merely a transfer of wealth, it doesn't create anything of value. That's why governments generally can't spend themselves out of recessions. Of course, if they do manage to do so they create inflation. So ... only an expansion of an economy can cure a recession. To expand an economy you have to have more investment so you have to cut taxes. It isn't rocket science.

If fact, government spending is good for economies, especially when there's a recession. The US economy recovered its strength by the end of World War II because a lot more money was spent on WW II than was spending on the New Deal's social programs. After all, there's no reason to believe that employing soldiers and buying weapons helps the economy more than employing nurses and buying medical supplies. Unless the nation is at risk of being attacked, social spending helps the economy more per dollar spent. The country's greatest asset is its population, which education and medical care make people more valuable, while war just leads to death, injury, trauma, destruction, and waste.

In other words, social spending has a double benefit. If you give more money to people who are struggling to get by, their lives will improve and they'll spend the money quickly, stimulating the economy. In contrast, cutting corporate taxes increases the deficit without helping the economy much, since companies will do their best to increase their profits, regardless of the tax rate.

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