To libertarians / Rand clones

[The Don]

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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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I thought we agreed that a high GDP and a low unemployment rate mean nothing in terms of actual gains in wealth.

1) The fact that you are relying on GDP to prove this is fallacious. Much of this increase was due to money spent on arms. Even if you do consider arms to be wealth, they are created to be destroyed, thus nullifying their positive effect on the economy. Again, I can hire a guy to dig a ditch and fill it back up again. This will raise the GDP, but won't do anything to increase wealth.

2) Your unemployment argument is also terrible. First of all, roughly one fifth of the workforce went to war from 1941-45. Second, these workers were paying themselves for their labor in the form of taxes and the bonds which they bought from the government. The government took care of the rest by priniting money.

So let's get this straight. People were producing products whose purpose was to be destroyed. In compensation for this, they recieved their own money in return (and some new inflationary money). You actually believe that wealth was created during this period?

Please read this... Broken Window Fallacy and some other stuff you really need to get straight...