Of War and Peace and GDP

Paul Krugman comments on an argument by Mark Thoma, Bob Hall and Susan Woodward, wherein Krugman asserts that the military spending resulted in a one-for-one effect on GDP during WWII because of rationing. But, Thoma et al., also look at the Koren War and see a similar effect. Now, I was born during the Koren War, so I have no direct memory of it. But, as far as I know, there was no rationing during that one. So, maybe there is more to this than Krugman allows.

Still the argument that infrastructure spending is equivalent to military spending seems a big stretch. I don't know of anyone who can use a tank or cluster bomb to increase productivity. Making stuff that is then only useful for destroying things and killing people somehow doesn't seem equivalent to building highways, mass transit, or electric power generation and distribution systems.

Big Stimulus Programs by Big Debtor Countries Will End in Tears??

The argument that, "Keynes, in the 1930s, advocated that the US make up for the demand loss rather than expecting the US's overindebted European trade partners to continue overconsuming" does not hold water. See for example Brad DeLong's econ 161 course notes. Hjalmar H.G. Schacht, the first central banker and then finance minister under Hitler, pursued deficit spending in a way that no other government did -- including the New Deal. One could argue that Schacht was the only Keynesian finance minister of his time. Although, Germany in 1932 was saddled with extreme debt, the expansionary program was fabulously effective -- Germany's unemployment rate problem was quickly solved -- the only industrialized country to achieve that goal. It is ironic that the insightful financial master, who worked for the devil incarnate, had the middle name Horace Greeley because his parents so admired the 19th century Repubican and Abolitionist.