This graph shows the direct tradeoff between the military and
manufacturing productivity, as the military increases the economy
slows. This cold war analysis uses Ruth Sivard's bar chart data and
plots them on a graph to produce this stunningly exactly result, R=
-99.7% accurate when weighted by continents. Updates every five years
were produced, with the last one 1960-1993, and the results change only
slightly. The national R= 98% when Canada is dropped. But Canada
traded 30% of its economy with the US, so the accurate way is to
combined these two into North America, which falls exactly on the
tradeoff line. Likewise Europe is exactly on the tradeoff line.
Britain was outside the EEC until 1974, so they underperform the graph
while France receives the lion's share of EEC subsidies so they
World War II
LEGEND: black is gross military spending; red is net of deficit military spending (otherwise known as net military burden); green is economic growth rate. In this graph (not shown here, available with video booklet), especially from 1941 to 1948, as the net military burden increases the economic growth rate decreases. The correlation coefficient is -.97, indicating that economic growth is 97% negatively determined by changes in the net military burden. The net economic growth of the economy from 1942 to 1947 is 17% for a six year period. The growth from 1934 to 1941 is 86% during the New Deal recovery years before the war. Hence the myth that the war brought the United States out of the Great Depression is quite an exaggeration.
What really happened is that Roosevelts programs and deficit spending from 1934 to 1941 brought down the 25% unemployment rate in 1933 to 14% in 1937 and 10% in 1941, the last prewar year (war covered 25 of 365 days in 1941). But his attempt to balance the budget for reelection in 1936 produced the lowest two growth years of the recovery period 1934 to 1941. Other than the setback of 1938, the average growth rate from 1934 to 1941 was 10% per year. (1937 was only 5% growth and 1938 was a 5% negative growth.) 1938 stopped the 3% per year drop in the unemployment rate in the years both before and after 1938. The unemployment rate soared from a 14% rate in 1937 to a 19% rate in 1938. Budget balancing set back the recovery three years, from 1937 to 1940 when it returned to the 14% unemployment rate. Without the Roosevelt failure of will to continue the recovery programs, full employment would have been achieved in 1940, not 1942, and the myth that World War II had brought us out of the Great Depression would never have been started. The deficit correlates about 72% with the changes in either the economic growth rate or the unemployment rate changes in the period 1934-1939.
The Great Depression ended in 1933 but the great unemployment continued until World War II, with only the 1938 recession stopping the steady lowering of unemployment.