Having emphasized, anonymity from the original photograph, that image in 1945 was used to be anything other than anonymous. We have a photograph here, of James Cagney and Spencer Tracy, two of the biggest film stars in America at the time. Standing with the photographer Rosenthal. And this was the image from Mount Suribachi which was then used to promote the Seventh U.S. bond drive. The Seventh War Bond drive during the Second World War. Now. Let's put this into, again, context. I think context is the word, though, I've overused for this particular lecture, but let's just move on from that point. America is widely regarded as having got out of the Great Depression, as a result of government expenditure associated with the Second World War. Paul Samuelson the Nobel prize winning economist. Predicted towards the end of 1945 that the American economy would immediately go back into recession. the, the point that federal government expenditure went back to a peace time footing. And the way that I tend to put this and, and to contextualize it is. The amount of money that the American federal government spent, on lend lease between April of 1941, and September of 1945 [SOUND] was equivalent to the entire federal expenditure from 1933 to 1939. So just, just put this in context. Again, I have to ban the word context for the rest of this lecture. Let's put this in perspective. What we actually have, [SOUND] is America giving its allies, resources, food supplies, munitions, over a, a four. Sorry over a four, four and a half year period, which is equivalent to everything the federal government spent from 33 to 39. In a time where we have. The first concerted efforts at deficit finance in America. Wasn't deliberate. Roosevelt as president actually was implicitly a balanced budget politician. But everything that was spent in those six years was the equivalent to the amount the Americans quote gave away unquote to its allies. So that gives you a, perspective. On how big the level of expenditure was. [SOUND] Now, at the time. About 19, between somewhere between 1938 and 1941 [SOUND]. The American government slowly came around to the idea of moving towards deficit finance as a deliberate policy. John Maynard Keynes' General Theory was published in 1936. I would argue that by 1941, both Britain and America, in the way that they managed their federal budgets, had accepted Keynesian principles. The idea of estimating the size of the economy. Working out how much the government could legitimately borrow or transfer to public expenditure in the time of war. And in Britain's case, that was critically important. So, April of 1941, coinciding with the lend beginning of lend lease, we have the first Keynes, we have Keynesian budget in Britain. The Kingsley Wood budget. And the idea of broad Keynesian principles and planning, helped manage the expenditure during the First World War. sorry, helped manage the expenditure during the Second World War. Both Britain and America. Went into deficit and in, in fact given that this is being filmed during the great recession. This is how the academics now refer to the period from 2008 onwards. You need to bear in mind that in 1945 sovereign debt in Britain, was equivalent to two and a half times the size of the economy. So if you like GDP the number of transactions in a given year. What Britain owed in 1945 as a result of the Second World War was two and half times the value of all transactions that took place in that year. And for those of you who are keeping track on what's happening in the Great Recession [SOUND] now go back and have a look at the concerns over the way that the concerns that how sovereign debt is approaching 100% of the size of GDP. Let's digress at this point in time. [SOUND] While there are elements of it in the First World War I would argue very much that the Second World War. Was really, the first total war, maybe the last. The complete commitment of resources, to achieve a military goal, without destabilizing, society. Now, in America we actually have the issue. Of how do you fund the war? Yes you can do it through raised taxation. We talked earlier about a shared common effort. And if you were it not at the front line you would be willing, more willing to sacrifice some of your salary, to help support the war effort overseas. [SOUND] But there was also the need to transfer further resources from the private sector to the public sector. And one way of doing that was getting the public in general to buy government stock, in this case, war bonds. So. The need to actually finance the war and continually going forward, required to a certain degree. The public deliberately for going consumption and making a decision their going to buy government stocks, war bonds I said, to defer that consumption to another time and, lend, literally, what they might spend on themselves to the government to spend conducting the war. Now, I think to a certain degree it's a bit over-dramatized in the film, but it's to make a point which is a little bit esoteric and we know how much fun it is having a conversation with an economist. [SOUND] Hi guys. [SOUND] Right. Back to the plot so to speak. The reason I'm raising this, is the Americans needed to persuade the public in general. The American government needed to persuade the public in general to once more, transfer their private funds into government coffers. By buying war bonds. So this was the seventh drive. And the aim was to raise, raise about 14 billion American dollars. Okay. The federal budget in 1945 was coming in at about $56 billion. So 14 billion is coming in at just about quarter of total expenditure. This was the most successful, war bond drive of the Second World War, and many have attributed this to the way that the publicity around the flag raising at Iwo Jima was put forward. So. Of the six men who raised the flag, only three survived. And I want to talk a little bit more about that in the context of the book, and the film a little bit later on. They were portrayed as the heroes of Iwo Jima. I think one of the, the key things just in a, a side this is John Bradley, the father of James Bradley, the co-author of Flags of Our Fathers. Did make the, point to his son the, and to the public more generally, the, the real heroes of Iwo Jima were those who lay dead. And again, it's a, a scene in the movie, but it's going back to the, the please give your money in memory of my fallen comrades, is one way of interpreting that. So, emotionally it is a very, very strong, very very emotive issue. But then suddenly you have the image stylized in posters. It is associated with the most famous in America. It is drawing very strongly on a patriotic spirit, that here are the men in the field making the sacrifice, sometimes the ultimate sacrifice. And we want you to support the government. Now, [SOUND] I think that's, that's something that you need to just consider the difference between the image of men in battle and how it was then used to generate sympathy for the government in terms of raising finances in the latter stages of the war. And. There's a point I want to come to that might be actually unpalatable, which we'll deal with a little bit later, with regards to government expenditure. Christina Romer, who has, who is at present, a special advisor to President Obama and had written volubly. About well, about suppose voluminously, voluminously might be a better point. Voluminously about the Great Depression. Makes the point that it is war expenditure and the concerted expenditure of government at the time of depression. That actually took America out of the malaise of the 1930s following the Great Depression. America, roughly speaking, raised half the money it spent. By borrowing during the Second World War. That actually wasn't a constraint to the American economy in the way that Paul Samuelson feared afterwards. For a variety of reasons, beyond the scope of this course. But, the nuts and bolts. How do you motivate a population who to a certain degree were war weary, were, not directly affected in terms of combat by the war, to commit their funds, to that effort once more, and I think. And I think, this is another way in which that image became popularized and imbedded in the American consciousness.
