Freedom's Forge: How American Business Produced Victory in World War II

by Herman, Arthur

  And thus far Henry Kaiser was not even a glimmer in anyone’s eye.

  On June 12, a steamy Wednesday, the National Defense Advisory Commission held its first official meeting. Far away in Europe, Italy had declared war on France and Great Britain—a move Roosevelt denounced in a speech at the University of Virginia as a “stab in the back”—the most militant speech from the president on foreign policy so far. Meanwhile, a demoralized French government was groping toward an armistice with Hitler.

  The big problem for the commission that day, however, was office space. William McReynolds, a wiry bespectacled thirty-four-year veteran of nearly every federal department in Washington before becoming FDR’s head of the Office of Emergency Management, and whom Roosevelt had loaned to Knudsen to help him get set up, proposed a solution. Everyone would move over to the new Social Security Building, which was nearly finished but had 200,000 square feet of empty offices.45 In the meantime, the Federal Reserve Building would be their temporary home. It also had the advantage of being air-conditioned, unlike the War or Navy buildings—and during one of the most torrid summers in Washington memory.

  Bill Knudsen’s immediate focus was on how a commission that was entirely advisory, with no powers of its own, was going to proceed.

  “First,” he told everyone, “we have to find out what the Army and Navy want, how much, and when.” The estimate they had given him of arming and equipping an additional 280,000 men would be, he believed, totally inadequate to the job that was coming. “I suspect the Army and Navy can, and will, change their mind pretty fast…. So let’s not pay attention to that 280,000 figure.”46§

  He then explained to those who weren’t engineers how mass production worked. He showed how to take a complete unit like an airplane or a truck or a machine gun, break it down into little individual pieces, then machine the parts back together again so each was uniform and each subassembly functioned exactly like every other subassembly—and then every completed unit functioned exactly like all the rest. This, he said, would be the basic way in which everything necessary for defending the country would have to be made.

  “Mass production has never depended on speed and never will,” he told his listeners. “Speed, as such, is worthless. The only thing that produces good work is accuracy.” Once factories and workers learned how to reproduce that accuracy with new unfamiliar products like tanks and planes, they could go on to make more complex weaponry at the same rate—perhaps weapons more complex than any ever seen.

  “I’m not a soldier, and I’m not a sailor,” Knudsen concluded. “I am just a plain manufacturer. But I know if we get into war, the winning of it will be purely a question of material and production. If we know how to get out twice as much material as everyone else—know how to get it, how to get our hands on it, and use it—we are going to come out on top—and win.”47

  Knudsen was happy, as well, because in addition to his own team, two more allies had turned up. One was Roosevelt’s new secretary of the Navy, Frank Knox, a fellow Republican and Chicago newspaper publisher. The other, even more important, was Henry L. Stimson, the new secretary of war. At age seventy-two, Stimson was a Washington legend. Former secretary of war under President Taft and former secretary of state under Hoover, no man knew more about the ins and outs of American foreign policy—and, as a leading corporate lawyer, the moods and direction of American big business.

  He and Knudsen soon discovered they were kindred spirits. “My impression of Mr. Knudsen’s ability and his tact grows with each time I see him,” Stimson would write in his diary.48 He also agreed with Knudsen that the only way for America to prepare for war was through American private enterprise. “You have got to let business make money out of the process,” he would write in his diary, “or business won’t work.”49

  Stimson became secretary of war on June 14. That same day the papers carried the news that the Germans had marched into Paris.

  Back in New York, Alfred Sloan sat in his office in the General Motors Building and penned a note to his friend John Pratt.

  It looks as if the war in Europe is rapidly moving toward a conclusion. I am probably wrong about this but I can’t see how it can be otherwise. It seems clear that the Allies are outclassed in mechanical equipment…. They ought to have thought of that five years ago. There is no excuse … except for the unintelligent, in fact stupid, narrow-minded and selfish leadership which the democracies of the world are cursed with…. [Now] there is nothing for the democracies to do but fold up. And that is about what it looks as if they are going to do.50

  Bill Knudsen was out to prove his former boss wrong.

  “No one can do what we can do if we all get together,” he liked to boast. Americans’ love of freedom, of individuality, of doing things differently from the other guy—these were sources of strength, he believed, not weakness. He believed in the power of the average American worker—“Progress in the world is accomplished by average people,” he would tell audiences—and the power of American business. “American ingenuity has never failed to cope with every specific problem before it,” he told a national radio audience, “and if we have your support and confidence, we will surely succeed.”51

  On that count, some American businesses were already giving him a head start.

  * * *

  * Jones was very proud that his Reconstruction Finance Corporation was the one New Deal agency that actually made the taxpayer money, instead of losing it like the others.

  † Jeffers, Montana-born son of a brakeman who had grown up on the railroad he would eventually run, decided someone else could run the show when he brought synthetic rubber output from almost nothing in 1941 to 270,000 tons by 1943, and resigned. Roosevelt and Jones pleaded with him to stay. But Jeffers refused. He wrote to the president: “I feel I can contribute more to the war effort by getting back to that railroad.”

  ‡ His colleague Ed Stettinius could tell him how after World War I Bethlehem Steel had been forced to close down its plant for making large artillery pieces because the federal government demanded the company pay a special tax for the facilities. Bethlehem offered to give the government the plant, and its huge forging, boring, and casting machinery, for free. The government had refused. And so, at its own expense, Bethlehem had been forced to break up and tear down every fixture and sell it for scrap.

  § He was right. Just three weeks later, the Army would raise that figure to one million men by 1941, and two million by January 1, 1942.

  Lockheed workers build Hudson bombers for the Royal Air Force, mid- to late 1940. Lockheed Martin Corporation

  America is like a giant boiler. Once the fire is lighted under it there is no limit to the power it can generate.

  —British foreign secretary Lord Grey

  ONE MORNING LATE in 1939, a woman who had lived in Pittsburgh for the better part of a decade woke up to find smoke pouring up from the hills behind her house. She called the police: Was that a fire across the valley? “No, ma’am,” the desk sergeant told her. “That’s no fire, lady. Them’s the mills.”1 After ten years of economic depression, she had never known there were steel mills in her neighborhood. But now they had roared to life. The first wartime orders from Britain and France had come in.

  That the Allies would look to the United States for their war materiel made sense. Even after a decade of depression, America’s manufacturing base was still the world’s biggest. British and French military planners all assumed American-made planes and other equipment could help to close the gap with the Germans.

  In 1938 alone, their orders would total some $350 million—with $84 million in aircraft engines.2 It was five times what the Army Air Corps was ordering. Britain’s war, and France’s, resurrected America’s aviation industry from the dead. One of the very first orders came in the spring of 1938, when a British team from the RAF flew out to Burbank, California, to tour the factory of Lockheed Aviation, now merged with the struggling Vega company. The British saw nothing they liked, and dec
lared they would move on. The president of Lockheed-Vega, Robert Gross, was desperate. “Give me forty-eight hours,” he told the RAF. “Let me see what my engineers can come up with.” The RAF waited, and working four times around the clock flat-out, the Lockheed men came up with a “mock-up” of a long-range medium bomber modified from their civilian Super Electra airliner.3

  The British were impressed. Before flying home, they ordered two hundred. The plane would become the Lockheed-Hudson, the first American-built airplane to fly with the British air forces in World War II. The British would go on to order more than thirteen hundred of them; the Hudson would become the mainstay of RAF Coastal Command. One would guide British destroyers to the Nazi supply ship Altmark, freeing three hundred British prisoners and scoring Winston Churchill’s first triumph as First Lord of the Admiralty. Another would be the first aircraft to sink a German U-boat, in 1941.

  Glenn Martin in Baltimore got his big order from the French in late January 1939, for 115 of what would become his version of a two-engine long-range bomber, the Martin 167 Maryland.4 The U.S. Army Air Corps showed no interest, but two months later France ordered 700 more, along with extra aircraft engines.* From Pratt and Whitney alone, they ordered 6,000.5

  The French had also taken a keen interest in a scrappy little fighter plane designed and built by a Long Island plane manufacturer, Roy Grumman. His F4F Wildcat, designed for aircraft carrier use, couldn’t raise any interest from his own nation’s navy. But the French bought one hundred, and when France surrendered, the British took over the order. Not only was Grumman’s balance sheet looking a lot better. The bulldog-like fighter that would spearhead the American war effort in the Pacific at Wake Island, Midway, and Guadalcanal was itself saved from oblivion.6

  Meanwhile, French and British purchasing agents were ordering machine tools for their own factories, some $100 million worth, while another $138 million was spent providing machine tools for American factories to fill their orders. It was equal to the entire machine tool output of the country the previous year.

  Making all these new planes and engines and tools also demanded aluminum and steel, especially steel. In 1929 American mills were annually producing close to 63 million tons. The Depression and failed New Deal years had slashed that number by more than half.7 Now in 1939 the mills were springing back to life. Ed Stettinius could walk down to a U.S. Steel foundry and watch in the near-darkness as the thin rivulets of glowing molten metal poured into the molds for steel ingots again, while in other plants huge machines spat out long red-hot sheets of rolled steel.

  Thanks to Britain and France, America’s manufacturing sector showed the first flutterings of activity in a decade. Men returned to work; families gathered to open the first paycheck. Stores in Pittsburgh crammed their windows with refrigerators and radios as crowds gathered in the streets on weekends to gaze and wonder. One clothing store owner remembered a Czech miner coming with his wife, daughter, and two sons. In a thick accent, the miner said, “Fit us out with new clothes.” None of them had seen a new shirt or pair of shoes in ten years.8

  The one thing that briefly threatened this revival of industrial prosperity was the Neutrality Act. Once hostilities formally began, the delivery to belligerent nations of orders for war goods would have to cease. The British became so spooked after Munich they halted all orders. Then in November 1939, Roosevelt had pushed Congress into modifying the law to allow Britain and France to buy as much as they could pay for in cash. It wasn’t just good foreign policy, it was good business. “Cash-and-carry” lifted the last barrier to British and French rearmament from the factories of America. Total orders soared to more than $200 million.9

  Then when the head of the French purchasing board, Jean Monnet (later architect of the Common Market), suggested the British and French pool their purchases of planes and other equipment, the stream of Anglo-French orders became a torrent.

  In the first half of 1940, Britain and France purchased three times more airplanes and engines than they had for all of 1939. American aviation companies found themselves swamped with orders for more than 8,000 planes, and then 13,000—all this at a time when their own Army and Navy could barely scrape together enough money to order 5,000.10†

  The evacuation of Dunkirk marked the next turning point in America’s call to arms—the very week Knudsen arrived in Washington. The British army had left all its tanks, trucks, and field artillery pieces on the beach. Even rifles and machine guns were in desperately short supply. With a German invasion looming, Churchill confessed to one intimate that there might be fewer than seventeen tanks left in the entire British Isles.11

  The most urgent need, however, was rifles. Churchill approached Roosevelt, who in turn approached General Marshall. What from the Army’s own current stores could be spared? That was the question Marshall posed to his chief of ordnance. By June 3 he had his answer. There were some 500,000 old Springfield rifles, all made during the last war and then packed away in grease. Since the Army was planning to deploy a new infantry firearm, the M-1 semiautomatic, Ordnance Chief Charles M. Wesson figured he could spare these plus 80,000 World War I—era machine guns, nine hundred 75mm guns, and 130 million rounds of ammunition without setting back the Army’s own rearmament plans.12

  Marshall signed on. That still left the problem of how to get the rifles and other surplus weapons across the Atlantic. Thanks again to the Neutrality Act, the United States still could not directly turn over weapons to a wartime belligerent—not even a democratic one like Britain, with its national existence at stake. Instead, the weapons had to be turned over to an American concern that could then resell the equipment to the British. It would have to be a concern large enough not only to take over and organize the rifles and guns, but also ship them out on a timely basis.

  Wesson walked out of the Munitions Building, crossed Constitution Avenue to the Federal Reserve Building, and went to the office of Knudsen’s colleague Edward Stettinius, former head of U.S. Steel. He asked Stettinius point-blank if the firm’s Export Company, which shipped iron and steel products all over the world, could handle the order. The deal would be good for U.S. Steel, as well, since the British payment for the guns would be down payment for the Army’s own order of steel plate for its tanks and new 105mm and 155mm artillery.

  Stettinius was delighted to say yes. There was only one hitch. Stettinius had just submitted his resignation from U.S. Steel in order to work on the National Defense Advisory Commission. It would become effective at three o’clock that afternoon. Until then he could make some calls, he told the general, and picked up the phone. In a few minutes, he had Irving Olds, the new chairman of U.S. Steel, on the line and arranged for a meeting the next morning with General Wesson. It was Stettinius’s last act as chairman of U.S. Steel, and by far the most important.13

  By June 11 more than six hundred freight cars were unloading their contents at the Army docks at Raritan, New Jersey, where shifts of one thousand men each worked round the clock piling the rifles, guns, ammunition, and an assortment of TNT and smokeless gunpowder into lighters, which sailed into Gravesend Bay toward the freighter Eastern Prince. Back in Washington, British purchase agent Arthur Purvis signed the agreement with U.S. Steel for $36 million, which also turned out to be the price U.S. Steel Export Company paid to the U.S. Army. Two days later the Eastern Prince set off for Britain, arriving on June 23—the day after France surrendered. Between July 1 and August 1, another fifteen freighters ferried the remaining supplies across the Atlantic.14

  Stettinius and U.S. Steel had established a direct lifeline between America and a beleaguered Britain that was only bound to grow larger. Nor did the fall of France halt the orders from that quarter. From the new French government in exile, Jean Monnet put forward his second big idea: pooling Britain’s and Free France’s gold reserves in order to buy whatever Britain needed to defend its shores—which was now the defense of free government everywhere. Churchill spoke to the House of Commons on June 4, stating that
“we will fight on the beaches until, in God’s good time, the New World, with all its power and might, steps forth to the rescue and liberation of the Old.”

  By August, Churchill and Roosevelt had reached a deal to lend the Royal Navy fifty outdated American destroyers. America was committed to the survival of Britain. The rescue Churchill prayed for was under way.

  Meanwhile, Knudsen was finally getting through to the Army. The answer to his persistent questions about what it needed and when came in a memo on June 13—the day before Stimson became secretary of war. It called for a one-million-man army by October 1941, and two million by January the following year. It also called for 9,000 and 18,000 new warplanes by those same dates, with a further goal of 36,000 planes by April 1, 1942.15

  Together with the Navy’s appropriations for three new aircraft carriers and 4,050 additional aircraft, Marshall believed this would be just enough to protect America’s borders from the Atlantic to the Pacific, as well as the Caribbean. South America would be on its own. As for intervening in Europe, that still belonged to the realm of fantasy, not strategy.16

  The whole buildup, Marshall estimated, would cost a whopping $11 billion—eleven times the entire defense budget in 1939.17 This was a raindrop in the Potomac compared to what wartime Washington would later spend, but that summer even the president said it was too much—he could never get an appropriation that size through Congress. Marshall bowed to reality, and the amount shrank to $7.3 billion. How the United States was going to squeeze a fully equipped modern army, navy, and air force out of that amount was anybody’s guess.

  Even so, Knudsen had some numbers to work with at last. Now American industry could get to work, starting with aircraft engines.

  The first meeting came on May 27 with people from Pratt and Whitney and Wright Aeronautical, the nation’s leading aircraft engine makers, as Knudsen asked for engines for more than six thousand planes.18 Allison, a division of GM, was also there. Knudsen saw aircraft engines as crucial to the early stage of industrial mobilization, not just because they were enormously complex machines to manufacture,‡ but because they were the kind of war machinery he figured other industries might be able to produce with the right machine tools and training. In order for that to happen, however, two big changes in the way the government dealt with business were going to be needed.