The U.S. government’s establishment of the War Industries Board to manage the resources needed to fight in World War I led to improved relations between big business and government.
The U.S. government organized the War Industries Board (WIB) on July 8, 1917, to coordinate and control the industrial resources of the United States in its World War I effort against Germany. Establishment of the WIB was the climax of several frustrating months of efforts to mobilize agencies of production and distribution following the nation’s entry into the war in April.
Federal coordination of industry had begun in 1915, when Congress authorized the creation of the Committee on Industrial Preparedness to study the supply requirements of the army and navy. The committee’s work was narrow in scope—its primary accomplishment was the preparation of an inventory of plants able to manufacture munitions. As the war emergency became more acute, the U.S. government extended its power over the nation’s industrial life. Through the National Defense Act of June, 1916,
The advisory commission, which served as the executive committee of the Council of National Defense, did most of the work and mapped out extensive preparations to meet wartime needs. Each of the seven members of the commission took charge of one of the following segments of the economy: transportation, engineering and education, munitions and manufacturing, medicine and surgery, raw materials, supplies, and labor. The commission soon became the nucleus of numerous committees and boards that were the forerunners of several wartime agencies, including the WIB. Finally, Bernard Mannes Baruch, a Wall Street investor and the commissioner in charge of raw materials, formulated an elaborate plan whereby representatives of various businesses were organized into “committees of the industries” to work with the council in coordinating the nation’s resources. For their efforts, they received payment of one dollar per year; thus they were known as the “dollar-a-year men.”
Because the Council of National Defense had been formed to plan for, rather than direct, industrial mobilization, its powers were only advisory. Moreover, its organization was extremely loose; many of its ablest members served only in a part-time capacity. The council was ill prepared, therefore, to assume the responsibility of directing mobilization, which was forced on it after the United States entered into war in 1917. That unpreparedness was readily apparent in the council’s attempt to coordinate the purchases of the U.S. Department of the Navy and the Department of War. For that purpose, the advisory commission first established the Munitions Standard Board and then the General Munitions Board,
The power and authority of the General Munitions Board were poorly defined, and the board’s machinery nearly broke down under the pressure of the war orders. Within a month after the board was established, it became clear that its jurisdiction and authority merely overlapped with those of many of the other committees formed by the advisory commission. As a result, the board was unable to coordinate the purchases of the military bureaus, which, jealous of their own prerogatives, continued to go their own ways. Realizing that a central coordinating agency was needed, the Council of National Defense replaced the General Munitions Board with the WIB on July 18, 1917. The new board comprised five civilians and one representative each from the U.S. Army and the U.S. Navy.
Before the Civil War, the United States had adopted a policy of procuring many—if not most—goods and weapons needed in wartime from civilian businesses. With the exception of a few shipyards and munitions plants, the government therefore relied primarily on private industry to provide a steady stream of war goods and combat weapons. Coordinating that production and flow was a major problem for a nation that allowed the market to determine the types and numbers of goods to be supplied. In wartime, the urgency of delivery dictated that the government take over coordination of production and delivery systems.
Although the War Industries Board was given broad responsibilities for the direction of war industry needs, its ability to do effective work suffered from the board’s lack of any executive power. As a result, the government’s attempts to coordinate the nation’s military and industrial efforts continued to flounder for the next eight months. The WIB’s first chairman, F. A. Scott, broke down under the strain of the war; its second, Daniel Willard, soon resigned because he believed that the board lacked authority.
In the spring of 1918, President Woodrow Wilson reorganized the WIB and named Bernard Baruch as its chairman. In effect, the president transferred to Baruch the power to coordinate industry that Congress had granted to the president in the National Defense and Military Appropriations Acts of 1916; he also gave Baruch certain controls over the military that Wilson had in his capacity as commander in chief. Endowed with this authority, Baruch was able to determine priorities, requisition supplies, conserve resources, commandeer plants, and make purchases for the United States and the Allies. The only important control he did not exercise directly was that of fixing prices, which was left to a separate committee within the board.
Despite some sharp criticism later from some members of Congress regarding the extent of the power the WIB assumed, the board was highly effective in coordinating the nation’s industrial and military efforts. The pattern of organization created by the board became the model for the war regulation of industry by the Allies in World War II. Moreover, the introduction of businessmen into government procurement placed professional business managers in close proximity with bureaucrats. This led to an appreciation by business for the role of control and planning, and it convinced many in government that business management practices could be effective in improving the government during peacetime. Business already had undergone a managerial revolution that emphasized planning; therefore, the new, centralized control reinforced the notion that stability can be achieved through proper accounting and forecasting. The quintessential proponent of that approach was Herbert Hoover, elected president in 1928, who attempted to apply such nostrums to the Great Depression.
On December 31, 1918, President Wilson directed that the War Industries Board be dissolved, and it was liquidated on July 22, 1919. Other wartime agencies that were involved in economic mobilization—such as the War Trade Board, which licensed exports and imports and rationed supplies to neutrals, and the U.S. Railroad Administration, which controlled the nation’s railroads—also were dissolved gradually after the war ended.
The friendly relationship between big business and the U.S. government that emerged from the experience of World War I cemented an alliance that lasted until the Great Depression. In the short term, business leaders believed that they were the beneficiaries of that relationship, receiving government contracts and favorable treatment. Although the boom provided by the Roaring Twenties proved nourishing to many small businesses, as witnessed by the extensive growth of all business during that decade, the special treatment afforded to such new enterprises as airplane manufacturers and some shipping companies, based on future wartime needs, served to align government with some industries at the expense of others.
More important, however, were the lessons learned by the government during wartime that were inapplicable during peacetime. The government assumed that wartime planning—based on the coercive powers yielded to bureaucrats by citizens facing a national emergency—would provide the same degree of effectiveness in the absence of an emergency. As the tendency of the government was to increase during emergencies and then never to recede to its original levels once the emergencies were past, the war intruded federal authority into the lives of millions of people who had never before experienced it. Thus, although the WIB was disbanded after World War I, the notion that government planning and direct management of businesses could keep the economy stable was revived on a larger scale during the Great Depression.
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Baruch, Bernard. American Industry in the War. New York: Prentice-Hall, 1941. A strong defense of the WIB by its third chairman. Includes the board’s last official report. -
Clarkson, Grosvenor B. Industrial America in the World War. Boston: Houghton Mifflin, 1923. A comprehensive history of the War Industries Board that ignores the predecessor Council of National Defense. -
Crowell, Benedict, and Robert F. Wilson. How America Went to War. New Haven, Conn.: Yale University Press, 1921. An administrative history of the United States during World War I. -
Cuff, Robert D. “Bernard Baruch: Symbol and Myth in Industrial Mobilization.” Business History Review 43 (Summer, 1969): 115-133. Reinterprets the managerial revolution as it affected World War I, emphasizing the role of private suppliers to the government. -
Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government. New York: Oxford University Press, 1987. Stresses the expansion of the federal government’s power during crisis periods, particularly wars. Argues that the WIB had considerable coercive power. -
Koistinen, Paul A. C. Mobilizing for Modern War: The Political Economy of American Warfare, 1865-1919. Lawrence: University Press of Kansas, 1997. Examines the relationship between business and government that emerged from mobilization for war in the United States from 1865 through World War I. Includes discussion of the work of the War Industries Board. -
Porter, Bruce D. “The Warfare State.” American Heritage 45 (July/August, 1994): 56-67. Asserts that war has been the greatest force behind the growth of the U.S. federal government, as presidents and others in power have used the need to defend the nation to overcome resistance to increased federal authority. Discusses U.S. mobilization for five wars, including World War I. -
Schaffer, Ronald. America in the Great War: The Rise of the War Welfare State. New York: Oxford University Press, 1992. A similar approach to that of Higgs’s Crisis and Leviathan (cited above), but more sympathetic to the rise of government power.
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