Business: Mobilization for World War II

BUSINESS: MOBILIZATION FOR WORLD WAR II

Impact of War

World War II was an event of enormous consequence for business and industry. Before the war, caught in a deflationary spiral, industry longed for customers and closed plants for lack of demand. As the 1940s began, Europeans, desperate for goods with which to wage the already-raging war, paid for millions of dollars' worth of goods. Factories reopened, and new workers were hired to meet the demand. Government programs to mobilize and supply the American military furthered the recovery. Yet the marketplace proved poorly responsive to the political and military emergency. As business recovered, for example, more and more industries devoted their production to meet increased consumer demand at the very time government officials were seeking greater military production. Shortages of raw materials were common; so too were strikes and labor disputes. All of these factors combined to retard the production necessary to supply the American military completely. While some within the Roosevelt administration favored the wholesale appropriation of private industry in order to meet war priorities, the president, following the precedent of the New Deal, favored government oversight of private industry as the best way to mobilize for war. Government and industry created a mixed public/private economy to advance war production. Even before the attack on Pearl Harbor, the character of American business had changed radically.

THE SPRUCE GOOSE

Howard Hughes made a fortune in the aviation business. In particular, he made a fortune during World War II building planes for the military. However, his war contracts became the subject of a public scandal as he was charged with plying top military officials and President Franklin D. Roosevelt's son with bribes. At the center of the controversy was the Spruce Goose, an $18-million airplane constructed of wood that stood five stories tall. In theory the Spruce Goose was to be a combination of boat and airplane. Testifying before the Senate, Hughes vowed that the plane would fly or he would leave the country. On 2 November 1947, almost by a miracle, the Spruce Goose took off from the water and flew almost one mile before landing in Long Beach Harbor. This was one of Hughes's last public appearances.

Source:

Michael Drosoin, Citizen Hughes (New York: Holt, Rinehart & Winston, 1985).

Bureaucracy

The Roosevelt administration, concerned over the ease with which continental Europe had fallen to the Nazis, was determined to prepare America's economic and industrial base for the possibility of war. Spending on military preparedness soared, reaching $75 million a day by December 1941. On the model of the New Deal, the administration also established a host of agencies to oversee the economy. Some New Deal agencies simply shifted their work toward war preparedness. The Reconstruction Finance Corporation (RFC), originally established to provide low-cost loans to small businesses, began financing the construction of defense plants. Other agencies were created to facilitate preparedness, such as the Office of Production Management (OPM). Headed by production genius William S. Knudsen, industrialist Edward R. Stettinius, labor leader Sidney Hillman, and New Dealer Leon Henderson, the OPM attempted to coordinate the distribution of raw materials to industry and set production goals for vital war goods such as steel. Later that year the Supply Priorities and Allocations Board (SPAB) assumed some of these duties. In March the administration created the National Defense Mediation Board, designed to mediate labor/management disputes in vital industries, In April the Office of Price Administration and Civilian Supply (OPA) was created to prevent inflation and protect consumers. In the wake of Pearl Harbor more bureaucracies were created. The War Production Board (WPB) had many of the same duties as the OPM but more-sweeping powers to accomplish its goals. Likewise, the new National War Labor Board (NWLB) took over from the National Defense Mediation Board and had the power to order arbitration rather than simply recommend it. When even these powers proved inadequate to the task of increasing war production, Roosevelt created a production czar to coordinate the varied problems of a mixed economy. Donald Nelson, a former executive with Sears Roebuck, reshaped the WPB and made himself the most powerful man in the American economy. Although critics charged he was a virtual dictator, the affable Nelson was a conciliator, and WPB was staffed with dollar-a-year men determined to use the board to advance the cause of private industry and retard government centralization of the economy.

Rationing

Despite Nelson's and the WPB's management of the economy, a persistent problem during the war was the scarcity of vital raw materials such as rubber, access to which was cut off in many cases by the enemy. To fill the orders for these raw materials (a B-17 bomber used half a ton of rubber) the WPB, the OPA, and the rest of the government turned to the public, engaging them in the pervasive home-front activity of rationing. The government deemed many everyday items as essential to the war effort, ranging from gasoline to ketchup. The OPA limited the amounts of these items consumers could purchase via a series of rather complex red and blue ration books. Meat, sugar, butter, canned goods—all were rationed. Gasoline was apportioned via rating stickers on the windows of cars. Cars used for pleasure got an A rating and limited gas; emergency vehicles received an E rating and unlimited fuel; the remainder of cars received a B, C, or D rating, with different amounts of gasoline for each. The OPA's rationing system was cumbersome, necessitating sixty thousand full-time employees and fifty-five hundred local rationing boards to administer it. It generated a terrific amount of grumbling among the public and a lively traffic in black-market goods. A friendly grocer might slide favored customers extra meat with their ration; organized crime sometimes hijacked goods and sold them for exorbitant prices. Authorities tended to be tolerant of small-scale abuse of the rationing system, but the government did alter the type of ration books printed midway through the war in order to thwart counterfeiters.

Shortages and Scrap

Consumers also endured shortages in favorite goods during the war. Coffee was scarce because the ships that normally carried the beans north from Latin America were carrying goods to the front. Cigarettes were difficult to find, as they too made their way to the battlefield. Alcohol, used in explosives, was less available to distillers (one whiskey maker marketed Olde Spud, a product fermented from waste potatoes). Spectacles, two-thirds of which were formerly imported from Germany, naturally became scarce. Women compensated for the lack of silk stockings (silk was used in parachutes) by keeping their legs shaved and drawing seams down their calves with eyeliner to give the appearance of hosiery. The worst shortage of all was in housing, especially near the booming defense plants. Americans routinely doubled up, sharing small rooms in cramped apartments, or lived in makeshift trailers and other forms of substandard housing. While Americans tolerated such shortages, they also participated in a voluntary austerity program by limiting their purchases of consumer items. In a widespread publicity campaign the Office of Civilian Defense (OCD) suggested that limiting purchases would help win the war. The government also urged the public to grow victory gardens and supply themselves with food, a habit many had already cultivated in the Depression. Officials also solicited public help in acquiring used and scrap goods that could be reused in the war. Children especially participated in "scrap drives," saving bacon grease (used in ammunition) and old newspapers (to conserve paper) and hunting for bits and pieces of cardboard, scrap metal, tin cans, tinfoil, and old rubber. The cumulative economic and production effects of these sacrifices were less important than their ability to knit the nation to a common cause. Mobilization on the home front gave Americans a sense of participating in the struggle and diffused criticism of the war. For the most part, however, shortages, rationing, and patriotism meant most American worked overtime and saved their money ($140 billion by 1945), building a base for the boom in consumer purchases after the war.

Boom

By 1943 the combination of government oversight and incentive and of rationing and resource allocation resulted in astonishing advances in production. Production of raw materials was unprecedented. During the war the United States Steel Corporation alone made 414 million ingot tons of steel, more than Germany and Japan combined. Direct war production was also enormous, nearly two-thirds the total production in the United States. American industry turned out 2.4 million military trucks, 86,000 tanks, nearly 30,000 aircraft, 15 million rifles and machine guns, 64,000 landing craft, and 6,500 ships. U.S. Steel made 21 million helmets for the army, each capable of withstanding a hit from a .45-caliber bullet. The quality of other war goods also improved. Aircraft became faster and more powerful; jeeps (the name was soldier slang for "GP," or general-purpose vehicle) more rugged; tanks more impenetrable. The engineering advances spurred by the war became invaluable in the postwar economic environment, as did improvements in manufacturing techniques, which speeded up production. Indirect war production was also considerable, laying the foundation for the postwar economy. U.S. Steel made 31.4 million kegs of nails, enough steel fencing to stretch from New York City to San Francisco, and 90,500 tons of barbed wire. They cast 1,250 miles of pipe, manufacturing the "Big Inch" pipeline that supplied Texas oil directly to New Yorkers. Walter Kidde and Company increased its sales of carbon dioxide fire extinguishers and fire detectors during the war; sales rose from $2 million in 1938 to $60 million during the war as the company's equipment was used in tanks, ships, and planes. Its workforce grew from 450 to 5,000 people. Lights, Inc., experienced similar growth. The company made lights used in aircraft and automobiles. Its sales went from $150,000 to $50 million annually. Such success stories were commonplace. The war precipitated boom times in nearly every sector of the American economy. By 1944 American manufacturers were itching for the war to end so they could convert their industries fully to civilian production. The industrial infrastructure was in place, profits were high, and the workforce was trained. All that remained was victory.

THE NEW CONSUMER HOUSEHOLD

In the years following World War II the American household changed dramatically. Not only was the birthrate exploding, but housework was transformed by technology. The new modern household now included many electric appliances designed to make housework easier. The electric waffle maker, coffeemaker, eggbeater, egg timer, toaster, and dishwasher all came into common use. The appliances in the average household cost a total of more than two thousand dollars.

Source:

Elaine Tyler May, Homeward Bound: American Families in the Cold War Era (New York: Basic Books, 1988).

Recovery

War mobilization rescued American industry from the worst crisis in its history. Massive government expenditures spurred tremendous growth, modernized aging physical plants, and insured high wages and speedy production lines. War profits after taxes reached $10.8 billion by 1944. The war also, in a sense, created the modern corporation, because government contracts did not go to small and large businesses equally; large companies benefited disproportionately. The government set aside antitrust suits as disruptive of production. Ten companies received 30 percent of the total $240 billion spent on defense contracts. The Kaiser shipbuilding company alone received 30 percent of defense outlays in 1943. Large companies further restructured their organizations to operate effectively within the new economic environment. Administration engaged more directly in politics; large corporations, such as General Motors, established planning divisions to anticipate future needs on the model of the WPB's allocation bureau; and research and development divisions became commonplace. The mixed economy of the war was so successful that many businessmen, heretofore opponents of government intervention into the economy, came to accept federal regulation, oversight, and expenditures. Other businessmen, however, ironically argued that the war vindicated private enterprise. Chafing at the bit of wartime regulation, they sought an immediate end to federal oversight after victory—whatever the temporary dislocations to the economy. The tension between these two groups fueled the political conflicts of the Truman administration. By the end of the decade, however, businessmen generally agreed that government participation in private business was beneficial. The mixed economy synthesized during the war became a model for subsequent decades: generous government defense spending; government expenditures to "prime the pump" of consumer spending during economic downturns; government mediation of labor disputes and generally high wages; and government toleration of gigantic American corporations. War mobilization ushered in thirty years of American prosperity.

Sources:

William Chafe, The Unfinished Journey: America Since World War II (New York: Oxford University Press, 1986);

John Harris Howeil, The Right to Manage: Industrial Relations Policies of American Business in the 1940s (Madison: University of Wisconsin Press, 1982).