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The Catastrophic Impact of War on Liberty

The Catastrophic Impact of War on Liberty. Robert Higgs. To Get Resources for War. (1) Accept donations (e.g., enlistments of soldiers) Not many come forth. => ? (2) Make purchases using enhanced revenues Raise taxes + new taxes  tax avoidance & evasion

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The Catastrophic Impact of War on Liberty

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  1. The Catastrophic Impact of War on Liberty Robert Higgs

  2. To Get Resources for War • (1) Accept donations (e.g., enlistments of soldiers) Not many come forth. => ? • (2) Make purchases using enhanced revenues Raise taxes + new taxes  tax avoidance & evasion Increase borrowing  interest rates bid up  Fed accommodation, interest-rate controls, & capital-market controls Gov’t purchases  price increases threaten mobilization  rig market with price controls, priorities, allocations, etc.  compliance problems (3) Demand transfers (e.g., labor draft, land seizures) •  draft avoidance and evasion

  3. Government Suppresses Resistance • (1) restrictions on rights of assembly, speech, press, petition for redress of grievances • (2) propaganda • (3) enlargement of police apparatus; more surveillance, arrests, prosecutions, & deportations • (3) encouragement of informants • (4) gov’t secrecy, censorship, show trials

  4. Ratchet Effect • Fiscal Expenditure, taxation, debt (2) Institutional Laws, organizations, precedents (3) Ideological => Growth of government from elevated trajectory

  5. European Geopolitics, 1914

  6. All numbers in billions of current dollars except for GDP deflator* 1996=100

  7. How Central Banks Fund WarThe Growth of the Fed Balance Sheet During WWI Assets (billions) Source: John Paul Konig, Financial Graph & Art

  8. Gross National Product, Government Purchases, and Gross Private Product, 1913-26 Source: Kendrick 1961; Numbers in billions of current and 1929 dollars

  9. Employment, Unemployment and Labor Force, 1940-1948 Source: U.S. Department of Defense, 1987; millions of persons at mid-year

  10. Hours worked in the US, 1929-1950 Source: John W. Kendrick, 1961; Billions of hours

  11. Total Civilian Hours Worked 1939-1950 Source: Higgs, 1999; index numbers calculated from data in Kendrick 1961; 1939=100

  12. Real GDP 1929-1950 Source: Robert Higgs, 1999

  13. WWII Rationing

  14. Federal Receipts, Outlays, Surplus (fiscal years), Federal Debt and Money Stock (mid-year), and GDP Deflator, 1940-1948(billions of current dollars, except deflator) Source: U.S. Office of Management and Budget 2002U.S.; Bureau of the Census 1975; Friedman and Schwartz 1963; Johnson and Williamson 2002

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