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I found this on an MMT site. It is by a retired English Civil Engineer named Tom Griffiths:

  A recent phone-in comment by LBC Radio's economics correspondent set me thinking, as it led to the usual nonsense over equating Govt. spending with 'debt'. There were phrases like "UK Govt is paying the salaries of 60% of Brits- even another month will bankrupt us" etc. I thought of a useful parallel which went on immensely longer, and yet the promised bankruptcy never arose.

    Shortly after the declaration of war in 1939, Britain ramped itself up into practically the most single-focused economy ever seen in the modern world. Within 2 years, 6 million Brits were paid directly by HMG in the armed forces alone. That is, at least 25% of the adult population. On top of which, a huge percentage of the UK economy was switched to exclusively war materials output. Domestic car, bus and truck manufacturing stopped completely. As did train manufacture. Dockyards concentrated on war vessels or freighters which often had a very short life.

    This continued until early 1946: in other words the UK Govt closed huge swathes of private industry, and more or less directly employed over half the UK population for 5 years uninterrupted. Practically nothing of the 'traditional' industries worked for anything other than Government money, apart from farms, food industry, shops and a token amount of clothing and domestic items manufacture. For 5 whole years.

    According to the 'household budget' idiots, this would have left us with a decimated economy, a crushing mountain of 'debt' equal to 5 years or more of GDP, and plunged us into a deep and savage depression.

    Instead, the only visible debts were a combination of the real ones: the $6.5bn dollars owed to Canada and the USA for provision of food, oil and war materials, and the sum total of war bond redemption costs in £Sterling. The Dollar debts began repayment in 1950, and the total apparent visible debt was only about a third of what the 'household' model would have predicted, i.e. about 2-2.5x GDP

    The whole 5-year complete takeover by Govt didn't lead to much inflation, due to rationing and price controls.

    As troops were demobilised in a planned way, because the infrastructure of the economy was still in place, although rather battered, output simply started again. Not quite as simple as turning on a tap, but not far off. The promised depression never occurred, probably helped by the stimulus of having to rebuild lots of things, and re-supply our old markets which had been turned off by the almost 100% cessation of international trade.

    So the answer to the pessimists is: we weathered a similar international hiatus which involved the Govt paying almost everyone, for a full 5 years once, and bounced back. That is (with this current lockdown scheduled to probably last 4 months) an almost exact parallel economic hit, but 15 times greater in magnitude. And with more deaths along the way (approx 400,000).

With neo-liberal economic doctrine neither the UK nor the USA could have successfully fought Germany in WW II. War mobilization would have been paralyzed by fear of debt, which is a totally bogus issue in an intelligently run nation with its own fiat currency.

Tom Griffiths

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 11th, 2020 at 01:31:55 PM EST
Failing the mobilization that did occur, Germany would have won WW II. Neo-liberal economics leads to fascism just as fascism is the default state of failed liberal capitalism.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 11th, 2020 at 01:35:54 PM EST
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