Friday, February 6, 2009

Animal Spirits, Part 3

"Once more unto the breach, dear friends...."

That's Shakespearean for: here I go again with animal spirits.

The nation is debating how best to revive the animal spirits that will drive us to shop and spend, thus saving us from the ravages of deflation.

Today, the estimable Jim Jubak offers his opinion that the New Deal did work, up to a point, but that it did not work as well as World War II. The latter really rescued us from the Depression because it provided the economy with a gargantuan level of stimulus. Link here.

That fiscal stimulus gave the economy a real and sustainable boost. More than that, Jubak declares, surprisingly, that the wartime stimulus produced economic growth for decades to come. "The momentum built up by the war years carried the economy for decades."

So, the best way to revive our animal spirits is the throw enormous amounts of money at them. This presupposes that we must always respond to fiscal stimulus-- a rather simplified view of human motivation.

So, I want to offer some simple observations, to show that, socioculturally speaking, there is more to warfare than fiscal stimulus.

First, the war did eliminate unemployment, through the miracle of conscription. And surely chronic, intractable unemployment made the option of a job with the military desirable.

Second, the war did not immediately revive consumer spending, mostly because it imposed strict rationing. Perhaps the years of limited consumption created pent-up demand, but you cannot credit the war with reviving those animal spirits.

Third, the war brought us together as a nation. It united the populace by giving everyone's daily activity a sense of overarching purpose. During the war, no one was running around asking: "What about my needs?"

Fourth, the war succeed eight years of depression. Was it because of the protracted depression that everyone was more than willing to engage in the war effort?

Fifth, the war restored a spirit of cooperation and competition. We forged alliances with our allies and competed in a struggle to the death against our enemies. Competition in a high-risk environment always tends to focus the mind.

Sixth, wars center the nation around the military. It makes soldiers, not celebrities, into heroes and fosters admiration for a social organization that has strict rules and roles, where everyone knows his or her place, and his or her duty.

Seventh, during the war civic virtues ruled. The war built character. During a war people identify with their nation. There are no citizens of the world during a war. Values like patriotism, loyalty, duty, responsibility, and obedience were elevated while values that involved self-indulgent complaining were reduced.

Eighth, we won. The nation won the war. And victory, especially victory against long odds, fosters confidence. Moreover, it was a victory for the nation, not for a leader or a party.

Ninth, success breeds success. The work habits, the good character, the patriotism and loyalty that had been inculcated during the war did not go away after the war. They were transferred into other economic activity.

If you are looking for what drives the "animal spirits," these sociocultural factors may also claim pride of place.

1 comment:

Adam said...

I know our host agrees, whatever the emotional or economic stimulation provoked or designed in response to crisis, at the end of the day it must pay enough, after tax, for investors to supply capital, for workers to supply their labor, for entrepreneurs to risk life and limb to re-electrify the market's animal spirits and thus generate gales of recreation out of destruction. Anything else is mere simulation ~ what this blog's author would call narrative and nuance.