Revealing the fallacy of war-generated prosperity

We’ve all heard it, “the war got us out of the Great Depression.” This fallacy, that war generates wealth and higher incomes—rather than waste, death, and destruction—seems to be everywhere, including the economics profession. Robert Higgs is an expert on this matter, and I encourage you to consider his perspective.

The key counterexample he offers is the period immediately after World War II. Not only did government spending decline rapidly, there was an enormous influx of military service people returning and looking for work. Did this cause a decline in economic activity and a rise in unemployment? Far from it, civilian production expanded rapidly and unemployment did not surpass 4 percent until 1949.