Taxation doesn't create wealth but government spending can. Look how defence spending ended the depression of the thirties both in the US and in Europe. Not just defence spending but spending on roads etc.
I'm afraid I don't know enough about Europe's part, but I can tell you about US:
Great Depression basically started in 1929 and it wasn't until 1939 or so before it ended. It was unusual in its length, especially when you consider that the crash of 1920-1921 was just as severe but was over so fast it was forgotten just as long. Going further back in history we can see similiar patterns- There were several recessions that were done in matters of months and where there were serious crash that lasted for years, usually were a result of government interference with market. (Crash of 1839 and 1879 are prime candidate of this as well as the Great Depression) During the Depression, Hoover and FDR implemented several social programs, creating work, among other various projects between 1929 and 1939, yet in despite of their spending, unemployment stayed high and investments continued to be squandered because people had wrong signals owning to the fact that government couldn't keep out their hand out of the market and thus obfuscate desperately needed corrections. If this is an interest to you, I would recommend Murray Rothbard's "America's Great Depression", which goes into much more details on how government intervention and spending actually contributed to the length of Great Depression.
As for the war, some has concluded that it was a fortunate savior from the depression, but to do so is to neglect that after the war there was a recession. Furthermore, there was a similar and severe depression after Civil War because in order to be able to afford war efforts, both governments of USA and CSA had to go off the gold standard and printed fiat money, which rapidly became worthless. They attempted to return to gold standard but it wasn't quite same. Even so the process was painful because we had to correct for rampant inflation bought on by printing press.
Furthermore, it is mistake to think that such spending stimulate economy. Allow me to use an analogy that I've read from various authors:
Suppose a vandal broke a glass at Baker's store. The crowd gathers and contemplate about this. They came to view it as a blessing in disguise because that would pay the glazier to make the glass. The glazier would then spend his money on whatever goods he needed and it would ripple outward. Thus in a sense, the vandal had performed a public good.
But! That doesn't consider the whole picture... specifically, who is left out of the picture. Suppose that day, Baker was planning on making trip to tailor to buy a nice new suit. But now the window is broken, he has to give this up and be content buying a replacement for the window.
Instead of having a baker who has a window and nice new suit, we only have a baker who has a window... Therefore we all are poorer for it.
This is why war cannot create wealth. Yes, it may create demand for guns, but it will come at expense of butter and we will be poorer for it. Furthermore, when we put them to use, we are destroying our potential trading partners, and consequentially, the comparative advantage, and thus further making us poorer for it.
To go a step further, this is why defense spending will do nothing for our economy, except to squander money that could be better spent in other goods and service far more useful to us collectively. Finally, same will apply to building a bridge that private industries refuse to build for the exact same reason. Instead of having a nice new recreation center in the town, we are stuck with bridge to nowhere that nobody will use but has to pay for.
I haven't even addressed how creating money doesn't create wealth. This is a whole another topic about how printing press cannot help create wealth but in fact only effect inflation, reducing the demand for money. What happened in Zimbabwe is no different from what happened in Germany post World War I. I understand that people back then were paid twice a day, to which the workers would rush to their housewives with wheelbarrows, so they can rush to market and buy just anything *but* the worthless marks that was getting even more worthless every hour!
To further illustrate the problem- Suppose a village of 100 people. Every person had $10 and earns $10 doing his trade which he then consume $10 worth of food and goods. Now, everyone complained that it would be nice to have more money. Suppose that their wish were magically answered and now they had $20 instead of usual $10. Naturally, they would rush to market to buy food and goods. But there isn't enough food and goods to go around... and when supply is low and demand raises... price raises. Thus what used to be worth $10 is now $20. Thus no net benefit.
Further suppose that instead of everyone getting extra $10 magically, suppose that only one person got $100 extra magically. He can go to market and spend more on goods. The sellers notice that their business is booming, and thus decide they need to spend more on capital. That in turn triggers a booms in say, construction to expand the store's shelves. Once the money has passed through everybody's hands, it become apparent that nobody had the money to buy more goods; they just had more money. This not only trigger inflation but also show that their investment in bigger store was mistaken because there isn't anyone else other than the first villager who had the extra money to buy more goods. The first villager walked off with a great bargain, having bought the goods at old prices and is thus richer at expense of everybody else. This illustrates how central banking essentially distort the economy. And in light of recent bailout, their answer has been... print more money! In a sense, inflation is a tax that doesn't required to be passed to be levied. No wonder why our real wages has been falling steadily and our savings dwindling, while people understand implicitly that it is better to spend now than to save and lose it.
This is how Austrian economists describe the boom-bust cycle, in fact. Ludwig von Mises and F.A. Hayek wrote books about the prices, production and business cycles, and they did so *prior* to Great Depression, even as Keynes's theory was the vogue. Turns out that Keynesian economic was failure and they were right. But even today, most economists hold some certain Keynesian theories, even if they are not out and out Keynesian themselves.
So in conclusion, neither taxation nor spending will create wealth. Only real saving created from under-consumption which is then invested into capital that actually increase productivity by further dividing the labor and specialization, can wealth be created.
? Do you have something against people making money?
