The latest episode of my Economics Explored podcast features a conversation on whether COVID can be compared to wartime. The episode considers the different scales and scopes of the shocks, and what it all means for prospects for economic recovery. In the episode, I chat with my good friend Tim Hughes, who was the one who originally asked me whether dealing with COVID was similar to a war effort, and we conclude that a comparison of COVID to wartime isn’t valid. For instance, World War II required a complete reorganisation of the economy to maximise production for the war effort, while COVID has involved restrictions that have reduced economic activity. This is a point that was well made in a Conversation article earlier this year from a Canadian academic Comparing COVID-19 to past world war efforts is premature — and presumptuous.
In the episode, I give various examples of how economic resources were marshalled in the interests of the war effort during WWII, including the construction of Beaufort bombers at the Chullora Railway Workshops in Sydney and the addition of 5 million women into the US workforce during the war. On the Australian and US economic experiences during wartime, check out:
In the episode, we also consider the debt build up associated with responding to COVID, and I mention to Tim that federal debt-to GDP in the US will likely exceed what it got to during WWII, largely because the US started with such a high debt-to-GDP ratio (check out US Council on Foreign Relations Backgrounder on The National Debt Dilemma). Incidentally, in Australia, debt-to-GDP will end up much lower than what it got to during WWII when it exceeded 120% (see the 2009 Treasury Economic Roundup Public Debt in Australia article, written by my then team members Kat DiMarco and Mitch Pirie and another colleague Wilson Au-Yeung).
Finally, I should note that, in our conversation, Tim and I compare COVID and wartime in terms of economic impacts. It’s undeniable that COVID is resulting in a large loss of life in many countries across the world, and, in terms of total lives lost, it could be compared to some wars.