I believe that a major factor in the weakness of the economy as it is now is the wars of the past. There has been so much warfare over the past century that the economy which has developed operates as if it was "designed" to accommodate and support a war. We can make what we need with fewer workers than we have, the result is often high unemployment if there is no war going on. The lack of a war means nothing to absorb unemployment, such as mass conscription, as well as nothing, such as the demand for war equipment, to create more industrial orders.
Plainly and simply, we have made production so efficient that we must fill the resulting gap in full employment with some type of crusade.
Notice that, in the U.S., there is never a recession when there is a major war in progress. The country was prosperous during the Vietnam War of the 1960s and early 1970s, but entered a recession soon afterward. How can the country be doing so well economically while the war was going on, but then nowhere near as well for the rest of the 1970s? It is because we have an economy that has developed to support the warfare that it requires both to absorb unemployment and for factory orders.
Whether it seems to make sense or not, a major war is the surest way to cure an economic depression. The government programs known as the New Deal of the 1930s certainly helped, but the U.S. did not truly emerge from the Great Depression until the Second World War.
In Germany, there was a democratically-elected government, known as the Weimar Republic, but it could not handle the economic crisis that began in the U.S. with the crash of 1929. A party called the Nazis emerged with the simple-yet-brilliant idea of absorbing unemployment by drastically expanding the military and getting factories back to full production capacity by manufacturing military equipment for them.
In the 1980s, militarism was a central component of Ronald Reagan's economic plan, not only to confront Communism but also to revive the economy. The plans included a possible six hundred ship navy, and the "Star Wars" missile defense shield. Not only would it supposedly create a booming economy, it would also force the Communists into an arms race that they could not afford.
The unprecedented U.S. dominance and prosperity from the mid-forties to the mid-seventies was due to the economic support provided by the Second World War, the Korean War and, the Vietnam War. The more recent wars in Iraq and Afghanistan could not provide anywhere near the same support because of the lack of conscription. The soldiers who served in those wars were volunteers, who were in the military already. In comparison with the size of the U.S. economy, the relatively low-level combat in these wars did not generate any mass manufacturing of military equipment.
The world wars generated economic prosperity not actually during the wars, but afterward. The reason for this is that, in the world wars, conscription was for the duration of the war while in the Vietnam War, tours of duty were for one year. There cannot be maximum prosperity while many millions of soldiers are away and are not engaging in consumer spending, the prosperity generated by the war will come afterward.
World War One was followed by "The Roaring Twenties", which unfortunately crashed in 1929. World War Two was followed by an even greater period of prosperity, the postwar boom of suburbs growing across America and the building of the interstate highway system to connect them. The manufacturing of war equipment switched to cars after the war. The fifties are sometimes known as "The American Decade" when, incredibly, half of the industrial production in the entire world took place in the U.S.
One reason that military production is a reliable way to generate economic demand is that, due to national security concerns, the manufacture of vital military equipment is less likely to be outsourced overseas.
The necessary crusade does not necessarily have to be a war. The U.S. interstate highway construction of the late 1950s bridged the gap between the Korean and Vietnam Wars so that the prosperity was unbroken. Then there was the urban renewal of the sixties and seventies and spin-off products from the Apollo Space Program.
Economics is complex and this is not the only reason for prosperity, or the lack thereof. The recovery from the destruction of the Second World War of other countries, and the progressive modernization of most of the world, all gave America a lot more competition. But I am certain that a primary factor in prosperity is that the economy which has developed is one which is geared to support a war, or other great undertaking that produces millions of jobs and generates a vast demand for equipment or other material, and it suffers when such an undertaking is absent.
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