How did WW1 and Wartime production bring an end to high unemployment from the Great Depression?
World War 1 and Wartime Production: Impacts on the Reduction of High Unemployment from the Great Depression
The occurrence of World War I led to an economic boom that resulted from the increased economic activities involving governments. In the U.S., the federal government engaged in massive expenditure due to shifts in national production and trading of goods. For instance, more than 3 million servicemen were recruited to the U.S. military and government offices, which created a high number of employment opportunities between 1914 and 1918 (Lozada, 2005). War engagement led to the establishment of manufacturing plants for the production of war equipment, thereby creating jobs in different industries. During the Great Depression, unemployment in the U.S. rose to 25% and increased homelessness, whereas a third of the banks collapsed. On the other hand, the Great Depression also led to a decline in international trade and deflation in the stock markets, which led to an estimated 50% shrinking of the U.S. economy (Amadeo & Estevez, 2020).
The start of WWI led to more than 40 months of economic boom due to the increased demand for war equipment and goods, which led to the transformation of industries. According to Margo (1993), the Great Depression led to the introduction of modern macroeconomics, which in turn increased the demand for labor and the increment of wages. Vergun (2020) asserts that wartime production focused on the mass manufacturing of weapons and military equipment, in addition to the conservation of useful resources such as rubber, petroleum products, metals, and plastic as a strategy for reducing production costs. During the start of World War II, the U.S. federal government encouraged Americans to enroll in the military and offer labor as support for the war, which stimulated the economy through employment opportunities and the increment of living standards that had been affected by the Great Depression. The high cost of warfare triggered an economic shift and increased the governmental roles in economic activities, such as market pricing and taxation. Therefore, wartime production and warfare engagement had significant impacts in the reduction of unemployment rates through the high demand for labor and supplies by participating nations and their allies.
Amadeo, K. & Estevez, E. (2020). The 9 principal effects of the Great Depression. The Balance. Retrieved from https://www.thebalance.com/effects-of-the-great-depression-4049299
Lozada, C. (2005). The economics of World War I. National Bureau of Economic Research. Retrieved from <span style="font-size:12.0pt;line-height:200%;font-family:"Times New Roman","serif"">https://www.nber.org/digest/jan05/economics-world-war-</span>i
Margo, R. A. (1993). Employment and unemployment in the 1930s. Journal of Economic Perspectives, 7(2), 41-59. DOI: 10.1257/jep.7.2.41
Vergun, D. (2020). During the WWII, industries transitioned from peacetime to wartime production. Retrieved from https://www.defense.gov/Explore/Features/story/Article/2128446/during-wwii- industries-transitioned-from-peacetime-to-wartime-production/