Debt to GDP Ratio Quebec from 1926 to 1959

To continue with my preceding post of Friday on Quebec’s debt between 1900 and 1959, I am publishing the debt-to-GDP ratio which sadly can only begin in 1926 since the only series I have with regard to provincial domestic product begins in 1926. However, it is quite telling that in 1959, Quebec’s debt stood only at 4.64% of GDP. At the start of the war, the figure increased dramatically to slightly above 24 %. This is quite telling because it illustrates how the government of Quebec grew massively during the 1930s (it did grow as I will show in future weeks).

However, I wish to make an “accounting comment”. As I have argued in earlier posts on this blog, wartime GDP (and GNP) measures are wholly inaccurate since it is hard to assign a value to weapons and munitions whose sole consumers will be enemy soldiers. I do not consider it a good measure of  “valuable” economic output.  I am currently working to imitate the Higgs/Kuznets of GNP and GDP figures for wartime periods, but for the time being, please take this GDP series as the most accurate there is.

What of Wartime Prosperity?

My friend and colleague, David Gagnon, over at Antagoniste.net (in french) posts a comment of Paul Krugman who asserted that «the Great Depression in the United States was brought to an end by a massive deficit-financed public works program, known as World War II». David answers by wondering if the Bush-era wars in Afghanistan and Iraq led to increased GDP growth. This reply – albeit snappy – does not convey the problems with the Krugman assertion.

Let met clear one thing first: I am not a Krugman-bashing conservative. I personally am fond of several of his scientific contributions especially with regards to economic geography. In fact, some of the tenants of my defence of unilateral free trade versus bilateral trade negotiations (or even multilateral) stem from his work.

However, his World War II assertion is a good occasion for me to vent a frustration I have with regards to the economic effect of wartime spending. Let me go at it in point form

  • Last time I checked, wars only destroy;
  • Wartime production creates demand for new product by government. As a result, consumption shrank as scarce resources are used for every new tank, plane, gun or cannon.  Economic historian Robert Higgs documented this when he looked at statistics with regards to consumption during World War II in the United States. He did note a drop in consumption which was hard to evaluate precisely. However, we do not really need statistics to understand that ration tickets must have meant that ressources were scarcer for the general.  I have also posted statistics with regards to calorie intake in Germany and we can see how food consumption in fact dropped. There are also stories of “butterless cakes” or “milkless cakes” which also point in that direction. Even neutral countries were not exempted. Sweden took steps to arm itself up in order to make itself as hard to swallow as it could in order to deter Germany. It never did join the war, yet it was noted that calorie intake overall dropped 10 percent and that several nutrients’ share of diets diminished (Time Magazine’s series on World War II – see “The Neutrals” book);
  • I have a hard time considering munitions, tanks and planes as “valuable production” which ought to be included in our GDP calculations. What value was there to US munitions whose only consumers were either German, Italian or Japanese soldiers? American workers and consumers were not made any richer with such production, they may have been made safer from totalitarian rulers, but not richer. This is something that Higgs also discussed in his 1992 paper in Journal of Economic History;
  • Investments made in war have to be discarded afterwards. Why keep 50 tank divisions in peacetime? There is little utility for such an army, hence ressources have to be spend to discard excess planes, tanks, munitions etc.
  • I also have a hard time considering the accounting value of military production. There were no competition for goods like these, the government just took a contract and paid for it at the price it fixed. Hence, the price system was immensely disturbed by wartime production.

Wartime prosperity is most likely a myth and its hard to see how increased government spending in World War II (or any war for that matter) might have made populations any richer.

The Eastern Front: Casualties

In June 2009, I took a class at Montreal University titled Canadian Military History which brought me to France (as a part of the class) to visit battlefields where Canadian forces engaged either forces of the Hohenzollern monarchy during the Great War or of the Third Reich during the Second World War. During my visit of La Somme, one of the bloodiest battle of the Great War, we could walk in the fields and still find bullets, weapons, shells, helmets, belts and all sorts of military remnants (picture here of me with a cannon shell of unknown origin). This gives you an image of how extensive the destruction was. Well, imagine that rather than finding fields of spent ammunitions and supplies, we had instead found fields of human bones…

Then you can imagine how peasants in the Western part of Russia feel when they find human bones in what are now called “bonefields“. Posting data here on this blog on military history (amongst other things) is not sufficient to convey how terrible some realities are. In fact, it took only one single battle – the battle of Kursk in 1943 – for German casualties(201 000 according to Michael Carver’s The Warlords) to exceed those suffered in the campaign to conquer France and the Africa Campaign (154,740 and 102,000 according to McNab). After detailing this, you can now see this graph which illustrates the extent of German Losses (and Soviet losses) on the Eastern Front. You think this is terrible? Consider that at the same battle of Kursk, the Russians lost over 800,000 soldiers against the German. Overall, 27 millions Russians lost their lives during World War II according to Constatine Pleshakov’s Stalin’s Folly and the some 900,000 of those in the first twenty days of the German offensive…

Add-on (July 28th 7h45 PM) – My friend P-A Beaulieu sent me this link with illustrations of findings on the Eastern front (weapons, bones, various accessories of both German and Soviet origin)