Keep From All Thoughtful Men

by James G. Lacey

  Although the leadership arrangements within SPAB were awkward, they reflected the political realities of the moment. Actually, though, SPAB was a step forward from what had come before. By this time, American rearmament had reached a point where it was essential to create an organization whose decisions could not be ignored and that had a powerful bite. Since Roosevelt was still not ready to concentrate economic decision making in one person, however, SPAB was the best possible compromise.41 The infighting within and among powerful groups ensured that SPAB’s decision processes would often be bloody and result in compromises. On the other hand, once decisions did emerge, SPAB had the power to enforce them. As one example, SPAB determined that it could not justify the resources required to complete the St. Lawrence Waterway Power Project in light of the current mobilization emergency. It fell to Donald Nelson to tell Roosevelt that SPAB wanted to kill off a project everyone knew was the “apple of the President’s eye.” On hearing the news, Roosevelt commented, “Don, you’re killing one of my children.” Nelson replied, “I know Mr. President, but it has to be done.” The project was closed the following week and nothing was heard about the matter again.42

  The SPAB leadership also revealed one important, but mostly overlooked, fact about Roosevelt’s thoughts. By this time, the president had gone far beyond his original conception of mobilizing enough of American industry to provide the Allied powers, short of war. It is now clear that he considered the entry of the United States into the war almost inevitable and the SPAB membership reflects his thinking. Wallace, Hopkins, Henderson, Hillman, and Nelson were all-outers. The president could count on them to counter the more conservative impulses of Knudsen, Secretary of War Stimson, and Secretary of the Navy Knox. This latter group had worked together to stymie the efforts of the all-outers within OPM, but they were now being pushed aside by the SPAB members. When Knudsen was the head of OPM, he used his influence to check the all-outers in favor of business interests that wanted a slower and more measured conversion to war production. The secretaries of War and of the Navy supported Knudsen so as not to antagonize firms they viewed as critical to their current production efforts.43 The removal from OPM, at presidential direction, of many of Knudsen’s business supporters—such as John Biggers and Edward Stettinius, who were viewed as drags on mobilization—further undermined Knudsen’s continuing efforts to bridle the likes of Leon Henderson and the other all-outers.

  Given its organizational weakness, SPAB’s accomplishments were rather remarkable. For instance, the SPAB board was the first to realize that the priorities system established for the use of key industrial materials was breaking down, due to a predictable inflation in the number of production contracts requiring a top priority. Because everybody wanted everything now and certainly ahead of everyone else, too many systems received A-1 ratings, forcing OPM to create new higher ratings. When too many projects claimed the new higher ratings, a new priority rating system was established that rated material from A-1-A through A-1-J. And after that system also seized up, OPM imposed an AA band on claimants as a type of super-priority. It was a vicious cycle and a crash was inevitable.44 As one of its first undertakings, SPAB launched a frontal assault on the priorities system.45 With no reliable requirements estimates available from the military and no hope of the situation improving any time soon, however, the civilians used their own best judgment as to military needs. For example, at the end of September 1941 a SPAB staff report to Nelson stated that the Army estimates the military provided were based on imaginary and arbitrary assumptions. As for the Navy, the report found that when the number of ships was increased, ammunition requirements only went up enough to account for target practice. There were no estimates about what might be required to fight a war, despite the Navy already being committed to combat operations in the North Atlantic. To make up for these estimation shortfalls, civilian production experts began doubling and in some cases tripling what the military was asking for without ever going back and reconciling the new numbers with the War or Navy departments.46

  It was rapidly becoming obvious not only that the civilians did not trust the military to come up with reliable requirements estimates, but also that they were becoming confident they could substitute their own judgment on many matters previously reserved to those with military expertise. Nowhere was this clearer than in the battles over increasing steel production, when the all-outers on SPAB went toe-to-toe against business, their supporters at OPM, and the military services. As Robert Nathan recalled decades later,In the fall of 1940, the Division of Research and Statistics sent to the National Advisory Commission a report stating that for an all-out defense effort the United States would need at least a 10-million-ton steel expansion. The steel industry’s response was, in essence, “This is absurd, only 6 years or 7 years ago we were functioning at only 15 to 20 percent of capacity.” That was true. Even in 1940, the American steel industry was producing at about 60 to 65 percent of capacity. The steel industry’s view was that we should not build new capacity because at the war’s end there would be another depression or recession and the industry would be left with even more idle capacity than in the Great Depression. They favored deep cuts in steel supplies for the civilian sector rather than adding new capacity. We pointed out that steel capacity had to be enlarged even if consumer uses were drastically reduced.

  Fortunately, this became a high-level issue. The government decided to offer attractive incentives, and we did get a 10-million-ton steel expansion. By the time Pearl Harbor was attacked, United States steel capacity was approaching 80 million tons rather than the 70 million tons of capacity that existed in mid-1940.47

  In a speech given after the war, though, Nathan remembered the steel debate as a “long bitter fight” that finally had been decided by a directive from President Roosevelt ordering a 10 million–ton increase in steel production.48 In addition to steel, SPAB pushed hard for production expansion of other key war commodities in the face of constant resistance from business and the military. In the case of aluminum, for instance, Nathan related,We pushed hard for much more aluminum capacity expansion than was under way. At that time the only aluminum producer in the United States was Aluminum Corporation of America (Alcoa). Henry Kaiser and the Reynolds Company were given incentives and support for building new plants to produce aluminum. Also, Alcoa greatly expanded its capacity. Later another company entered the field. The United States had four aluminum producers instead of one. This was of great importance because the United States had been producing airplanes for military use only at the rate of a few hundred a year. Within one year after Pearl Harbor we were producing over 1,000 [tons of aluminum] a week and by the end of 1943 the production reached about 2,000 [tons] a week.49

  At this point, it is important to understand why business was so resistant to major increases in production. In most situations, a business expansion based on guaranteed government contracts would appear to be almost a license to print money and that businesses would be expected to jump at the opportunity. There were three main reasons that this was not the case. First was the political atmosphere. In 1940 and even late 1941, most Americans remained adamant that the United States should remain out of the war. In the years after World War I, many Americans became convinced that crafty British propaganda had drawn them into that war. This time they were determined to resist such pressure. With national heroes such as Charles Lindbergh touring America to spread the gospel of noninvolvement and no rearmament and others leading massive rallies advocating a policy of “America first,” it was by no means clear that America would enter the war in the immediate future. Business interests feared the government would force them to expand in order to support a military that America would never build, and leave them with a huge load of expensive, possibly even ruinous, excess capacity.

  Moreover, most business executives found their regular current business environment unpredictable. Even though the economy was expanding at a rapid clip in 1940 and 1941, no one was sure the
expansion would last. The Depression had been a grueling time for American business. Those firms that survived the lean decade of the 1930s had learned caution and conservatism. During the 1930s there had been several moments when it appeared the worst had passed and a growth trajectory had returned. Each of those instances proved to be a false dawn, however, with the economy quickly reversing itself, usually within a single quarter. Each of these experiences left business and industry wary; by 1941, although this time the growth trend appeared sustainable, no one was ready to move too quickly toward an optimistic vision.

  Hard-headed business interests were not the primary reason why American business failed to answer the clarion call to action until after the attack on Pearl Harbor, however. Before World War I, according to Donald Nelson, the United States had no munitions industry such as that found throughout Europe, which had existed for hundreds of years. There was, in fact, a strong feeling in the United States against the “merchants of death,” of whom von Hindenburg had said, “They understood war and were both brilliant and pitiless.” After World War I, politicians, reacting to their constituents’ sentiments, cracked down on the so-called munitions barons.

  Bethlehem Steel Corporation provides a sterling example of this process. Before the end of World War I, Bethlehem Steel was making almost all the munitions necessary to wage modern war. Postwar tax laws were such that Bethlehem had no other recourse than to destroy its whole munitions empire—literally to wreck it physically. The new facilities were too expensive to maintain and pay taxes on, so Bethlehem demolished them. One month there was a munitions production behemoth that might have dwarfed Krupp or Vickers, and the next month there was no trace of it left. This fate befell scores of other firms, too. The largest rifle-manufacturing firm in the world, the Eddystone plant of Remington, was swept away. Half-finished ships rusted and rotted because shipyards had gone out of business. The world’s biggest merchant marine faded to a shadow of its former self. Machine-gun plants and the beginnings of a promising military plane industry disappeared. All that was left of the engine of war production that made von Hindenburg shudder was reduced to the plans in the files of the War Industrial College.50

  In short, ramping up production to ensure Allied victory in World War I not only had forced American businesses to absorb crippling financial and economic losses, but also had seen the top executives of the firms demonized as “merchants of death.” Chief executive officers were now understandably reluctant to undertake actions that would lead to the pillorying of their own reputations.

  SPAB had a considerable impact in the allocation of scarce materials between the American military and those of America’s future allies.51 The services had already come to terms with Lend-Lease for the British, but when Roosevelt announced his intention to supply military aid to the Soviet Union, the military chiefs rushed to the barricades, claiming they needed every bit of production to equip American forces. Roosevelt ignored his military advisers, however, and in early October approved the Moscow Protocol with Britain, which agreed to the sending of large shipments of military materiel to the beleaguered Soviet Union.52 On 23 October SPAB issued orders for allocating materials and equipment to meet the protocol’s undertakings.53 Since German armored columns were already deep inside European Russia and pushing toward Moscow, these orders met bitter resistance from the military. Most military experts agreed that the USSR’s life expectancy could now be measured in weeks, so the military could not see any justification for shipping precious munitions and raw materials in a futile attempt to prop up a losing cause. According to Army analysts, the best one could hope for was that the Soviets might be able to hold at the Urals and become a nuisance for the Germans in the future. Accomplishing this feeble outcome, at the cost of America’s own military capabilities, remained a hard sell for many months. So, although SPAB’s material allocation decisions were in accordance with the president’s direct orders, they had to be fought over in every board meeting. On a weekly basis, the military, and particularly the Navy, citing expert opinion that the USSR was about to collapse, strenuously objected to the shipment of raw aluminum and machine tools to the Soviets.54

  After losing a series of battles within SPAB, the Army and Navy teamed up in an attempt to create a super-priorities committee on which the military would have the dominant role and that would not contain the SPAB members who supported the president’s Soviet policy.55 In this new conception, Hopkins, Nelson, and Henderson were to be removed and Stettinius returned.56 With a SPAB super-board consisting of Stimson, Knox, Knudsen, Stettinius, and Wallace, the War and Navy departments were sure they could dictate mobilization policy, or, at the least, determine the level of assistance that would be made available to the Soviet Union. Roosevelt in no uncertain terms quashed the Knox–Stimson proposal for a super-board, but the attempt had firmly drawn the battle lines for the future.

  How the military thought it was going pull off this coup is still hard to understand. Advocating the removal of Harry Hopkins, who by this time maintained his residence in the White House, demonstrates a remarkable political naiveté on the part of senior military officers. In the end, the military had to execute an ignominious retreat, but bad blood remained. Fortunately, Hopkins, with his close relationship with the president, could shrug off any military hostility. In fact, Marshall and the other JCS soon found him to be a great asset in their dealings with the president, so any residual hostility from the ANMB and other military staffs remained muted. As for Henderson, he always gave the impression of a man who lived for conflict. He noted his enemies, marked his time, and focused his energies on winning the war of production.57 Nelson was most affected by this early squabble. He was the man those leading the military side of the production and mobilization apparatus identified as the primary obstacle to achieving their desires. Unfortunately, Nelson’s personality and desire to manage by consensus made him an easy target in the upcoming internecine warfare. He represented the kind of target who was unaware of how to defend himself and was unlikely to do so even if he knew how. The consequences of his inability to get into the mud and fight were almost ruinous, and disaster was averted only because Henderson and Nathan were bureaucratic in-fighters of the first order.

  While these debates continued, SPAB was conducting a rapid but comprehensive analysis of the American economy. In its first meeting, on 9 September 1941, Leon Henderson convinced Nelson to produce a study that would compile scheduled, overall military, civilian, and foreign requirements through mid-1943.58 Stacy May, who recently had returned from the United Kingdom with the completed Anglo-American Consolidated Statement, undertook this new assignment. On 10 September SPAB began a systematic review of all the requirements necessary to defeat the Axis and stabilize the home front. The accuracy of these estimates rested on fundamental assumptions about the size of the defense effort required and on the barest essentials needed to keep the civilian economy functioning at peak efficiency. Once completed, there still remained an enormous statistical problem of translating these numbers into quantities of raw materials and required production capacity.59

  In an attempt to help May and his research staff undertake this task, in mid-September Nelson again asked the Army, Navy, Maritime Commission, and Lend-Lease administration for clear statements of their estimated requirements, based on military objectives over the next two years.60 In response, the War Department submitted what staff officers termed a comprehensive set of estimates covering domestic and foreign needs for Army-type equipment.61 As for the Lend-Lease administrator, his staff sent only partial requirements because staff was still in the process of compiling data. Astonishingly, the Navy Department and the Maritime Commission both refused to forward any estimate and claimed that the country would actually have to be at war before they could determine what was required for victory.62 Undeterred by the quality or scarcity of the data, Stacy May and his team substituted their own best judgment based on previous military estimates and an incomplete Joint Board plan.6
3

  In early November May turned his attention to creating requirements estimates for all production programs, industry by industry. He worked out estimates for what raw materials would be required on a monthly basis—not just for war production, but also for industry, civilian use, and essential public services.64 This was the first instance where someone bothered to integrate the needs of the civilian economy and the rest of government into the economic planning for war. The developing Victory Program was no longer just a statement of military requirements, but also was a realistic appraisal of what the United States would require to win the war and keep the country functioning at peak capacity.65

  Despite some defects, the requirements May outlined in his study were superior to any previous standard. Because of its immense size, however, a number of individuals immediately called its feasibility into question. A feasibility study was required and its conduct fell to Robert Nathan, who at this time was working for Stacy May. His analysis went on through most of November and forced major alterations in the program.

  What Nathan found was astounding. As of November 1941 the total defense effort in the United States, including Lend-Lease, added up to $60 billion. According to Victory Program estimates, however, the United States would have to spend at least $165 billion by October 1943 if it were to have the materiel necessary for an all-out offensive against the Axis powers.66 Thus Nathan concluded that the entire defense program would have to be doubled if there were to be any hope of attaining the objectives of the Victory Program. This meant that the United States economy would have to reach a GDP level of $150 billion by 1943, and at least half of this total would have to be dedicated to war production. Once he completed his analysis, Nathan announced that the program was feasible, but only in terms of a wartime economy with a high degree of central control. The problem was that on 4 December 1941, when Stacy May delivered Nathan’s final report to Donald Nelson, the country was not at war.