Keep From All Thoughtful Men

by James G. Lacey

  Table of Contents

  Title Page

  Dedication

  CHAPTER 1 - Economics and War

  CHAPTER 2 - Unmaking the Victory Program

  CHAPTER 3 - The Real Victory Program

  Plan Dog

  The Production Victory Program

  The Consolidated Balance Sheet

  CHAPTER 4 - The Economist’s War

  The Financial Revolution

  The Statistical Revolution

  Gross National Product and World War II

  CHAPTER 5 - The Production Organizations

  CHAPTER 6 - The War Production Board and Two Wars

  Reorganizations within WPB and the Army

  Army Reorganization: Creation of Army Service Forces

  The Personalities

  CHAPTER 7 - War and Feasibility

  CHAPTER 8 - The Great Feasibility Debate

  CHAPTER 9 - Marshall’s Commitment to a 1943 Invasion of Europe

  Casablanca Conference

  CHAPTER 10 - Why Marshall Changed His Mind

  APPENDIX 1 - The Feasibility Concept

  APPENDIX 2 - The First Feasibility Study (14 March 1942)

  APPENDIX 3 - Wedemeyer’s Victory Program

  APPENDIX 4 - Nathan’s 6 October Memorandum for War Production Board Meeting

  APPENDIX 5 - General Somervell’s Comments to War Production Board Proposals of ...

  APPENDIX 6 - Simon Kuznets’ Reply to Somervellʹs Comments on His Feasibility ...

  APPENDIX 7 - Letter from Robert P. Patterson (Under Secretary of War) to ...

  APPENDIX 8 - Minutes of War Production Board 6 October Meeting

  Notes

  Bibliography

  Index

  About the Author

  Copyright Page

  For Sharon, whose love, support, and

  encouragement made this and much else possible

  CHAPTER 1

  Economics and War

  Approximately a generation ago, historians finally realized that much of what they had written about battle and war in the past had neglected the effects of logistics. While they may have been aware of the old adage “amateurs talk tactics, while experts talk logistics,” they had largely ignored logistical concerns, except for a few feeble mentions of famine-induced disasters. The probable reason is that logistical studies are boring and recounting logistical matters invariably slows down the narrative pace of a campaign history. After all, who really wants to read about how many trains it took to move ammunition to the front in 1916 or about the hay consumption rate of one of Murat’s cavalry divisions? 1

  Though historians begrudgingly allowed logistical concerns into the mainstream of military history, they have still largely barred the door to the study of economic matters. While no one has analyzed the divorce of economics from most histories of war, that failure probably has two causes: economics lacks drama, and it is often hard to understand. Among historians who research and write about armies sweeping across continents and who paint verbal pictures of brutal battlefield carnage, there is little desire to delve into the economics that drive the character and form of war. Furthermore, the “dismal science” of economics is not a subject military historians typically have invested much time in learning.2 This neglect will likely widen as economics continues on its current path toward pure mathematics and model-based econometrics, and slips farther from its original moorings connected to political economy.

  Over time, this historical oversight led to considerable misrepresentations of history. For example, the greatest historian of the ancient world, Thucydides, made only one mention of the Athenian silver mines in his history of the Peloponnesian War. In a speech, Alcibiades urged the Spartans to fortify Decclea: “Whatever property there is in the country will become yours, either by capture or surrender, and the Athenians will at once be deprived of the revenues of their silver mines at Laurium.”3

  Following Thucydides, two millennia of historians, for the most part, have identified Athens’ failed Syracuse Expedition as the turning point in the Peloponnesian War. Actually, Athens made good most of the losses from that campaign in a remarkably short period and continued the war for another decade. What wrecked Athenian power were the successive economic hammer blows of losing the silver revenues from Laurium, isolation from the revenues of the Delium League, and, finally, the blockade that a Spartan fleet (financed by Persia) imposed between Athens and its Black Sea food sources.

  Likewise, few historians focus on the discovery of two major silver mines in Macedonia as a major factor in Phillip’s rise to dominance over Greece, or how that new wealth allowed Alexander to purchase the loyalty of his army by paying them twice the going wages of the most skilled masons.4 In the Roman era, military historians marvel at the brilliant maneuvers and stratagems of Hannibal and his nemesis Scipio. Few ever mention, however, how the silver mines Hannibal controlled in Spain allowed him to keep his army in the field for almost two decades without financial support from Carthage. This factor also explains Scipio’s strategy of cutting off Hannibal from this inexhaustible source of finance, while securing the mines for himself and Rome before launching his invasion of the African coast.5 In fact, Caesar, in his war against Pompey a century and a half later, invaded Spain for the same reason: before the first winter of the war was over, he had exhausted the fifteen thousand gold bars and thirty thousand silver bars that he had seized from the Roman treasury.

  Historians who focus on the military dynamics of the situation often wonder what was behind Caesar’s propaganda statement, “I go to meet an army without a leader, and I shall return to meet a leader without an army.”6 The reality is that Caesar chose his main theater of operations not because Pompey had troops there, but because that was the location of the mines that would finance his war. Lost on most military historians is a fact Caesar knew well: the base of Pompey’s power was Spain’s wealth. Knowing it would take time to mobilize the wealth of the eastern portions of Rome’s empire, Pompey had placed seven legions in Spain to protect that source of funds and recruits. Caesar knew that without access to Spain’s mines Pompey would inevitably find it difficult to finance another army.7 As it turned out, by Herculean efforts Pompey extorted sufficient money to raise an army, but it was a near-run thing and his raids on temples throughout Asia Minor and confiscation of their gold and silver did much to undermine his local support.8

  In summary, for the 2,500 years that historians have studied war, they have largely neglected its economic sinews. As such, historians have mostly missed the way finance and economics have driven changes in operational and strategic methods, as much as if not more than technology, logistics, or even the operational brilliance of commanders. So, it is unremarkable that, while most military histories give at least passing reference to Britain’s subsidies to its allies in the wars against France, there is precious little investigation into just how England revolutionized national finance so that a small, underpopulated nation could raise the funds required to fight wars on a global scale.9

  So, it is also of little surprise that there are few military histories of World War II that focus on how economics drove Allied strategic decision making, an observation that until recently also has been true of the Axis.10 There are, admittedly, passing references to Hitler’s decision to send Kleist’s panzers into the Caucasus for economic reasons, as well as his famous complaint, “My generals do not understand economics.” There is also lip service paid to the fact that World War II was a war of production and materiel resources, won, in Churchill’s words, “on a sea of oil.”11 Besides the work of a few economic historians who demonstrate little interest in the relationship between economics and military operatio
ns, however, serious military historians have largely failed to examine the economic decisions that drive war production or to relate them to the critical military choices of the war.

  In considering World War II, this neglect has led historians to accept some startling fallacies and miss the true revolution that occurred in translating “economic potential” into the munitions of war. This book focuses on how a few almost-forgotten economists determined when the Normandy invasion would occur. In reinterpreting the strategic history of the war, it also challenges four main planks underpinning much of the extant literature. These planks have gained almost mythical status, each of which will be shown to be untrue: 1. The myth that Lieutenant General Albert Wedemeyer’s prescient findings in his “Victory Program Report” became the foundation for strategic planning as well as the basic guidance for U.S. munitions production throughout the war is at odds with the demonstrable facts. The effects of Wedemeyer’s Victory Plan were minimal, and what impact the report did have was almost uniformly negative.

  2. The proposition that General George C. Marshall at the Casablanca Conference was a strong advocate for a second front in 1943 but British intransigence stymied his aims does not accord with the full historical record. General Marshall became aware immediately before the Casablanca Conference that the munitions production he expected the United States to produce in 1943—the basis of his strategy—would not be fully available until June 1944. Therefore, an invasion in 1943 was impossible.

  3. To argue, as most historians have done, that President Roosevelt’s insistence on setting what at the time appeared to be both astronomical and impossible production goals inspired and provided impetus to American industry to reach record levels of production, ultimately burying the Axis under a tsunami of U.S. munitions, is also incorrect. I will show that Roosevelt’s ill-thought-out goals and his stubbornness about adjusting them came close to seizing up the entire production program and ending any practical chance of invading northern Europe in 1944. Furthermore, his insistence on producing what he called his “must items” threw U.S. production so out of balance that it endangered the conduct of military operations.

  4. Finally, the myth that in the pursuit of total victory the American people sacrificed so that consumer production facilities could convert to war production is also demonstrably untrue. Consumer spending in America went up (as a percent of GDP) every year of the war, and virtually all wartime munitions production can be accounted for by GDP growth and not by limitations placed on consumer production.

  There is also a factor more profound than these that economic and military historians have overlooked. World War II overturned the economic basis of major-state war, which had held true since the Battle of Marathon 2,500 years before. For more than two millennia, money had been the determining economic influence on war. As long as a ruler had the equivalent of cash on hand or access to a loan, he could continue to prosecute any war of his choosing. There were always sufficient armories to produce war materiel and enough people whose service was for sale.

  Beginning in eighteenth-century Britain, this truism eroded as revolutions in the industrial and financial world began. Together, these fundamental changes eventually made possible a true nation-in-arms far beyond the dreams of the French Revolutionaries and their levée en masse. Industry could now produce armaments in quantities that were entire orders of magnitude beyond what the artisans of the past were capable of, while the Bank of England’s consols could pay for them.12 Britain had discovered that it was better for an economy to maintain a high level of liquidity by keeping as much specie in circulation as possible rather than hoarding cash and gold reserves for potential wars. By creating reliable programs for emergency debt finance, peacetime Britain could invest its income back into growing the economy while simultaneously ensuring a ready source of cash in the event of war.

  Nevertheless, old habits die hard, and before the onset of World War I many looked with trepidation at the German war reserves stored inside the Spandau Fortress.13 Rather than spend or invest a large segment of the reparations France paid after the Franco-Prussian War, Germany had stored away $70 million of gold to defray the costs of a future war. When, on the eve of war, someone reminded future British prime minister Lloyd George of this apparently massive gold reserve, he responded, “A mighty sum, but England will raise the last million.”14 It was a remarkable testament to his faith in Britain’s capacity to finance a prolonged conflict, as well as proof that his government, if not historians, realized that the ability to raise massive sums of cash was still the determining economic factor in war.15

  In any event, no one in 1914 could have envisioned the colossal sums of cash twentieth-century warfare would consume. The much-feared Spandau gold reserves proved insufficient to cover even two days of the war’s expense during a major offensive. While methods of finance had improved considerably in the century and a half since Pitt the Elder, they still strained under the stress. Without the timely intervention of the United States and its untapped financial resources, the Allied financial system would have collapsed.16 Accessing this American financial stream was by no means an easy task and the scope of the effort involved was daunting. By 1916 Britain was spending $5 million a day on the war, of which $2 million had to be raised in the United States. Still, it was not until the British credit crisis of 1917 that the United States began providing credits to the British government.17

  While the Allied financial system adjusted to the demands of global war, industry also rapidly converted to meet new challenges. Though there were early shortages of materiel as the combatants either built or converted plants, once industry hit full stride it easily met war demands, particularly after the United States added its massive production potential to the Allied pool.18 Reports of British Cabinet meetings of the period often reflect a concern about raising more millions, but have nary a word about running short of production capacity. While finance had closed the gap on production, it had not yet caught up. As long as the cash held out, there were always sufficient munitions available for purchase.

  World War II reversed that situation. For the first time, the warring powers ran out of production capacity long before they ran out of money.19 As U.S. Secretary of War Henry L. Stimson said after the war, “The one thing upon which the whole country was agreed was that the services must have enough money. At no time in the whole period of the emergency did I ever have to worry about funds; the appropriations from Congress were always prompt and generous. The pinch came in getting money turned into weapons.”20 As evidence that modern financial methods had closed the funding gap, the week after the United States entered the war, the head of the Federal Reserve, Marriner S. Eccles, announced he would throw the entire power of the Federal Reserve behind the war effort and that there were more than sufficient funds available to pay for the total mobilization of the country for war.21

  Nevertheless, politicians and planners in the United States were slow to adjust to the new reality. Consequently, there were ferocious struggles between the military, civilian production experts, and the White House. From the beginning, each party knew it was in a war of production and that the Allied powers were counting on the United States to bury the Axis powers under an avalanche of war materiel. Roosevelt announced as much in his State of the Union speech one month after the attack on Pearl Harbor:It will not be sufficient for us and the other United Nations to produce a slightly superior supply of munitions to that of Germany, Japan, Italy, and the stolen industries in the countries which they have overrun.

  The superiority of the United Nations in munitions and ships must be overwhelming—so overwhelming that the Axis nations can never hope to catch up with it. In order to attain this overwhelming superiority the United States must build planes and tanks and guns and ships to the utmost limit of our national capacity. We have the ability and capacity to produce arms not only for our own forces, but also for the armies, navies, and air forces fighting on our side.22

  I
t was also during this speech the Roosevelt laid out his “must items,” which were to plague both the production experts and the military for the next few years. He announced that he had ordered government agencies to take all steps necessary to produce sixty thousand planes in 1942 and one hundred twenty-five thousand more in 1943. In this speech, Roosevelt also ordered that forty-five thousand tanks were to be built in 1942 and another seventy-five thousand the following year. Not quite finished, he also ordered fifty-five thousand antiaircraft guns and an additional 16 million deadweight tons of shipping to be built by the end of 1943.23 When economists and industrialists questioned the feasibility of such plans, Roosevelt had a ready answer: “Let no man say it cannot be done. It must be done—and we have undertaken to do it.”24

  Unfortunately, Roosevelt’s hopes were built on faulty assumptions. The reality was that even the United States could not achieve such monumental goals, and all of Roosevelt’s cheerful optimism, cajoling, and demands for the impossible could not make it happen. In fact, his demanding the impossible actually meant that the United States would produce considerably less than if the government had told industrialists to produce an optimal amount. Unfortunately, few if any senior officers in military procurement ever grasped this point. But one can hardly blame them, since at this point in the war only a mere handful of people—unknown economists and statisticians—understood the concepts of industrial feasibility and optimal production goals.25 These people and their contribution to victory in World War II remain mostly unknown, because military historians have greatly distorted the story of what has become known as the “Victory Program.” The next two chapters will deconstruct the myth that a lone genius on the Army staff devised the strategic and industrial plan that would win the war, and will also correct the record so that those who did understand and undertake this endeavor get the credit they deserve.