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

by Herman, Arthur

  Catton’s version of the war years in Washington, which cast big business as the great obstructionist villain, joined up with the narrative put together by acolytes of economist John Maynard Keynes. Far from demonstrating that government intervention failed to revive the American economy during the New Deal years, they argued that war mobilization proved the opposite. Roosevelt in the thirties simply hadn’t spent enough, they claimed. Three hundred billion dollars of deficit spending for the war completed the job the New Deal’s $50 billion couldn’t. The implications were profound. Keynesians asserted, in wartime or peacetime, all you had to do to generate economic growth was increase demand through growing the federal budget or by running government deficits, or both. From 1940 to 1945, business and industry had simply been the lucky recipients of federal largesse. In peacetime, the poor, disadvantaged, and elderly would be next to receive the blessings of big government deficit spending. “Our mixed economy,” wrote economist Paul Samuelson—the same man who predicted economic depression at war’s end—“has a great future before it.”18

  Knudsen had forced Washington to give up the illusion of M-Day—of government effortlessly mobilizing an economy of war with the throw of a fiscal switch. Now the illusion returned, disguised as a Keynesian miracle rather than a mass production one.

  Even before the war was over, Keynes’s disciples occupied key posts in the Office of Price Administration, the Commerce Department, the Bureau of the Budget, and Treasury. When Keynes appeared at the international economic conference at Bretton Woods in 1944, the delegates sang, “For he’s a jolly good fellow.”19 Knudsen and the businessmen who had made production possible were already forgotten. Samuelson’s Keynesian account of World War II in his best-selling textbook, Economics, completed the process of amnesia.

  But then, the people Knudsen had recruited early into the war effort, the roll-up-the-sleeves men who had built their companies up from the ground and had spent their lives learning to make more things better and cheaper, were also disappearing. Henry Ford died a year before the big Dane, in April 1947. Bill Jeffers, the railroad man who built the synthetic rubber industry from nothing, went the way of all flesh in 1953. Andrew Jackson Higgins, the landing-craft wizard had died the year before, as did Alvan Macauley of Packard, whom Knudsen had called when he needed someone to build Rolls-Royce Merlin engines.

  Kaufman T. Keller, whom Knudsen had also called that summer of 1940, quit as president of Chrysler in 1950. That year the unions and the big auto and steel makers, acting under the watchful eye of President Truman, cut a deal that allowed union wages and fringe benefits—in 1943 Congress had exempted health and pension concessions from federal taxation—to steadily rise in exchange for those companies knowing what their labor costs would look like, year to year. Keller stayed on the board of the company until 1956. His death followed a decade later.

  Tom Girdler, Kaiser’s steelmaking mentor who had turned Consolidated Aircraft into a mass-production giant, died in 1965. Felix Kahn was struck down by a heart attack in 1958—as it happened at the Shoreham Hotel in Washington, where his old Six Companies partner had headquartered the Kaiser war effort.

  As for Knudsen’s old rival Charlie Sorensen, he stayed as tough and ornery as ever. When Henry Ford II took over his father’s company in December 1943 and failed to offer Sorensen any part in senior management, Cast-Iron Charlie abruptly quit. He switched to Willys-Overland, the makers of the jeep, and supervised their conversion to peacetime production, including turning out more versions of the most famous Army vehicle of World War II.

  Sorensen went through more than one clash with the Willys board, but managed to hang on until 1950. Then he retired and took off for the Caribbean, where he sailed his beloved yacht, White Cloud, and nursed his many resentments.

  Three years later Willys was sold to the other giant of the war years, Henry Kaiser.

  Kaiser was one of the last of the old breed, and the most complicated.

  He had anticipated the postwar boom by four years. “We have only a glimpse of what the future holds,” he told an audience in September 1942, echoing Alfred Sloan’s words at the World’s Fair three years earlier. “A pent-up consumer demand will be released, seeking satisfaction in every artifice and device we know how to make.”20

  When the war ended, Kaiser plunged out in every direction. He struggled hard to keep the Richmond and Portland yards open. In August 1946, Richmond No. 3 was still employing 3,500 workers. But in October the Maritime Commission officially wrapped up operations in both yards. A tearful Kaiser told his workers and managers of his “deep regret” at having to shut down what had become the most famous shipyards of the war.21 But in his own mind, he had already moved on.

  He expanded his steel and magnesium operations, and started up Kaiser Aluminum in 1946, turning a $5 million profit his first year of operation. His experience with building homes for shipyard workers drew him to the possibility of postwar home building. He recruited designer Norman Bel Geddes—the same designer who had built GM’s Futurama for the 1939 World’s Fair—to create a prefabricated three-room steel frame house for only $1,300. He launched Kaiser Community Homes, Inc., which built miles of sprawling suburban homes across places like Panorama City, California—the ancestor of the tract housing development.

  In the postwar glow, it was easy to forget the shortcomings of the Kaiser empire. After all, there had been the Hughes debacle, the cracked Liberty Ships, and the ubiquitous but cheaply made and under-armored baby flattop carriers that the sailors who sailed them called “Kaiser coffins” and “one-torpedo ships.”22 What finally pulled the public up short, however, was his disastrous venture into the Detroit auto industry.

  Just as he had humbled Big Steel and Big Aluminum, so Henry Kaiser figured he could teach Ford, GM, and Chrysler something about how to make cars. He had all the elements of the Kaiser success formula. There was the teaming up with Willys-Overland’s knowledgeable boss, Joseph Frazer; the sweetheart deal with the United Auto Workers, including health benefits for all workers; a plant that he could boast was the largest in the world—nothing less than Charlie Sorensen’s Willow Run, which he had bought from Ford for $12 million. Then there was the Kaiser public relations machine, splashing raves across the pages of Time and Life; and an award-winning automobile design, the “Henry J.”

  The one thing missing was generous government funding. Kaiser learned that selling to the American public was more difficult than selling to the federal government. He had to rely instead on private investors and the Bank of America, and soon found himself fatally undercapitalized. He planned to build the Henry J. for less than four hundred dollars—something his car allies told him was an impossibility.23 No one bought his cars, so Kaiser opened plants in Argentina and Brazil, hoping to attract Latin American buyers. In desperation he reconverted Willow Run into an aircraft factory, to make transoceanic cargo planes—reviving the old Hughes dream.

  Nothing worked. A discouraged Henry Kaiser had to sell his entire operation in 1958. It had been a spectacular disaster. Although he went on to launch successful construction ventures in California and Hawaii, his new adopted home, and Kaiser Aluminum remained a powerful industrial enterprise, his reputation as America’s entrepreneurial wizard was permanently tarnished.

  Still, the master builder now in his sixties remained as tough and tireless as ever. Associate Tim Yee recalled doing a full day’s work in Honolulu, then catching a red-eye back to the mainland with the old man, which meant discussing business all night and a normal workday on arrival. Clay Bedford’s brother Tim recalled a whirlwind trip to Brazil to find investors for Kaiser-Frazer, which involved an all-night flight from Oakland and deplaning in a hot, sticky early-morning Rio de Janeiro. There was no time to change or visit the hotel. Instead, he and Kaiser trooped off to a series of meetings with Brazilian notables through lunch, drinks, and cigars until late afternoon. Kaiser decided Bedford needed to go over some of the figures they had presented that morning,
but also insisted he accompany Kaiser and the Brazilians on a tour of Rio nightclubs.

  Sometime after midnight Bedford got back to the hotel and reworked the numbers. At 5 A.M. he threw himself into bed. Two hours later the phone rang. It was Kaiser, who had spent the night partying with his hosts. “Where are the figures?” he wanted to know. He and Bedford scanned them over breakfast, then headed back to a second round with the Brazilians. Henry Kaiser did the presentation himself. “It was dynamite,” Tim Bedford had to admit, “he was just incredible.”24

  By 1966 the man who used to rise regularly at 4:30 A.M. and hit the telephone to associates around the world finally began to flag. Building Hawaii Kai on Honolulu Island was his last great construction project. At the insistence of his second wife, Ale, he had slimmed down to 225 pounds for his eighty-fourth birthday. But the old drive was gone; more and more time during the day was spent in bed. What revived him were visits by those who had been his allies during the war years, like his son Edgar and Clay Bedford. Sensing this, the faithful Alonzo Ordway sent him a letter, dated February 6, 1967.

  It concerned the day they jumped off the train, at the start of the great adventure.

  You probably recall that it was 46 years ago this month when you and I walked into the general offices of the Division of Highways [in Redding]…. Now their headquarters is in a large multi-story building just opposite the Capitol and covers about a block. Possibly you recall that the receptionist the first time we called (who was also the switchboard operator) told us her feet were cold, so we went out and bought an electric heater for her, which of course paid for itself many times over in our later business….

  I would like to visit you someday for a few hours at your convenience so that I can see your pet project and enjoy smelling dirt with you. I would only plan to be there for part of the day….25

  Ordway never got the chance. In late August of 1967, at age eighty-five, an increasingly bedridden Henry Kaiser slipped into a coma and died on August 24. Ordway would be a pallbearer at the funeral.

  Already the era of American industrial exuberance that characterized the arsenal of democracy was fading. Thanks to two decades of concessions to unions, Kaiser’s steel and aluminum companies were about to suffer from the same problems as the rest of industrial America: high costs and low productivity plus cutthroat overseas competition—ironically, from Japan and Germany, where Kaiser Engineers had helped to install new efficient steel- and ship-making facilities after the war. The same fate was about to befall Detroit, the heartland of the arsenal of democracy. From Fontana to Pittsburgh, manufacturing America was in headlong retreat. The term “smokestack industry” would soon become a term of derision, even abuse, as it conjured up images of pollution, drab company housing, and dead-end blue-collar jobs.

  Yet no man had tried to do more for his own employees than Henry Kaiser, and no firm left a more important legacy for the future of privately funded health care for workers than Kaiser Permanente. And no one gave America’s push for victory in World War II a sunnier, more optimistic face than the bald man with the glasses and the big grin.

  It was the same optimism that had animated Bill Knudsen: the sense that America carried the seeds of its own renewal, the capacity to overcome failure and disaster and push forward. Even on his deathbed, his grandson Henry F. Kaiser remembers, he always spoke about the future, not the past.

  After Kaiser’s death someone remembered his encounter with a discouraged workman at a work site ruined by a passing storm. Everything, including the big earth-moving equipment, was submerged in a sea of mud.

  “What are we going to do?” the worker moaned. “Just look at this mud.”

  “What mud?” Kaiser said. “I see only that big sun shining down. It’s going to turn that mud into solid ground.”

  See the sun. Smell the dirt.

  * * *

  * It had not come without a human cost. The number of workers, male and female, who were killed or injured in the U.S. industries in 1942–43 exceeded the number of Americans killed or wounded in uniform, by a factor of twenty to one.

  And not just workers. One hundred and eighty-nine senior GM officials died on the job during those five years of intense mobilization and activity. The obituary pages of American Machinist in those years show the names of one corporate executive after another who “died unexpectedly of a heart attack” or was cut down “after a brief illness.”

  For Beth,

  my arsenal of love and strength

  ACKNOWLEDGMENTS

  THIS BOOK IS a special salute to the millions of Americans who worked in the factories, shipyards, mines, farms, plants, and offices to make victory in World War II possible—and to those who spoke to me about their service and sacrifice during those years. We all owe a permanent debt of gratitude to them.

  Writing this book was an amazing experience. So many wonderful people shared their time, thoughts, and labor to make it happen, and I’m pleased to have the opportunity to thank as many of them as I can.

  I start with the American Enterprise Institute, where I served as a visiting scholar from September 2010 to May 2012. AEI’s former president Chris DeMuth was enthusiastic about the project from the start, saw its rich possibilities, and offered invaluable advice at every stage. AEI’s current president, Arthur Brooks, warmly extended every resource AEI had to offer, as did its executive vice president, David Gerson. Henry Olsen, director of the National Research Initiative, made sure support for the book was there at critical times, and helped me enormously in understanding the book’s lessons for the present.

  The list of AEI colleagues who helped in my research is staggeringly long, but certain names stand out: Joe Antos, Michael Auslin, Claude Barfield, Michael Barone, Kevin Hassett, Bob Helms, Marvin Kosters, Michael Novak, and Alex Pollock, as well as Tom Donnelly and Gary Schmitt of AEI’s Center for Defense Studies. Véronique Rodman encouraged me to think creatively about the book’s many audiences, as did John Cusey of AEI’s Government Relations Office. And a very special thanks goes to my research assistant Keriann Hopkins, who tirelessly helped with the research and then correcting the typescript and galleys, and tracked down books, images, and photo permissions with riveting diligence. Thanks also to interns Joey McCoy and Harrison Dietzmann for their help along the way.

  One of the first people I spoke to about this project was my friend Roger Hertog, a champion and advocate of all my work. Paul Johnson and Steve Forbes helped to shape many of the book’s major themes, as did Dan Senor and the Discovery Institute’s George Gilder. And every historian venturing into the arena of industrial mobilization during World War II owes an enormous debt to Alan Gropman of the National Defense University, Professor Mark Harrison of the University of Warwick, and Professor Richard Overy, author of How the Allies Won. Without their prior work, this project would not have been possible.

  Grateful thanks also go to the staff of the National Automotive History Collection at the Detroit Public Library and the Henry J. Kaiser Papers at the University of California, Berkeley’s Bancroft Library; the Library of Congress; the Henry Ford Collection; the National Archives at College Park, Maryland; the libraries at Georgetown University and George Washington University; the New York Public Library; the Navy Historical Center at the Washington Shipyards; and the U.S. Army Center of Military History at Fort McNair, particularly its former chief archivist Frank Shirer; as well as the friendly people who run the Rosie the Riveter Trust at the Home Front National Park in Richmond, California.

  The Cosmos Club Library, and librarian Karen Mark, helped with the earliest stages of my research. Staff past and present from the Grumman History Center at Bethpage, New York, answered many important questions, while the resources for studying the history of American business at the Hagley Library and Archives in Wilmington, Delaware, are matched only by the helpfulness of the staff and the beauty and comfort of its surroundings.

  The libraries at the University of Virginia in Charlottesville, especially
the Brown Science and Engineering Library, were indispensable to the project from start to finish, as were the efforts of librarians Philip McEldowney and Warner Granade in making my work as painless and trouble free as possible.

  I also want to thank the many people who agreed to sit down for interviews about parents and grandparents who were central to the book. They included Fred Eberstadt, Peter and Clay Bedford Junior, Richard Girdler, and Judith Knudsen Christie. Ms. Christie also kindly gave me permission to read the unpublished oral history interview of her aunt and Bill Knudsen’s daughter, Martha Knudsen. Warren Kidder, author of Willow Run: Colossus of American Industry, offered interesting insights about working with Henry Kaiser in the postwar years. And many years ago the late John J. McCloy generously took time to answer my questions about working with the legendary Colonel Henry L. Stimson at the War Department.

  Automotive scholar Mike Davis kindly took time to read the first chapter of the book, while Bob Brown, editor of Magnesium Monthly Review, not only read chapters but provided help with everything from documenting Henry Kaiser’s magnesium ventures to finding me a B-29 pilot’s manual. My friend Jeb Nadaner, formerly of the Department of Defense and now at Lockheed Martin, carefully followed the book’s progress and offered suggestions and insights that all helped to make it a better book.

  Tom Veblen’s friendship, support, and sage counsel decisively charted the book’s course, and he kindly read an early draft of the manuscript. Linda Veblen’s hospitality and her reminiscences of her father’s service as a B-25 pilot in Italy also helped to understand the real meaning of the arsenal of democracy. My editor at the New York Post, Bob McManus, saw the significance of the project and passed along materials to help.

  Other friends offered advice, encouragement, read early chapters, or generally put me on to the right research trail. They include (again, in alphabetical order) Captain Joseph Callo, USN (ret.); James Capua; Mike Du Pont; my former Commentary editor, Neal Kozodoy; my brother-in-law Captain Keith Krapels, USN; John W. Miller; Chet Nagle; Mark J Reed; Ivor Tiefenbrun; and Kevin Weir. Arlene Anns generously opened her private collection of materials relating to American Machinist magazine during the war years, and Philip Anns, ex-Hellcat pilot and Royal Navy (ret.), provided special inspiration and expert help. Friend and neighbor Len Wolowicz helped me to solve the problem of why Liberty ships developed cracks, and answered innumerable questions about the wartime steel industry.