Is the USA a superpower today because of WW2?
It's really an urban legend that wars are good for the economy. It's formally called the "Broken Window Fallacy" and was first written about in 1850 by French economist and author Frédéric Bastiat.
The broken window fallacy is a parable that is sometimes used to illustrate the problem with the notion that going to war is good for a nation's economy. Its wider message is that an event that seems to be beneficial for those immediately involved can have negative economic consequences for many others.
Bastiat compares wars to a child breaking his father's window and the towns people deciding that the child has done the town a service because the father will pay for the windows to be replaced and all that money will jump start the local economy. But what this fallacy fails to account for is the opportunity cost of necessitating such spending.
Bastiat points out that further analysis exposes the fallacy. By forcing his father to pay for a window, the boy has reduced his father's disposable income. His father will not be able to purchase new shoes or some other luxury good. Thus, the broken window might help the glazier, but at the same time, it robs other industries and reduces the amount spent on other goods.
Economically wars cost money they don't make money, and while massive government borrowing, spending does have some short term benefits it's not the kind of investment or growth which is sustainable. When the government invests in industry in order to build war materials, that doesn't translate necessarily into commodities the commercial economy finds useful. It also comes at the expense of the commercial economy's growth which is frozen or reduced, really the antithesis of what the question proposes. Yes some of investment will help the post war economy, but that's the exception not the rule. Any such benefit is secondary to it's original purpose which is War production. Thus any such benefit to the post war economy is coincidental. Coincidences don't make for efficient long term economic growth; not when they require incurring such massive debt as come with war.
Yes there are short term benefits to the economy during war. Unemployment goes down, increased government spending, and some infrastructure investment. There are also significant disadvantages.
- Research declines
- Consumer consumption declines as a percentage of GDP
- Commercial products disappear from the market altogether
- infrastructure built is for war production and not for commercial production, some of it is thus not useful
- National Debt increases
- Taxes increase
- Millions of productive workers withdrawn from the economy to fight
- Inflation increases
Beyond the short term the economy is better off if that investment was put into commercial infrastructure, or research. These pursuits create the same short term economic benefits much more efficiently (inexpensively) while having a greater benefit in the long term.
Think of it this way, if a country borrows a billion dollars to produce fighters, bombers, tanks etc the economy benefits from producing those items but that’s it. If the government borrows a billion dollars to build bridges, roads, or utilities plants the economy gets the same short term benefit from job creation but then gets the substantial additional benefit of using those items for the next six or seven decades. All those war material are of little or no use to the economy after they are produced and the war concludes.
For those who consider this question in the affirmative how do they then explain the economic ascendancy of Germany, and Japan after the War? Much less Korea after the Korean War? Were these wars (WW2 & Korean War) of attrition which completely destroyed each of these countries economies to be considered to be a net economic positive for them too? If so then is it the hypothesis that winning and loosing of wars is irrelevant and really it's just the fighting of wars which yield economic growth regardless of outcome? Kind of preposterous.
Economic Consequences of War
• World War II was financed through debt and higher taxes, by the end of the war, U.S. gross debt was over 120% of GDP and tax revenue increased more than three times to over 20% of GDP. Although GDP growth skyrocketed to over 17% in 1942, both consumption and investment experienced a substantial contraction. One of the key causes was government control of raw resources and materials. Trend lines taken from before the war and dating from 1933 onwards clearly indicate that for investment, consumption, and GDP growth there was no increase in the trend lines after the war had finished. While unemployment was virtually eliminated, recovery was well underway prior to the war, and the key counterfactual is whether
similar spending on public works would have generated even more growth. The stock market initially dropped and once victory was foreseeable then rose to be higher than at the start of the war.
Militarily, after WWII the United States demobilized its military and returned to it's pre Dec 7th 1941 military sizes. In 1941 the United States had 1.8 million men under arms. In 1945 the United States had 12 million men under arms, By June 30, 1947 the US had 1.5 million. (see demobilization). That's almost a 90% reduction. The US really didn't maintain a military worthy of the name Super Power until the cold war after North Korea's invasion of south Korea in 1950.
The reason why the answer should be No. The United States was an economic super power decades before WWII. In terms of GDP the United States became the worlds largest economy in the 1920's. Yet, as a traditionally isolationist country for most of it's existence it did not maintain a army proportional to it's economy or population, it never had. As WWII broke out for instance the United States Army was smaller than Portugal's and slightly larger than Bulgaria, (see page v end of column 1) vastly inferior to Britain, France or Germany.
On the affirmative side of the argument yes WWII did demonstrate to the US policy makers that the United States could not sit idle on the sidelines. WWII coming so shortly after WWI, was used as proof the United States should maintain active foreign security treaties as well as a military capability to project power overseas something it had never done before. Only it did not come to these conclusions in 1945 at the end of WW2 but in the 1950s after North Korea invaded South Korea and the US felt it needed to respond but could barely do so. It’s vast ww2 army and navy having been almost entirely demobilized.
The benefit for the United States which catapulted it's economy beyond any peer was not WWII directly. It was the peace which came after the war. It was the rebuilding of Europe. Specifically it was the Marshal Plan which extended credit to Europe in exchange for Europe's business patronage. That and the other aid plans which came before and after which jump started Europe's recovery and relied on and expanded the American already robust pre-war economy. That's what fueled American economic growth across the 1950's and through the 1960s. Not the war spending but the benefits of having one of the only industrial economies still standing after WWII.
I understand that the USA funded the war effort against the Axis, although the Allies in Europe had to pay for this help in one way or another.
Initially the United States was neutral in WWII, and it was illegal for Americans to transport weapons to either side. The Neutrality Acts of 1935, 1936, and 1937 were intended to keep the United States out of war. In Sept 1939, President Roosevelt decided to allow combatants to pay for American products, if they could pay in cash. No credit was extended, which was intended to aid the allies while maintaining US neutrality. Aid the allies because they had cash reserves and the Axis (Germany and Japan) were not as fortunate. That policy however was short lived. After the battle of France, and after Dunkirk(4 June 1940) the British had lost the bulk of their artillery and tanks and were in desperate need or resupply.
On December 7, 1940, its Prime Minister Winston Churchill pressed President Roosevelt in a 15-page letter for American help.nb 2 Sympathetic to the British plight, but hampered by public opinion and the Neutrality Acts, which forbade arms sales on credit or the lending of money to belligerent nations, Roosevelt eventually came up with the idea of "lend–lease".
The aid the US pumped out was massive, Both Stalin and Marshal Zhukov said Russia could not have defeated Germany without US aid. US aid to Russia took many forms. Gold bullion in the Billions, oil, food, weapons, planes, trucks, train engines, cars.. you name it all in the tens of thousands as well as millions of tons of raw materials like rolled steel.
Lend-Lease: US Deliveries to the Soviet Union
In total, the U.S. deliveries to the USSR through Lend-Lease amounted to $11 billion in materials: over 400,000 jeeps and trucks; 12,000 armored vehicles (including 7,000 tanks, about 1,386 of which were M3 Lees and 4,102 M4 Shermans); 11,400 aircraft (4,719 of which were Bell P-39 Airacobras) and 1.75 million tons of food.. Roughly 17.5 million tons of military equipment, vehicles, industrial supplies, and food were shipped from the Western Hemisphere to the USSR, 94% coming from the US. For comparison, a total of 22 million tons landed in Europe to supply American forces from January 1942 to May 1945. It has been estimated that American deliveries to the USSR through the Persian Corridor alone were sufficient, by US Army standards, to maintain sixty combat divisions in the line.
Still as you say, the Soviet's paid for all that material by putting it to good use against the Germans.
Roosevelt, eager to ensure public consent for this controversial plan, explained to the public and the press that his plan was comparable to one neighbor's lending another a garden hose to put out a fire in his home. "What do I do in such a crisis?" the president asked at a press conference. "I don't say ... 'Neighbor, my garden hose cost me $15; you have to pay me $15 for it' ... I don't want $15—I want my garden hose back after the fire is over." To which Senator Robert Taft (R-Ohio), responded: "Lending war equipment is a good deal like lending chewing gum—you certainly don't want the same gum back."
In practice, very little was returned except for a few unarmed transport ships. Surplus military equipment was of no value in peacetime. The Lend-Lease agreements with 30 countries provided for repayment not in terms of money or returned goods, but in "joint action directed towards the creation of a liberalized international economic order in the postwar world." That is the U.S, would be "repaid" when the recipient fought the common enemy and joined the world trade and diplomatic agencies, such as the United Nations.
Lend lease was worth billions to the allies.
Country Value of material supplied
Lend Lease ( 1940 money)
British Empire $31.4 Billion
Soviet Union $11 Billion
France $3 Billion
China $2 Billion
Tons of War Materials Which Went to the Soviet Union
Year Tons of Supplies
Congress had not authorized the gift of supplies delivered after the cutoff date, so the U.S. charged for them, usually at a 90% discount. Large quantities of undelivered goods were in Britain or in transit when Lend-Lease terminated on September 2, 1945. Britain wished to retain some of this equipment in the immediate post war period. In 1946, the post-war Anglo-American loan further indebted Britain to the U.S. Lend-Lease items retained were sold to Britain at 10% of nominal value, giving an initial loan value of £1.075 billion for the Lend-Lease portion of the post-war loans. Payment was to be stretched out over 50 annual payments, starting in 1951 and with five years of deferred payments, at 2% interest. The final payment of $83.3 million (£42.5 million), due on December 31, 2006 (repayment having been deferred in the allowed five years and during a sixth year not allowed), was made on December 29, 2006 (the last working day of the year). After this final payment Britain's Economic Secretary to the Treasury formally thanked the U.S. for its wartime support.
The Soviet Union
While repayment of the interest-free loans was required after the end of the war under the act, in practice the U.S. did not expect to be repaid by the USSR after the war. The U.S. received $2M in reverse Lend-Lease from the USSR. This was mostly in the form of landing, servicing, and refueling of transport aircraft; some industrial machinery and rare minerals were sent to the U.S. The U.S. asked for $1.3B at the cessation of hostilities to settle the debt, but was only offered $170M by the USSR. The dispute remained unresolved until 1972, when the U.S. accepted an offer from the USSR to repay $722M linked to grain shipments from the U.S., with the remainder being written off.
In 1941, Life magazine editor Henry Luce predicted that the 20th century would be the "American" century, at a time when World War II was in progress, and America was profiting from the resulting trade (and as we now know, was about to join it). Was it World War II, or some other event(s) that caused the rise of the USA to being a superpower today?
As previously discussed the US never made money during WWII at least not after Dec 1940, and even then it was a poultry amount compared to what it spent buttressing the allies for the last 5 years of the war. Money it would never recoup directly contrary to statements.
It was really some other event. WWII absolutely was a steroid shot to the American Economy which ramped up to produce all those war materials to defeat the Axis. But as I said, the American tax payer paid for most of that production both the production which went to it's own forces and also most of the production which went to it's allies. What really made the US economy into a "SUPER power" rather than just merely the worlds largest economy came after WWII.
After WWII the economies of Europe were shattered, their treasuries were depleted and their industrial and infrastructure were largely destroyed. The United States industrial base on the other hand was massive from all the war spending and production which had occurred, Their were no bombs dropped on the US in WWII as had effected Europe and Asia. The American problem was there were no global customers to purchase it's goods.
Harry Truman came up with the plan, only he was not popular in congress and named it after his highly respected Secretary of State General Marshal who won the Nobel Peace Prize for it, the Marshal Plan. The United States would grant and lend about 17 billion dollars to foreign countries at little or no interest. Dispersals were over 2 years, the loans would be paid back over 50. In exchange the countries would agree to spend that money along with some of their own money on American durable goods to rebuild their domestic infrastructure destroyed in the war. Now this "aid" went along with an additional 12 billion which the United States had already spent in aid prior to 1948 which wasn't part of the Marshal Plan. Additionally when the Marshal Plan ended in 1950, it was replaced in 1951 by the Mutual Security Act which annually dispersed an additional 7.5 billion in grants and loans. This was in turn replaced by new foreign aid program. The Foreign Assistance Act of 1961, which created the Agency for International Development (AID), which focused more on Latin America.
I would argue those aid programs, which pumped billions of aid annually directly into the US Economy while jump starting Europe's recovery, are what actually created the American miracle economy of the 50's and 60's. Adam Smith in Wealth of Nations said the real wealth of nations resided in their ability to produce goods, not in the gold they had in the bank. If that's the case WWII definitely expanded the United States manufacturing war materials. Again though after WWII the American economy fell into a deep recession. There were no buyers for America's goods. Not until the government subsidized financed economic aid programs began to roll in.