How did the US get out of the Great Depression during WWII? If there was no money, how could the government start paying soldiers and factory workers?
In: Economics
The great fallacy is that the economy is a zero sum game. People imagine it is like running a business and when you have spent all the money it is all gone. This is not how the economy works.
The economy and wealth of a country is the sum total productive output of the country. If you put people to work making things someone (even the military) wants, the country will have more money.
A better way to think about it is a household, not a business. If everyone pitches in and fixes busted things, refinishes furniture, weeds the garden, cooks, cleans, etc, everyone in the house gets to live in a nicer home. If half the household lays on the couch belching, not so much.
The economy is NOT a zero sum game. For one country or one industry, or one community to benefit, another one does not have to lose. If I paint my house and clean my dishes, my house is a nicer home, that does not effect anyone else’s home.
Edit: someone pointed out that I didn’t circle back and explain how this answered OPs question. The answer to OPs question is that they created wealth enough to pay for the war by putting everyone to work. Everyone got up off the couch and started helping out.
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