The decline of US manufacturing productivity between 1941 and 1948

Abstract

The view that war benefits potential output has been influential in treatments of US mobilization for the Second World War, where it has been largely premised on the benefits of learning by doing in producing military durables. If the thesis that war benefits aggregate supply is correct, it is indeed within manufacturing that we should most likely see its effects. Total factor productivity within the sector in fact fell at a rate of −1.4 per cent per year between 1941 and 1948, −3.7 per cent a year between 1941 and 1944, and −5.1 per cent a year between 1941 and 1945. The emphasis on learning by doing has obscured the negative effects of the sudden, radical, and temporary changes in the product mix, the behavioural pathologies accompanying the transition to a shortage economy, and the resource shocks inflicted on the country by the Japanese and Germans. From a long-run perspective, the war can be seen, ironically, as the beginning of the end of US world economic dominance in manufacturing.