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Brooks Wilson's Economics Blog: Wartime Malinvestment in the Civilian Sector

Wednesday, August 17, 2011

Wartime Malinvestment in the Civilian Sector

In “Wartime Prosperity?  A Reassessment of the U.S. Economy in the 1940s,” Robert Higgs persuasively argues against the “consensus” view World War II got the U.S. economy out of the Great Depression.  One argument he makes asserts that resources were transferred from industries producing consumer goods into industries producing armaments causing wartime production of consumer goods to fall.

Holly George Warren describes problems Gene Autry’s had in maintaining production of consumer records and cap pistols during the war (“Public Cowboy No. 1: The Life and Times of Gene Autry”).  War shortages forced Autry to invest in jukeboxes rather than record records suggesting that malinvestment was not limited to to movement of resources from civilian to noncivilian activities but within the civilian sector as well.
With fewer records being pressed due to shellac shortages and no new recordings released, including the reissues he had requested, Gene’s Columbia earnings plummeted from $29,332 in 1942 to $16,662 in 1943.  Royalties from tie-ups also had been negatively affected by rationing of raw materials, with some items being discontinued, including the Gene Autry cap pistols.  His investments improved his bottom line, however, with his share of the Championship Rodeo bringing in a hefty $22,457 by year’s end.  He also bought into the Automatic Phonograph Company, an Arizona-based jukebox concern, which he staffed with employees from his prewar businesses.  What better investment for a man who wanted to keep his own discs playing in roadhouses and diners?  His connection to Columbia also assured enough platters to stock jukeboxes during a time when new records were quite scarce. 

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