The American WW2 Economic Puzzle

[Guaporense]

But, during wartime the productivity per worker is expected to decrease.

The reasons include:

1st - Conscription is among young men which tend to be the most productive and vigorous workers in society. So the average quality of the civilian workforce declines during war.

Pre-war unemployment must have been highest among young men, so if you have to hire a never previously employed 20 year old woman instead of a never previously employed 20 year old man, you are still getting a productive and vigorous person. As well, the US manpower situation never became as strained as in the UK or Germany and the medical standards of the US armed services remained high, meaning that many a young man with flat feet or a minor vision problem remained available to join the work force. I would guess that the average age of the US work force decreased during the war, so the quality of the workforce may well have gone up.

Not really because the number of men conscripted was 16 million which was much higher than the number of young male unemployed in 1939, also just because they are unemployed does not mean that they have ZERO experience.

So there certainly was a decline in the quality of the workforce. Although it was not a labor drain as high as France's mobilization in WW1, which drained 8 million workers out.

[Guaporense]

But I must say that at times Guaporense views from another perspective than the ordinary military centred are intereting!

Frankly, I find "estimates" which consist of little more than WAGs suitable for story-telling time to grandmothers, sprinkled with altered and falsified data, and blatant anti-Americanism combined with an unhealthy admiration for Nazi policies, completely uninteresting.

Where do you find any evidence of "anti-Americanism"? :roll: "Admiration of Nazi policies"? :roll: You are lying here.

[Guaporense]

But I must say that at times Guaporense views from another perspective than the ordinary military centred are intereting!

Frankly, I find "estimates" which consist of little more than WAGs suitable for story-telling time to grandmothers, sprinkled with altered and falsified data, and blatant anti-Americanism combined with an unhealthy admiration for Nazi policies, completely uninteresting.

Well, very few at this forum maintains a scientific standard, what about labeling people "anti-Americanism" when you dont agee?
Is that American scientific standard post election 2016?

He has some personal hatred towards me. I don't quite understand why, actually.

I perceive that he is a very nationalistic type of person that gets personally offended and extremely hostile to people that do not show tremendous respect and admiration for the US's federal government* while being hostile to anything that he perceives as being "admiration of the Nazis". Which is kinda weird considering that we are in 2016 and it is essentially contradictory:

That's because nationalism is an ideology from the late 19th century that provided most of the ideological basis for the National Socialist German Workers Party in the 1920's and 1930's. So while he hates people that do not share his nationalistic feelings, he also hates people that he perceives as admirers of a regime based on nationalistic feelings, feelings that he harbors so intensely.

*Even though it's that same federal government that's paying me right now.

[Guaporense]

For what it's worth, GDP in the other North American Allied country, Canada, doubled during the war, from $5.6 billion in 1939 to $11.8 billion in 1945.

I am just discussing this precise type of statistical distortion in this thread:

Why productivity apparently grew in WW2 while in WW1 there was a collapse?

I already noticed that the US's experience was not distinct in this post that people here apparently ignored completely:

Estimating productivity change: WW1 versus WW2

All right, I (re)calculated the growth in GDP per worked from 1939 to 1943 in Germany, UK and from 1940 to 1944 in the USA and USSR. These are the figures:

Germany -- 27.7%
UK --------- 36.2%
USA -------- 30.4%
USSR ------- 29.4%
average --- 30.9%

US figures are Kendrick's (from the link above), Germany's figures are Klein (1957), UK figures are Maddison's and USSR's figures are Harrison's.

So, apparently, in all major powers (Japan was not major power, BTW), apparent or official productivity increased in a similar fashion in wartime. This contrasts with the experience of WW1 and apparently the distortions in WW2 are everywhere not only in the USA. Thing is, the USA had a bigger growth in GDP because it's civilian employment levels increased while in all other countries they decreased.

So I was wrong, USA productivity growth was similar to the other main belligerents.

The discrepancy in GDP growth is explained by manpower allocation:

Civilian employment levels in 1943-44 in proportion to pre-war levels in 1939-1940:

Germany -- 90.8%
UK --------- 92.3%
USA -------- 116.3%
USSR ------- 86.8%

WW1

Change in GDP per civilian worker 1913-1917:

France --------------- (11%)
Russia ---------------- (24%)
Austria-Hungary --- (13.3%)
Germany ----------- (22.3%)

Germany and Russia refer to industrial productivity (which tends to change more than aggregate productivity). Still WW1 was characterized by general collapse in economic activity among the major belligerents.

I think that the difference between the two wars was that in WW1, the degree of price control was smaller so that inflation could manifest itself more and since real GDP is equal to nominal GDP divided by inflation, in WW2 GDP growth was inflated, in WW1, GDP figures reflected reality.

Canadian war production was fourth among the Allies, but only 30% of the output was used by Canadian forces. The rest was given to our Allies under the Mutual Aid program, the Canadian counterpart to Lend-Lease. (I note that German war production was not sufficient to provide significant materiel support to its allies. Would 6th Army have been surrounded so easily if the Romanian armies on its flanks had been given lots of Panzer IVs?)

Some more pro-Canadian nationalism here I see. :roll:

German tank production could have been easily increased if they wanted to. Also, there is a fact that continental Europe's industrial capacity was not remotely as intensively utilized as Canada, US or UK's.

I conjecture that the reason was that Wehrmacht's demand for equipment was satiated so there was no point in increasing output further. Or that their war effort was extremely inefficient.

And I don't think the Nazi ideology allowed for massive material support of their allies either, even if they could have supported them. There was also the fact that Germany had mobilized all it's labor force into the armed forces which was the inverse case of the WAllies who used Soviet manpower in the front while they used their own manpower in industry and then supplies other countries with munitions (such as the Brazilian division sent into Europe).

And no, lack of tanks was not the factor that made Romanian and Hungarian armies relatively ineffective vis the Wehrmacht. The main factors were the human factors: training, morale, endurance, etc. Also, the most important material factors in WW2 were not tanks or aircraft, but basic supplies of food, medical supplies and ammunition to maintain the armies operating in adequate conditions. Were the Hungarian, Romanian and Italian armies supplied adequately? I don't know but I don't think their logistical situation was below their own standards of adequacy. And no, it wasn't because the Romanians ran out of ammunition that the 6th army was encircled.

And no, the 6th army was not encircled "so easily", please, the Red Army lost just 7 million men in battle in that year, enormous sacrifices were made to encircle an army that was 2,000 KM inside that country's borders. Saying that their victory in Stalingrad was "easy", is like saying "the advance at the battle of Somme proceeded so easily". It's really a tremendously ignorant statement, in fact, I cannot even conceive of something more ignorant than the claim that "6th army was encircled so easily".

Of note in this context, Canada produced 707,000 military vehicles, not including armored vehicles, significantly more than Germany did. The Canadian vehicles were most assuredly produced on assembly lines, as was the case in the US.

Motor vehicles in the 1930's were produced in assembly lines everywhere.

German motor vehicle factory in 1936:


Or you do think that entrepreneurs outside of North America were simply unaware that assembly lines existed for 30 years?

Finally, German output of motor vehicles in WW2 was constrained by oil supplies.

Why you don't compare Canadian to German production of locomotives, instead? Locomotives were far more important for the German war effort because they were the basic means to supply armies.

[Guaporense]

2nd - The types of goods demanded change: instead of clothes and cars, now the economy has to produce bombers and ships. Since the machines and tools in the economy were designed and made to produce clothes and cars, they suffer loss of efficiency if employed to produce bombers and ships.

You don't build tanks in a machine, as you previously noted.
The machines who build parts for truck or tank engines were basically the same.

Not in an advanced industrialized economy based on a high level of specialization in production, in those cases machines were made for specific purposes.

In a less sophisticated economy, the degree of flexibility is higher. Around 1940, the world was much less sophisticated than it is today so that industries back then were less specialized. Still the degree of specialization was high enough so that a shock caused by war would certainly have lowered productivity dramatically. As I have explained: a blacksmith can easily shift from plowshares to swords, while a car factory cannot switch so easily to produce tanks.

As I understands the biggest difference between the US and German way of producing munitions was that US did invest in new plants,
first causing an increase in construction and then facilitation for optimum output of arms.
While Germans tried to convert existing plants and part of the German late war effort where underground facilities with a much higher cost per area.

Well, German industrial investment in WW2 was of the same relative proportion as the US's. In both cases there was an increase of about 60% of the stock of metal working machine tools with similar increases in terms of the value of the installed stock of industrial machines.

So I don't think your statement is actually true.

Also, the most advanced an economy is, the bigger is the fall in productivity due to mobilization for war. The reason is that a blacksmith can shift from plowshares to swords easily while a modern economy that employs lawyers and burger flippers will have a hard time shifting the lawyers and burger flipper's employment to work in bomb and tank factories without losing a lot of productivity in the process.

If not the bigger economy have a much more flexible structure.

Not really. It's the inverse as I have explained before.

More advanced economies, however, can cut civilian consumption more and mobilize a higher fraction of their GDP into warfare. The reason is that higher incomes allow for people to cut down consumption more. Also, more advanced economies are more industrialized so that a higher fraction of their economy is easily mobilized for the armed forces and munitions production.

Although our modern post-industrial economies have lower warmaking potential relative to GDP than economies of 80 years ago because modern economies are LESS industrialized than Germany and the UK were in the 1930's. So that it's harder for modern countries to convert their civilian service sector based economy into war-related sectors.

So, I think that statistics showing wartime GDP growth are mostly an artifact of statistical distortion caused by government manipulation of prices and quantities sold in the market. The true market value of output would certainly decrease in wartime. Well, it's not like private individuals would be willing to pay 80 times the price of a car for a Sherman tank which was the average difference in official sales prices between Sherman tanks in 1943 and cars in 1939.

What the relevance?
If US government paid 80 times as much for a Sherman then fine, US could afford to pay the bill.

Well, it shows how inefficient the production of tanks was: the cost of producing a tank was much, much, much higher than the cost of producing the same weight in terms of civilian cars. Even though the cost of producing a Sherman tank should have been lower than civilian cars on a per ton basis due to it's massive bulk.

US government flooded the country with cash(investments) while they maintained price control a feat not easy to reproduce in any current economy.

No, it's trivial to reproduce and its a very stupid policy as well because it generates massive distortions and resource misallocation in the economy.

For a recent example, Brazil froze prices in 1986 while the flooded the economy with cash. That time was particularly because

Anyway, in the US's case in WW2, the price freezing was political: to hide the cost of war to the population while the government imposes rationing that replaced the role of price system (which was basically knocked out) in allocating resources in the economy: people are not free to buy stuff, now they have the right for X pair of shoes per year, etc.

Other countries did the same in WW2. Heck, the Soviet Union had price controls even in peacetime. Essentially, the US's economic policy in WW2 was derived from the Soviet Union's economic policy in peacetime. Characterized by high level of government intervention.

This is a result of the fact that wars are fought by governments and governments then have to confiscate society's human and material resources to fight the war. Price freezing as a way of hiding the confiscation of resources from the citizens: they continued to make the same income and prices were officially the same. He or she just couldn't acquire goods because they were rationed.

[Richard Anderson]

Where do you find any evidence of "anti-Americanism"? :roll: "Admiration of Nazi policies"? :roll: You are lying here.

So the spate of anti-American posts a few weeks ago was just a poor joke? Ditto the bit about the economic advantages of nazi rule?

[Richard Anderson]

Some more pro-Canadian nationalism

So now it's Canadian nationalists persecuting you?

[Stiltzkin]

a blacksmith can easily shift from plowshares to swords, while a car factory cannot switch so easily to produce tanks.

A blacksmith cannot make TZF 5s or SCR-528s , but yes we understand your point and the impact.

More advanced economies, however, can cut civilian consumption more and mobilize a higher fraction of their GDP into warfare. The reason is that higher incomes allow for people to cut down consumption more. Also, more advanced economies are more industrialized so that a higher fraction of their economy is easily mobilized for the armed forces and munitions production.

And they are usually linked to political systems which rarely allow for such actions. Totalitarian systems can "demand" more in that aspect, so to speak.

That time was particularly because

.....?

[Guaporense]

Hyperinflation. They tried to control inflation through price controls without controlling the government's budget (which was a very stupid policy) and it failed. They tried it again 7 times, failed every time.

Brazil's inflation rate:

[Guaporense]

More advanced economies, however, can cut civilian consumption more and mobilize a higher fraction of their GDP into warfare. The reason is that higher incomes allow for people to cut down consumption more. Also, more advanced economies are more industrialized so that a higher fraction of their economy is easily mobilized for the armed forces and munitions production.

And they are usually linked to political systems which rarely allow for such actions. Totalitarian systems can "demand" more in that aspect, so to speak.

France in WW1 is your counter example.

France mobilized 8 million men out of 39 million population (favorable compared to 34.5 million mobilized in the USSR's in WW2 out of 198 million population in 1940), managed to endure through 6 million casualties (higher in proportion to the population than the USSR's losses in WW2), mobilize it's economy to the utmost and win the war*, while being a democracy with universal male suffrage.

Also, the French war effort in WW1 had much less government intervention than the war effort of the WAllies in WW2 as well (there was massive inflation during the war, a reflection of the relative lack of price controls in the economy).

*With some help from the UK and other countries.

[Richard Anderson]

He has some personal hatred towards me. I don't quite understand why, actually.

No, I have very little feeling towards you personally at all. It is your modus operandi that bothers me, not you. It annoys me that you don't seem capable of understanding why, but then I suspect that is part of your problem rather than mine.

I perceive that he is a very nationalistic type of person that gets personally offended and extremely hostile to people that do not show tremendous respect and admiration for the US's federal government* while being hostile to anything that he perceives as being "admiration of the Nazis".

What an astonishingly bad analysis. I am an American, and live in the U.S., but love my country I suspect as much or as little as the other person loves theirs. What is truly amusing is that I have worked for the Federal government for years, so know all too well its problems, which I suspect you know only through the veil of your own all too evident prejudices. I have respect and admiration for the ideal of America, but very little otherwise for the condition of what passes for its government now.

What I am actually extremely hostile too is people, who show absolutely no respect for data and who manipulate it and corrupt it to suit whatever hobbyhorse they currently are astride. Especially those who when corrected simply ignore the correction and continue to pass off corrupt data as valid.

Which is kinda weird considering that we are in 2016 and it is essentially contradictory:

That's because nationalism is an ideology from the late 19th century that provided most of the ideological basis for the National Socialist German Workers Party in the 1920's and 1930's. So while he hates people that do not share his nationalistic feelings, he also hates people that he perceives as admirers of a regime based on nationalistic feelings, feelings that he harbors so intensely.

No, the contradiction is you accusing others of "hating" you because of some sort of nationalism - apparently Americanism with me and now Canadianism with other another poster - while at the same time you have now declared was a 19th century phenomena.

*Even though it's that same federal government that's paying me right now.

Really? You're now employed by the U.S. Government?

[Michael Kenny]

Why you don't compare Canadian to German production of locomotives, instead?

This is how this argument is formed.
Germany was outproduced in tanks.
Germany was outproduced in trucks.
Hmm............must find a way to put Germany back in pole position .
Let me find an area where Germany out-produced the latest Allied aunt sally.
Here is one, Locomotives.
Thus:
'Tanks and trucks are not important. Locomotives are!'

Locomotives were far more important for the German war effort because they were the basic means to supply armies.

I would say they were vital to a Army still using millions of horses. Never mind Polish Cavalry charging tanks in 1939 what about a backward army using horses to supply its Panzer Divisions in 1945!

[South]

Good morning Guaporense,

On my screen's page 4 of thread, you've got a string of statements requiring comments. This is only for discussion; not for defamation at all.

Nationalism doesn't get a benchmark start date with the French Revolution (Liberty, Equality, Fraternity, Lend-Lease) ? This was the EARLY 19th century. Robespierre can amplify.

You estimate productivity using GDP. The economic world does not. Are transfer payments included ? The US had global economic operations during the 20th century and some information was not placed in GDP tallies. Plus, some USG data was "adjusted" by the Roosevelt administration ( I am neutral here; other administrations did / do it also).

This is called "circular reasoning": "...Italian armies supplied adequately?...their logistical situation....their own standards of adequacy." Adequate logistical support is an objective standard, with parameters. It cannot be adjusted by High Commands.

Highly specialized machines in sophisticated economies can be producing eg morphine vials for civilian consumption and, presto, convert to military production. It only takes olive drab packaging with black block lettering. Ditto: foot powder.

The usual example is a TRACTOR factory compared to tank factories; not car factories.

Advanced economies, eg the US, had as much economic flexibility as the recent pre-industrial European countries. Actually, the US had more. Plus: a key abbreviation: "I & W" .....= Indicators and Warnings. The FDR administration had a hunch there would be a global war. Much secret mobilization occured prior to Pearl Harbor - and Poland. Juan Trip of Pan Am was familiar.

Look at civilian aircraft morphing into military aircraft. Review the history of Pan Am, Folker, Dobrolet,.....

You write "German industrial investment in WW2 was....same relative proportion to US's". You are being highly selective to make your case.

Consider replying to my non-rhetorical discussion question in re Kiel Canal shipping versus Panama Canal shipping. Economic terms eg economies of scale and place utility govern much of industrial investment.

Re: "...our modern post-industrial economies have lower war making potential ... because ... LESS industralized...";

During Spring break from Woods Hole, Wyoming internship, visit a US Gulf Coast refinery. Return via Silicon Valley. A side trip to a satellite launching facility eg Vandenberg AFB, Wallops Island, Virginia, will show an absence of organic food production for Trader Joe stores.

Have you heard or "rail guns" (not cannons mounted on railroad cars) or class 4 lasers.

Those in the real world do not compare cost production of discussed products using weight.

......

These new-fangled telegraph keys limited in warfare ?

~ Bob
eastern Virginia

[John T]

Also, the most advanced an economy is, the bigger is the fall in productivity due to mobilization for war. The reason is that a blacksmith can shift from plowshares to swords easily while a modern economy that employs lawyers and burger flippers will have a hard time shifting the lawyers and burger flipper's employment to work in bomb and tank factories without losing a lot of productivity in the process.

If not the bigger economy have a much more flexible structure.

Not really. It's the inverse as I have explained before.

More advanced economies, however, can cut civilian consumption more and mobilize a higher fraction of their GDP into warfare. The reason is that higher incomes allow for people to cut down consumption more. Also, more advanced economies are more industrialized so that a higher fraction of their economy is easily mobilized for the armed forces and munitions production.

Aha, I am plain Wrong, " the bigger economy have a much more flexible structure"
While your "Also, more advanced economies are more industrialized so that a higher fraction of their economy is easily mobilized for the armed forces and munitions production." Are right

So the difference is about you are right and I'm wrong or how do you interpret the difference between "bigger economies" (like US compared to Germany in this case) to "more advanced economies"

I can't see the big difference in the two statements except that you claim you are right?

So, I think that statistics showing wartime GDP growth are mostly an artifact of statistical distortion caused by government manipulation of prices and quantities sold in the market. The true market value of output would certainly decrease in wartime. Well, it's not like private individuals would be willing to pay 80 times the price of a car for a Sherman tank which was the average difference in official sales prices between Sherman tanks in 1943 and cars in 1939.

What the relevance?
If US government paid 80 times as much for a Sherman then fine, US could afford to pay the bill.

Well, it shows how inefficient the production of tanks was: the cost of producing a tank was much, much, much higher than the cost of producing the same weight in terms of civilian cars. Even though the cost of producing a Sherman tank should have been lower than civilian cars on a per ton basis due to it's massive bulk.

IT SHOULD ??
AS you obviously do not know anything about production, why do you bother to write so much on this forum regarding maters you have not the slightest unerstanding of?
You could start to note the difference between how to press steel to make the body of a car with how you make the glacis o a tank.

Cheers
/John

[Stiltzkin]

while being a democracy

Imperial, nationalistic times, during the collapse of the last feudal systems. France was a country which had to face strong opponents, continously over centuries. A better correction: It does not apply to the Nation that is Invaded, fighting on their soil.

Never mind Polish Cavalry charging tanks in 1939

Obvious myths are obvious. You do realize cav never charged tanks with sabers right? It was propaganda made up by Guderian and subsequently picked up by the Soviets.

backward army using horses to supply its Panzer Divisions in 1945

Yes, makes their performance stand out even more, considering they conquered so much in such an amount of time with Horses and Bolt Action rifles. :roll: I am sure the British would have been able to fully motorize their forces when launching such an operation like Barbarossa in 41, on the grand Steppes of the Eastern front, just like Arthur Percival could rely on fully motorized units.

Much secret mobilization occured prior to Pearl Harbor

Actually, the US was very undermilitarized (look at outlays). The enormous ecnomic power allowed them to convert quickly.