In this new working paper out with the Global Institute for Sustainable Prosperity, I take a look at the economics of wartime mobilization, to see what lessons can be learned to help guide the COVID-19 response and a Green New Deal. 1/n
This paper is a continuation of my earlier work, which examined the economic worldview held at the US Treasury during WW2. 1.5/
Fighting WW2 involved a massive reorienting of every aspect of society to put the goal of winning the war first. However the economic theories that guided this, "mobilization economics," were generally abandoned in the 1960s because people believed, thanks to the H-bomb, the /2
next war would have no time for full-scale mobilization. But mobilization - putting to work all of society's un-tapped and under-used resources to fight an urgent existential threat - is newly important today, thanks to climate change and COVID-19. /3 
This paper calls for a return of "mobilization theory," but argues that we should go broader than just economics - mobilization is a wider social, cultural, and political project. However, I start here by reviewing some of the WW2-era literature. The paper considers a range of /4
issues. First, real resources have to be sourced. Here it's an advantage to start the mobilization with substantial unemployment, as these people can be put to work. After that, options become difficult or unpleasant, eg. increasing productivity, or reducing living standards. /5
The most important task in mobilization is "programming": basically, figuring out what we need and how we're going to get it from what we have. Programs need to be built in concert with the front-line experts for the crisis at hand eg. the military or epidemiologists. /6
Programs should be "feasible" (meaning we have the resources to pull them off) and they should be "balanced" (meaning the allocation of resources is workable, both at any given moment and across time). They should be "tested" using available data on our resource capacity. /7
To make broad sense of mobilization and how the real elements relate to the financial elements, I highlight 5 plans for public finance, which I refer to as "mobilization frameworks." The first is "pay-as-you-go." /8
In today's discourse "pay-as-you-go" means balancing the gov's budget for a program, but in the mobilization economics literature it didn't. It was explicitly about inflation: pay-as-you-go directed gov to use tax increases to prevent the inflation caused by gov war spending. /9
The other plans allow for lower taxes, by encouraging or forcing people to save: if private people reduce their purchases of goods, then the gov can buy those goods without pushing up prices. The Keynes Plan, outlined in "How To Pay for the War" was a scheme for deferred pay. /10
"Expenditure rationing" proposed by Kalecki is an untested scheme to limit not just what people get paid, but what they're allowed to spend. Both of these are compulsory saving plans. By contrast, Beardsley Ruml argued that a voluntary saving plan is better whenever possible, /11
both for preserving liberty and for promoting social solidarity. The last framework comes from John Kenneth Galbraith's "disequilibrium system," which I refer to as "tight mobilization." In a tight mobilization, there is neither enough taxing nor enough saving /12
to prevent inflation. Instead, aggregate demand is persistently too high, and inflation is prevented through strict price controls and rationing. Galbraith argues that by inducing a "positive pressure" on resource use, tight mobilization is able to use our resources to their /13
fullest potential, particularly the labor force: while normally the market needs a buffer of unemployed resources for stability, tight mobilization eliminates that buffer. I interpret this by arguing this buffer should be seen as the "cost" of using the market system to /14
allocate resources. Along the way I consider what mobilization for GND or COVID might look like. Next, the paper turns to controls. General controls refer to policies that are felt economy-wide, such as fiscal and monetary policy. /15
Taxes can play many roles, including preventing inflation. Because public perceptions of fairness are critical to the success of mobilization, using taxes to fight profiteering is important. (eg. ) /16
Raising interest rates is criticized as both not being effective during mobilization (as direct controls limit investment behavior) and as being morally problematic. /17
Specific controls refer to legal devices directing activities in particular markets. These can be used for redirecting resources, regulating demand, and promoting equity. For instance, "priorities" and "allocation" orders can be critical to ensuring that the gov gets /18
needed resources w/out competing against other buyers. Price control and rationing can be critical for fighting inflation + ensuring equity in mobilization. (For more on the possible need for rationing/price controls in the near future, see here: ) /19
Direct controls on credit, such as regulating the size of down payments and length of repayment periods, are a handy tool both for controlling demand in general, as well as attempting to steer it out of specific markets. /20
I briefly mention the variety of other direct controls, and speculate what role direct controls may play in a GND or COVID response. Then we turn to demobilization, where the two prominent macro issues are inflation, and national debt. Inflation would be about /21
pent-up demand being unleashed at a time when industry is not yet prepared to handle it. On national debt, some writers of this era had a much more nuanced understanding of national debt than the contemporary discourse. /22
Finally, I ask what's next for mobilization theory, presenting a series of questions that social theorists considering these important historical episodes might shed light on. /23
One last thought: we don't mobilize because it's fun or easy. We do it because we don't have a choice. But, these windows of existential threat offer the chance to learn about ourselves and our systems, and build a better future. /Fin
