What specific challenges did industrialists face as they converted from a commercial market to a war footing?
The biggest one I think is machine tools. You don’t produce anything if you don’t have the correct machine tools. These are the point of a spear of a drill press, or the typical way that you’re setting up a lathe or a punch press. And building machine tools had to be first. Obviously, what goes into making a refrigerator for civilian use is a different animal than boring out a 16 inch battleship gun. And so you had to create these machine tools first. That was the biggest challenge. Machine tools are high precision and there are only a few firms in America that make them.
The first thing that had to be done though was to contact machine tool producers and give them new specs, give them loans plus contracts to enable them to produce machine tools. That’s the biggest one.
The second one I think is exploiting American economies of scale by building larger factories than had ever been built. And that’s not romantic, thinking of the Willow Plant of Michigan for example. It was built very quickly, and in many ways not everything worked, not everything fit together. There was a pretty bad record of safety and accidents while on the job, and it was kind of like the whole thing was gonna break down all together. It also required Americans to be willing to move from wherever they happened to live and go where there was work. And I know again you could play inspiring music behind the soundtrack of that, but what I mean was that people were forced to uproot their lives if they wanted to keep working in a wartime economy. And those big firms which got bigger and bigger and bigger replaced a lot of small firms which went under all through 1940 and 1941. So I think the first thing is machine tools and the second thing is rationalization: larger and larger corporations supplanting smaller, single-room machine shops across America.
Once production goes into play, then the big third one, which is the one we’ve already discussed to a certain extent, is getting that stuff from America to the Theaters and the front. That was a big challenge, and that was still being played up in ‘42 and ‘43. When we went to war in late ‘41, the first thought of General George Marshall, who was the Chief of Staff of the Army, was to invade Europe: beat the Wehrmacht, beat the Germans in France, push back into Germany, and march into Berlin and capture Hitler. But he soon realized that we couldn’t. We didn’t have the transport capability. Even if we did have the transport capability, we didn’t have the landing craft that could actually land on a hostile shore and get troops into action quickly. This is, of course, the famous Higgins boat: Landing Craft Personnel (LCP), and the Landing Craft Tank (LCT). There are all sorts of varieties of it. That ship had barely been designed, and it certainly wasn’t in the kind of mass production that it was going to take.
Napoleon famously said that an army marches on its stomach. That is to say: you can only do what you are supplied to do. It doesn’t matter how good your generals are or how good your soldiers are, if they aren’t being fed or if they don’t have any ammunition, then they’re not going anywhere. The absolute upper limit of U.S. operational mobility of World War II was the Higgins boat: we could only do what the amount of landing boats would allow us to do. Thankfully, we wound up producing so many of them that there was no real practical upper limit, only a theoretical upper limit. That’s where that production story becomes so important in terms of strategic and operational challenges.
One of the theories on how the American postwar economy boomed attributes the success of the American economy to monumental government spending. Is this a misconception and, if so, what can we attribute to the success of the postwar American economy?
There’s a famous book, Arthur Herman’s Freedom’s Forge, which attributes the entire success of the World War II economy onto a handful of these Knudsens and Higgins’ and Kaisers that you and I have been talking about. They brought their patriotism forward, the innovation, the entrepreneurial skills that U.S. workers on all levels enabled. I don’t deny any of that, but the portrait has been overdrawn. Cost-plus contract gave every World War II contractor a guaranteed 8 percent profit, more or less. A guaranteed 8 percent profit is a lot of money for a $10 billion industry. Things like Cost-plus contract, a five-year amortization rather than 16, and letters of intent that could be used for borrowing [also impacted the success of the World War II economy]. Henry Stimson who was Secretary of War at the time said “you have to let business make money, otherwise business won’t work.” It’s quoted all the time. What’s not quoted all the time is the preface to that quote: “Under capitalism, you have to let business make money.” I think you had a lot of intrepid entrepreneurs in World War II, and you also had a lot of government spending. It’s neither a pure form of free enterprise nor some kind of top-down government socialism, I think it’s somewhere in the middle.
I think in the ‘50s, a couple of things work together for the U.S. economic growth. One of them is that all of our competitors had pretty much been laid low. If there was ever a rivalry with the British Empire, that rivalry died in early ‘41 when Britain ran out of money to buy our products and went to Lend Lease. But Lend Lease did not come into place until Great Britain ran out of money. Likewise, Western Europe had been devastated, the Soviet Union had its own problems, there was no real major peer competitor on an international market.
If you add one more thing in there, stable and incredibly cheap cost of energy between 1950 and 1973, I think you’re going pretty far forward in explaining America’s incredible level of economic boom and incredible level of prosperity. I was born in 1958, and one thing I remembered most of my lifetime up to my teen years was that gas cost 30 cents a gallon. One year you’re making $5,000 a year and the next year you’re making $20,000 a year, but gasoline still costs 30 cents a gallon. It did until the oil shock of 1973; the Arab-Israeli War, the oil embargo declared by OPEC. I think often we may be look for ‘Why are we no longer as successful as we used to be? Is there a spiritual malaise in the country?’ Well, I’m not sure anything is wrong with it. Oil prices fluctuate wildly and that leads to a great deal of economic uncertainty. Energy is the lifeblood of the modern economy. I think cheap energy was really fuelling the prosperity of the ‘50s and ‘60s.
What commonalities were there between the British war economy and the American war economy?
There were commonalities, in that Britain was wedded to a capitalist system, free enterprise, banks that were regulated but hardly directed by the state. I think you had all of these things in abundance in the United States as well. But rather than emphasize commonalities, let’s look at some key differences.
Britain was in that war a long time before we came into it. Two years plus. Early in 1941 Lend Lease began, but it did not go into place until Britain was pretty much tapped out, and Britain would remain tapped out for the rest of the war. And what that meant was that Great Britain always had to fight with one eye on how much reserve manpower it had remaining.
By the time British forces landed in Normandy, we always say of Montgomery that he was so slow and never seemed to move as rapidly as he ought. By that time, he was down to Britain’s last field army, and if they lost that one, there probably wasn’t going to be another one set up on the front. So it resulted in a great deal of caution. So Britain mobilized and they came up with great designs and mass-produced them as far as Britain was capable. But of course the British economy was nowhere near the size of the American economy. By 1943, U.S. military production was twice that of Germany and Japan combined. Victory in 1945 was inconceivable without Britain, and we have to emphasize that Britain fought World War II and helped lay Hitler low at the cost of surrendering its world empire and in many ways surrendering its global status.
In the Soviet Union, you have economies of scale, gigantic industrial facilities, and mass production. However, I think there are a couple qualifiers: the Soviet Union lost so much of its productive farmland and so much of its industrial territory and raw materials in the initial Barbarossa offensive. Imagine if in World War II an enemy had overrun the American Eastern Seaboard all the way up to Pittsburgh and how America might have retooled and how America might have gone back to mass production after that. It would have been very difficult.