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Old 12-12-2005, 01:29 AM
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Default Re: To libertarians / Rand clones

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Namely, growth implies a creation of wealth

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Excellent, that is what I conclude as well. In fact, its what Adam Smith concluded. Adam Smith further articulated that the source of a nation's wealth is its ability to efficiently transform resources (inputs) into goods and services. It is the people who perform this transformation through their labor which is applied to land and capital. This is what determines a nation's economic production - Y(GDP) is a function of K(capital), L(labor), and resources(M). What this means to the people is income for which they can then purchase goods and services. But without jobs, people lack income. When people lack income, they cannot buy goods and services, and their quality of life plummets. This was clearly the case in the 1930s for many millions of Americans.

Something happened from 1940-1945 that brought tens of millions of new jobs for men in private firms contracted out by the government in order to apply their labor(L) to transform worthless metal (resources, M) into much more valuable goods (value added) such as tanks and planes (final output). In addition, 19 million women were brought out of the homes for the first time and entered the labor force to apply their labor and receive income as well. With all of these jobs, people once again had income, and plenty of it. This led to greater amounts of both savings and consumption than before as well. Of course, supplies of standard consumer goods were rationed, but the income was there none the less, and quality of life increased for the average American, as joblessness vanished entirely. On top of all of this, our ability to "efficiently transform resources" grew during this time period as well, as new processes for mass production were developed for everything from airplanes right down to penicillin.

So, clearly, as our increased capacity and efficiency to transform resources into output was more than fulfilled, our nation's wealth increased. There are several numerical indications of this, such as GDP, index-base 1939, in which it increased substantially. This is typically an indicator of economic growth, however. Economic health is usually defined in terms of unemployment, incomes, and quality of life. We also know that these indicators also improved greatly from 1939 to 1945. After a decade of economic depression, our economy was surging according to all standard economic indicators.

Now the $64,000 question. What happened following the economic depression of the 1930s that so greatly improved our nation's wealth? Clearly it was not WWII, since "wars cannot possibly be good for an economy, ever, period". What, then, was it?
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