The prospect of involvement in war prompted the United States to convert domestic production to meet military needs. The result was a huge increase in U.S. industry’s production but very little change to the American economy’s basic structure.

In June, 1940, German forces overran France, and the British military placed large orders for military supplies from the United States. These orders helped spur U.S. industrial mobilization, but events in Europe also aided President Franklin D. Roosevelt’s administration in passing a number of military appropriations bills. Although more money was becoming available for wartime production, U.S. industry was reluctant to exploit this market. Conditioned by the static economic situation of the Depression, many capitalists expected such conditions to return after the war. [kw]United States Begins Mobilization for World War II (Aug., 1939)
[kw]Mobilization for World War II, United States Begins (Aug., 1939)
[kw]World War II, United States Begins Mobilization for (Aug., 1939)
[kw]War II, United States Begins Mobilization for World (Aug., 1939)
World War II (1939-1945)[World War 02];U.S. mobilization
[g]United States;Aug., 1939: United States Begins Mobilization for World War II[10040]
[c]Business and labor;Aug., 1939: United States Begins Mobilization for World War II[10040]
[c]Economics;Aug., 1939: United States Begins Mobilization for World War II[10040]
[c]World War II;Aug., 1939: United States Begins Mobilization for World War II[10040]
[c]Wars, uprisings, and civil unrest;Aug., 1939: United States Begins Mobilization for World War II[10040]
Roosevelt, Franklin D.
Roosevelt, Franklin D.;World War II
Truman, Harry S.
Byrnes, James F.
Nelson, Donald Marr
Knudsen, William Signius
Jeffers, William Martin
Land, Emory Scott

Expanding plants for wartime production was seen as a risky, short-term investment, and the Roosevelt administration tried in various ways to persuade industrialists that this was not true. For example, the federal government offered to finance expansion through low-interest loans from the Reconstruction Finance Corporation. Reconstruction Finance Corporation The Revenue Act of 1940 Revenue Act (1940) provided an incentive in the form of a depreciation of new defense plants of 20 percent per year, instead of the former 5 percent tax write-off. Most important, however, was the “cost-plus” provision incorporated into government defense contracts. Cost-plus contracting[Cost plus contracting] Private industry was guaranteed the cost of producing particular military hardware plus a profit of a certain percentage of the cost. This plan proved lucrative to industry but led to excessive waste in production. Eventually, Senator Harry S. Truman of Missouri led a special investigation into the waste and corruption in defense work, and the resulting revelations resulted in improved efficiency.

Roosevelt wrestled desperately with the problem of centralizing control of industrial mobilization. Drawing on his experiences during World War I, he first established the War Resources Board War Resources Board (WRB) in August, 1939. The WRB drew up a plan of mobilization providing for rigid government controls, but Roosevelt rejected this plan for political and personal reasons, and he permitted the WRB to be dissolved in October, 1939, after organized labor accused it of being prejudiced in favor of big business. A pattern of establishing an agency with a vague mandate and then reorganizing it when its attempts to operate provoked criticism was repeated during succeeding years.

Members of the U.S. Office of Production Management, including Edward Reilly Stettinius, Jr. (third from left), and William Signius Knudsen (second from right), meet with British minister of supply Lord Beaverbrook (center) in August, 1941.

(Library of Congress)

The next attempt at central direction was the establishment of the National Defense Advisory Commission National Defense Advisory Commission on May 28, 1940. Composed of representatives of labor, industry, the armed services, and the consuming public, the commission was under the direction of a former General Motors executive named William Signius Knudsen, who was expected to balance these various interests. The most vexing problem was the assignment of priorities to the various manufacturers for the acquisition of scarce materials. Ideally, such materials ought to have gone to factories in proportion to the relative importance of their finished products to the health of the economy as a whole. Knudsen never solved this problem; instead, he permitted the Army-Navy Munitions Board to gain great power in acquiring scarce materials.

On January 7, 1941, Roosevelt tried another reorganization. The Office of Production Management Office of Production Management (OPM) was created with Knudsen and labor leader Sidney Hillman Hillman, Sidney of the Congress of Industrial Organizations (CIO) as joint directors. The OPM did succeed in beginning the shift toward a war economy, but it placed strains on domestic needs and shortages developed in the electric power, aluminum, steel, and railroad-equipment industries. By August 28, 1941, Roosevelt was ready for another change. At first, a slight adjustment was made with the creation of the Supplies Priorities and Allocation Board, headed by Sears, Roebuck executive Donald Marr Nelson. Within a few months, the OPM had gone the way of the WRB, and Nelson was called to the White House to head an entirely new organization called the War Production Board War Production Board (WPB).

Established on January 16, 1942, the WPB was to have supreme command over the entire economy. Nelson, however, proved inadequate for the job; he permitted the military to regain control over priorities and seemed to favor big corporations in the allocation of contracts. He also permitted the economy to develop unevenly. Ship factories were built at a pace far exceeding the ability of the steel industry to supply material for ship construction. Nelson remained as head of the WPB until 1944, but long before then control of economic mobilization had been assigned to yet another agency.

Recognizing that problems were developing under the WPB, Roosevelt asked Supreme Court associate justice James F. Byrnes to head the new Office of Economic Stabilization Office of Economic Stabilization (OES). This new office replaced the WPB as supreme arbiter of the economy. Byrnes did solve the problems of priorities and brought order to the entire mobilization scheme. He seemed to have the political astuteness required to make the OES work. In May, 1943, his agency’s official title was changed to Office of War Mobilization, Office of War Mobilization and in October, 1944, it became the Office of War Mobilization and Reconversion.

Despite such frequent reorganization of the government’s regulatory bodies, U.S. industry performed fantastic feats of production during the war years. Statistics tell part of the story. In 1941, the United States produced approximately $8.5 billion worth of military equipment. Using the same dollar value, in 1944 the sum was $60 billion. Included in these gross figures was an increase in the annual production of planes from 5,865 in 1939 to almost 100,000 in 1944. Ship tonnage rose from one million tons in 1941 to nineteen million in 1943. Certain parts of the economy performed miracles. As public director of WPB, William Martin Jeffers, president of the Union Pacific Railroad, directed the creation of a great synthetic rubber industry, and Admiral Emory Scott Land, head of the U.S. Maritime Commission, prodded the shipbuilding industry to the point that a ship could be produced in fewer than ten days. Comparable production feats were achieved by other industries.

In the long run, the most significant fact of this remarkable production was that it was accomplished with little effect on the basic corporate structure of the U.S. economy. Of course, shortages existed in the civilian community during World War II, and rationing was introduced for foodstuffs, including meat and sugar. Although restraints were imposed on free enterprise, however, outright government seizure of private industry was never attempted. For the most part, government gave business exceptional freedom in choosing what it could produce and how; the only requirement was that national goals were met. In fact, the government let contracts for a wide variety of experimental or unusual projects, such as the famous Spruce Goose developed by Howard Hughes’s engineers. Government allowed exceptional industrialists, such as Andrew Jackson Higgins, Preston Tucker, and Henry Kaiser, to mass-produce patrol torpedo (PT) boats and landing craft, gun turrets, and ships with little interference and almost no concern for cost. Kaiser, for example, cut the production time for a Liberty Ship (a basic freighter crucial to the war effort) from 120 days to 4.5 days. As British historian Paul Johnson has observed, the war “put back on his pedestal the American capitalist folk-hero.”

The War Production Board’s efforts increased businesses’ involvement in planning future economic activities, and many were persuaded that government could and should play a role in economic planning. The size of government has never returned to its pre-Depression levels, and only in the administration of Ronald Reagan did the military’s share of the gross national product remain at less than 6 percent for more than a year. Ironically, many business leaders took from the war the exact opposite message from what it had taught. Rather than reaffirming the phenomenal productive capacity of the United States, business left the war expecting special favors and government considerations. World War II (1939-1945)[World War 02];U.S. mobilization

• Catton, Bruce. The War Lords of Washington. New York: Harcourt, Brace & World, 1948. Argues that the war failed to produce the social revolution that started with the New Deal, because putting industrialists in charge ended the opportunity for social reform. Given the extraordinary production of the system, Catton’s thesis does not convince.
• Civilian Production Administration. Industrial Mobilization for War, 1940-1945. Washington, D.C.: Government Printing Office, 1947. The official government record of mobilization.
• Divine, Robert A. The Reluctant Belligerent: American Entry into World War II. 2d ed. New York: John Wiley & Sons, 1979. A valuable source of information about the political climate in the United States at the dawn of World War II.
• Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government. New York: Oxford University Press, 1987. Examines the War Production Board and dozens of other government agencies as agents of government expansion during wartime. Hypothesizes that wars and other critical episodes created a ratchet effect that caused government power and scope to increase.
• Janeway, Eliot. The Struggle for Survival. New Haven, Conn.: Yale University Press, 1951. This brief volume in the Chronicles of America series is a convenient treatment of the economic mobilization for the general reader.
• Johnson, Paul. Modern Times: A History of the World from the Twenties to the Nineties. Rev. ed. New York: HarperCollins, 1991. Vast interpretive history of the modern world devotes more than two chapters to World War II and spends several pages celebrating the efforts of U.S. business.
• Kennedy, David M. Freedom from Fear: The American People in Depression and War, 1929-1945. New York: Oxford University Press, 1999. Describes how Americans responded to the deprivations of the Great Depression, the recovery period of the New Deal, and the country’s entrance into World War II. Includes maps and index.
• Nelson, Donald M. Arsenal of Democracy: The Story of American War Production. New York: Harcourt, Brace & World, 1946. A personal account of the WPB’s achievements by its director. Depicts the difficult decisions about strategy that the WPB had to make and praises the free enterprise system for its efficiency and productivity.
• Novick, David, Melvin Anshen, and W. C. Truppner. Wartime Production Controls. New York: Columbia University Press, 1949. An older but useful study of the problems faced by Nelson and his associates in allocating priorities.
• Rhodes, Benjamin D. United States Foreign Policy in the Interwar Period, 1918-1941: The Golden Age of American Diplomatic and Military Complacency. Westport, Conn.: Praeger, 2001. In-depth examination of American diplomacy during the period covered. Features selected bibliography and index.
• Rockhoff, Hugh. Drastic Measures: A History of Wage and Price Controls in the United States. New York: Cambridge University Press, 1984. Argues that controls kept inflation under wraps during the war, a tactic that only postponed its effects.

Hitler Comes to Power in Germany

Nazi-Soviet Pact

Germany Invades Poland

Canada Enters World War II

Roosevelt Uses Business Leaders for World War II Planning

Collapse of France

United States Begins Building a Two-Ocean Navy