Topics in the News
Business: Mobilization for World War II
Impact of War.
World War II was an event of enormous consequence for business and industry. Before the war, caught in a deflationary spiral, industry longed for customers and closed plants for lack of demand. As the 1940s began, Europeans, desperate for goods with which to wage the already-raging war, paid for millions of dollars' worth of goods. Factories reopened, and new workers were hired to meet the demand. Government programs to mobilize and supply the American military furthered the recovery. Yet the marketplace proved poorly responsive to the political and military emergency. As business recovered, for example, more and more industries devoted their production to meet increased consumer demand at the very time government officials were seeking greater military production. Shortages of raw materials were common; so too were strikes and labor disputes. All of these factors combined to retard the production necessary to supply the American military completely. While some within the Roosevelt administration favored the wholesale appropriation of private industry in order to meet war priorities, the president, following the precedent of the New Deal, favored government oversight of private industry as the best way to mobilize for war. Government and industry created a mixed public/private economy to advance war production. Even before the attack on Pearl Harbor, the character of...
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Defense Spending under Scrutiny: The Truman Committee
The Truman Committee, officially known as the Senate Special Committee to Investigate the National Defense Program, was organized by Sen. Harry S Truman of Missouri. He wanted to contribute to the war effort, but he was too old to serve as an artillery officer, as he had during World War I. Concerned that the money spent on war preparedness was being wasted in corruption and inefficiency, he began his investigation in 1940 by driving thousands of miles to visit military bases and other projects to investigate complaints. Concluding that his concerns were accurate, on 10 February 1941 he delivered a speech to the Senate describing the waste he had uncovered.
The Senate then established a special investigative committee to examine all aspects of war production, placing Truman in charge. While serving on the committee, he approached the issue of war funding with tenacity and caution, vigorously pursuing government officials and businessmen who wasted taxpayer money while also taking care not to hurt the incipient war effort or to damage the Roosevelt administration politically. Beginning in 1941 and continuing well into World War II, the committee investigated the construction of army camps and uncovered evidence that $100 million of a $1-billion budget was being wasted. The main problem was the cost-plus system, in...
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The Economy: War Taxes and Financing
The economic recovery of World War II was the result of massive federal expenditures for defense. The government spent approximately $360 billion on the war, at times as much as $250 million a day. A little under half of these expenditures were raised by taxes; bond sales and deficit spending accounted for the rest. Throughout the war the government operated in the red; by 1945 the national debt was a staggering $260 billion.
Taxation was the government's best means of raising revenue, but tax policy was a complicated political construction, the product of numerous compromises between interest groups and their representatives on Capitol Hill. The Roosevelt administration hoped for a heavily progressive tax geared toward the wealthy. Such taxes would raise the greatest revenues and dampen inflationary pressures by reducing disposable income. From the experience of World War I, Roosevelt was also concerned about excess profits and price gouging by large corporations and wealthy individuals. He proposed an excessprofits tax on corporations and a cap on personal incomes of $25,000 to prevent this—impossible ideas politically, but ideas the administration used to gain tax concessions from privileged interests. The 1942 Revenue Act, the basis of wartime financing, was a compromise. The tax structure was unprecedentedly...
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The Crisis of Capitalism.
Although a citizen of Great Britain, economist John Maynard Keynes had a tremendous impact on American business practices and in particular the role of the government in the economy. Keynes theorized that the Depression was not a result of overproduction, the most commonly given cause, but rather a problem of distribution. Although Keynes's ideas were initially rejected during the 1930s, in the 1940s they became widely accepted.
Priming the Pump.
Essentially, Keynes argued, the Depression was caused by a shortage of money that made it difficult to move goods from one location to another. The cure, as he saw it, was for the government to prime the economy's pump with deficit spending. An increase in government spending without accompanying tax increases would put more money in circulation and start the economy moving again. His theories were first put before President Franklin D. Roosevelt during the Depression, but at first Roosevelt rejected them because of his reluctance to use deficit spending to end the Depression. However, after the recession of 1936-1937 the Roosevelt administration halfheartedly adopted Keynesian economic policies. Before World War II the administration did not commit the nation to sufficient spending to end the Depression. In fact, Roosevelt had caused the economic slump by cutting...
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The Military-Industrial Complex
As World War II was winding down, the alliance between the Soviet Union and the United States, brought together by a common foe, was deteriorating. Tensions between the two nations had existed since the Russian Revolution of 1917, and within a few years after World War II the two powers were engaged in a cold war. Following the war, the Truman administration made containment the cornerstone of all American foreign policy toward the Soviet Union. The policy of containment was originally devised by George Kennan, chargé d'affaires at the American embassy in Moscow. He argued that the United States and the Soviet Union could not coexist because the Soviet Union was by its very nature expansionist. The goal of the United States, according to Kennan, should be to apply counterpressure against Soviet attempts to expand, thus containing the Soviet empire. Successful containment of the Soviet Union, according to the plan, would mean its eventual collapse. This policy remained in effect for the next forty-five years and was the rationale behind American involvement in the Korean and Vietnam Wars.
The Cold War dramatically changed the American economy and the role of the federal government in business. Containment meant that the United States committed itself, for the first time in American history, to a large standing army...
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New Markets: American Business Follows the Flag
During the 1940s many American businesses became truly international. During World War II American businesses expanded dramatically and acquired enormous wealth that could be used as investment capital after the war. In 1947 American investments abroad reached an all-time high of $26.7 billion, with a net outflow of $5.8 billion in loans and investments occurring in the first six months of 1947 alone. Both the private and the public sectors invested in overseas facilities; $16 billion in private capital and $ 10.7 billion in public capital went to foreign projects. Much government investment took place in new international agencies such as the International Monetary Fund, the World Bank, and the Reconstruction Finance Corporation of the Marshall Plan.
The American policy was to open foreign markets as part of an effort to contain communism and to prevent another global economic disaster such as the Depression. Also, many American businesses took advantage of the collapse of the European imperial system resulting from the war, particularly the empires of France and Great Britain. One of the constant tensions between the United States and Great Britain during the 1940s was the fate of the British Empire. American leaders, especially President Franklin D. Roosevelt, wanted to dismantle the empire and its barriers to...
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The Plan that Marshall Built
In June 1947 U.S. secretary of state George Marshall proposed what became known as the Marshall Plan, in which suffering European nations trying to rebuild would receive American aid. The program, according to Marshall, would be "directed not against any country or doctrine but against hunger, poverty, desperation, and chaos." European nations, including the Soviet Union, responded quickly to the American offer. The Soviets and their allies withdrew after the first meeting, but the sixteen remaining countries reached an agreement with the United States. These countries initially asked for $29 billion in aid, but the United States cut this amount to $17 billion over four years, with $5 billion going to Europe in the first year of the program.
Marshall's proposal represented the culmination of much debate in Washington as to the best foreign-policy approach to the postwar world. Essentially,...
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Supplying New Demands and Finding New Sources for Oil
During World War II the United States supplied the Allies with the bulk of the oil needed to fight the war, and oil was one of the most important strategic resources of the war. During the war U.S. secretary of the interior Harold Ickes also assumed the position of director of the Petroleum Administration for War, thus becoming an oil czar with unprecedented power over the oil industry. He increased domestic production and rationing civilian use of gasoline and other oil products to meet war needs. During the war American leaders in both the public and private sectors redefined the importance of oil and of overseas oil fields, particularly those in the Middle East.
Running Out of Oil.
In the December 1943 American Magazine Ickes published an article titled "We're Running Out of Oil!" In it he expressed concern about the rapid depletion of America's oil reserves, writing that the "law of diminishing returns is becoming operative. As new oil fields are not being formed and the number is ultimately finite, the time will come sooner or later when the supply is exhausted." For the first time in its history the United States would become an importer of oil rather than an exporter, which would have serious implications for national security. As Ickes and others saw it, the United States had to gain access to foreign oil to...
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Unions: The Heyday of Organized Labor
During the 1940s the power of organized labor in the United States was at its height; at no other time in American history did labor unions exercise so much power and influence. Much of this power came from labor's close relationship with the Democratic Party and the labor shortages created by World War II. During the war membership in unions expanded dramatically, aided by the National War Labor Board (NWLB). In 1941, 10.5 million workers belonged to a labor union; by 1945 the number of union members had reached 14.7 million men and women.
The largest labor organizations, the American Federation of Labor (AFL) and the Congress of Industrial Organizations (CIO), both agreed to a nonbinding no-strike pledge for the duration of the war, but labor leaders soon became disenchanted with the NWLB as the agency implemented wage controls as an inflation-fighting tool. Further, labor leaders charged that representatives from big business dominated the NWLB and other wartime agencies. Labor leaders argued that a cap on workers' wages when wartime spending was driving inflation higher was unfair to working people. Eventually the NWLB allowed a 15 percent increase in wages. In addition, most workers made more money from overtime, which helped to increase take-home pay in some industries by as much as 70 percent during the...
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Arden, Elizabeth 1884-1966
Elizabeth Arden reached heights of business success traditionally reserved for men by building a business that relied upon women for support. She astutely tapped into several important trends of the twentieth century when she entered the cosmetic business, taking advantage of the rise of a growing youth culture and consumerism and the increasing presence of women in the workforce. A strong-minded, driven woman who fit the classic image of the American entrepreneur, she relied on implementing good ideas, innovation, and invention to make her business prosper.
Florence Graham, the future Elizabeth Arden, was the fourth of five children born in Canada to immigrant tenant farmers; her mother was from England, her father from Scotland. Upon reaching adult-hood she tried a variety of jobs, working as a dental assistant, cashier, and stenographer before she moved to New York City with her brother. There she took a clerical job with Eleanor...
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Boeing, William Edward 1881-1956
INNOVATOR IN THE AVIATION INDUSTRY
William Edward Boeing went from being a general businessman to a giant in the aviation business during the 1940s. Most of this success came as a result of the need for new weapons. World War II was the first major war to be fought with the extensive use of airplanes in a variety of capacities, and airplanes were what Boeing provided.
Born in Detroit, Boeing studied at the Sheffield Scientific School at Yale University but left after two years without graduating. He then moved to Seattle, where he became a prominent timberman, land-owner, and yachtsman. Inspired by the new field of aviation, he organized the Boeing Airplane Company in 1915 with a friend, Conrad Westervelt, hoping to build better airplanes than the wooden ones then being used. The Boeing Company began manufacturing airplanes in a seaplane hanger in Seattle, where he copied the designs of European planes used in World War I. Two of Boeing's seaplanes attracted the attention of the U.S. Navy, which encouraged Boeing to develop a new plane that would...
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Hillman, Sidney 1887-1946
LABOR LEADER AND GOVERNMENT BUREAUCRAT
Unlike most labor leaders, Sidney Hillman assumed a place in the Roosevelt administration, both through a series of official appointments and as a confidant of the president, that allowed him to operate at the highest levels of government. Hillman became a power in the Democratic Party and was a participant in the shaping of domestic economic and social policy throughout the 1930s and 1940s.
In 1887 Hillman was born to a Russian-Jewish family living in Zagare. His family had a strong rabbinical tradition and intended for him to follow a religious calling. Against his father's wishes he began to read books on Western social thought, and he soon became politically active. In 1905 he was arrested for participating in a public protest in support of the Russian revolution of 1905. In 1907 he immigrated to the United States, where he became involved in the New York Jewish socialist community.
Pragmatic Labor Leader.
HillMan's reputation came not as an ideologue but as a pragmatic labor organizer and a reasonable and fair negotiator. He helped to found and became the first president of the Amalgamated Clothing Workers of America in 1914. During World War I he made contacts with progressives in the...
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Kaiser, Henry 1882-1967
Henry Kaiser was one of the industrialists who most benefited from America's mobilization for World War II He headed the Liberty Ship program, which incorporated techniques of prefabrication and mass production to speed ship production. During the war his companies also built roads, boats, and shelters for the government, but primarily they built ships. His contacts allowed him access to the government officials who over-saw the allocation of resources, particularly steel, and they also provided him with access to the officials who supervised labor contracts and the allocation of materials.
Kaiser's production techniques fit in with President Franklin D. Roosevelt's belief that speed and energy were more important than efficiency in producing quality war goods. Kaiser was originally from the West, where he had developed a reputation for taking risks, for getting things done, and for receiving generous government contracts. His reputation for speed was belied by his physical appearance: he was a large, lumbering man of about 250 pounds who tended to bully...
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Lewis, John L. 1880-1969
PRESIDENT OF THE UNITED MINE WORKERS
John L. Lewis was the most controversial labor leader and perhaps the most controversial political leader of the 1940s. As a labor leader he brought industrial unionism to many workers who had been previously ignored by trade unions and the American Federation of Labor (AFL), forever changing organized labor in the United States. During the 1940s he did not join the government or the Democratic Party as the newly organized industrial workers and their leaders did, instead charting a different course as an independent. In doing so he became one of President Franklin D. Roosevelt's most vocal critics and a lone voice among labor leaders in opposition to the expansion of the federal government.
Lewis's background was different from those of many other labor leaders, who had often studied socialist and Marxist thought. In 1948 he said that "there are two great material tasks in life that affect the individual and affect great bodies of men. The first is to achieve or acquire something of value or something that is desirable, and then the...
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Murray, Philip 1886-1952
PRESIDENT OF THE CONGRESS OF INDUSTRIAL ORGANIZATIONS AND LABOR LEADER
Born in Blantrye, Scotland, in 1886, Philip Murray arrived with his family in the United States on Christmas Day 1902. At the time of their arrival he was a coal miner and a union member like his father, who was president of a local coal miners' union in Scotland. He remembered attending union meetings at age six. He began working in the mines when he was ten and as a result had little formal education. His family was Roman Catholic and tutored him on both religious and social issues.
Working as a coal miner in western Pennsylvania, Murray became a labor activist because, as he explained, a "coal miner has no money. He is alone. He has no organization to defend him. He has nowhere to go. It is not inadequacy of the State law. The law is there, but the individual cannot protect himself because he has no organization. He has no one to go to." He joined the United Mine Workers (UMW), and in 1905 he was elected president of his local. He quickly moved up through the UMW bureaucracy by hard work and making contacts with labor leaders such as John L. Lewis. From 1919 to 1940 Murray served as a vice-president of the UMW under Lewis.
Murray also served...
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Nelson, Donald 1888-1959
BUSINESS EXECUTIVE AND GOVERNMENT BUREAUCRAT
The War Production Board. During World War II Donald Nelson assumed the responsibility for the entire mobilization effort, making him one of the most powerful men in the country. Many of the nation's leaders, including President Franklin D. Roosevelt and Sen. Harry S Truman, saw a need for a single centralized authority to coordinate economic mobilization. To this end Roosevelt created a variety of agencies but finally vested much of the power over mobilization in the War Production Board (WPB), with Nelson in charge of the agency.
Nelson was a gregarious, likable man, which proved to be both his strength and his weakness as an administrator. During the period that he was in the government, his easygoing nature endeared him to the New Dealers in the Roosevelt administration at a time when many veterans in the administration were suspicious and resentful of dollar-a-year businessmen who had previously been its enemies. His personality and style also made his relations with Congress remarkably good, especially after he personally took up the popular cause of preserving small business in a period dominated by big business. Unfortunately for him, some people took advantage of his good nature. He allowed the army and the navy to control their own procurement and Roosevelt to...
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Wrigley, Philip K. 1894-1977
CHEWING GUM EXECUTIVE AND SALESMAN
During World War II Philip K. Wrigley, the chewing gum manufacturer, seemed an unlikely candidate for success. Initially it seemed that the war would temporarily halt the production of chewing gum, but Wrigley managed to turn it into an opportunity to introduce his company and his product to more people.
Philip Wrigley was the second child and first son of William Wrigley, Jr. He worked in the family soap factory and eventually moved into sales, where he excelled. In sales, according to Paul M. Angle, his "salient traits—unbounded confidence, flair, imagination, industry, and persistence—paid off." He assumed control of the Wrigley Company in February 1932. In coping with the Depression he departed from his father's politics and cautiously embraced President Franklin D. Roosevelt's New Deal, making the Wrigley Company one of the first to sign up with the National Recovery Administration. Wrigley also continued to take an interest in sales. Prior to the war the company had emphasized the taste and the "healthful" nature of its Doublemint gum, but a new sales pitch would be necessary during the 1940s.
Certainly, chewing gum was not an essential war commodity. Gum consisted of 50 percent...
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People in the News
William Balderston became president of the Philco Corporation in June 1948. Philco manufactured radio receivers, and under Balderston the company moved into the manufacture of televisions and refrigerators.
During the 1940s Hilland G. Batcheller served on the War Production Board and the Committee of Nineteen that assisted U.S. secretary of commerce Averell Harriman in determining European needs under the Marshall Plan. Batcheller was the president of the Allegheny Ludlum Steel Corporation, one of the foremost manufacturers of stainless steel.
Dave Beck served as the president of the Western Conference of Teamsters, an affiliate of the American Federation of Labor's International Brotherhood of Teamsters. In that capacity he organized national union drives during the late 1940s.
Chester A. Bowles advised Presidents Franklin D. Roosevelt and Harry S Truman. During World War II he served as director of the Office of Price Administration, and during the Truman administration he played a crucial role in the development of Cold War policy.
Concerned with America's rising debt, Warren Randolph Burgess wrote Our National Debt (1949). He was vice-chairman and director of the National City Bank of New York.
Although an insurance company executive, Fred G. Clark...
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Earle Bailie, 50, investment banker who served the Treasury Department as a dollar-a-year man, 15 November 1940.
Asa George Baker, 73, former president and chairman of the board of the G. and C. Merriam Company, publisher of Webster's dictionaries, 10 September 1940.
Herbert Baker, 59, president of the American Can Company, 25 November 1940.
George L. Berry, 66, labor activist and union official, 4 December 1948.
Charles Boettcher, 96, industrialist, 2 July 1948.
William J. Bowen, 80, labor leader, 27 July 1948.
Thomas A. Buckner, 77, president of New York Life Insurance Company (1931-1936) and chairman of the board (1936-1941), 8 August 1942.
Patrick Henry Callahan, 74, president of the Glidden Varnishing Company and later the Louisville Varnishing Company, innovator in employee profit, director of the Reconstruction Finance Corporation and the National Labor Relations Board during the 1930s, 4 February 1940.
Louis Chevrolet, 56, former race-car driver who in 1911 built and designed, with William Durant, the first Chevrolet automobile, 13 December 1941.
Walter Percy Chrysler, 65, former vice-president in charge of operations of General...
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William Beveridge, Full Employment in a Free Society (New York: Norton, 1945);
Ralph Bradford, Along the Way (Washington, D.C.: Judd & Detweiler, 1949);
Robert Brady, Business as a System of Power (New York: Columbia University Press, 1943);
Melvin de Chazeau and others, Jobs and Markets: How to Prevent Inflation and Depression in the Transition (New York: McGraw-Hill, 1946);
John Flynn, As We Go Marching (Garden City, N.Y.: Doubleday, Doran, 1944);
Alvin Hansen, Fiscal Policy and Business Cycles (New York: Norton, 1941);
Seymour Harris, The New Economics: Keynes's Influence on Theory and Public Policy (New York: Knopf, 1947);
Donald Nelson, Arsenal of Democracy: The Story of American War Production (New York: Harcourt, Brace, 1946);
David Novick, Melvin Anshen, and W. C. Truppner, Wartime Production Controls (New York: Columbia University Press, 1949);
Paul Anthony Samuelson, Foundations of Economic Analysis (Cambridge, Mass.: Harvard University Press, 1947);
Henry A. Wallace, Sixty Million Jobs (New York: Simon & Schuster, 1945);
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Important Events in Business and the Economy, 1940–1949
- The U.S. Supreme Court rules that National Labor Relations Board (NLRB) decisions cannot be appealed and that only the NLRB, not labor unions, can enforce NLRB rulings.
- On October 24, the forty-hour workweek in industry begins as a result of the Fair Labor Standards Act, passed in 1938.
- On November 21, John L. Lewis of the United Mine Workers (UMW) resigns as head of the Congress of Industrial Organizations (CIO) in protest over President Franklin D. Roosevelt's election to a third term. Philip Murray succeeds him as president of the CIO.
- On January 3, in anticipation of war the federal government calls for the construction of two hundred merchant vessels.
- On January 7, President Roosevelt creates the Office of Production Management to supervise defense production.
- On January 22, strikes at the Allied Chalmers plant initiate a series of defense-industry labor disputes.
- On January 24, Labor Secretary Frances Perkins reports the largest increase in employment in the past eleven years.
- On February 3, the U.S. Supreme Court rules that the Fair Labor Standards Act of 1938 is constitutional.
- On April 11, the Ford Motor Company signs its first union contract, settling a...
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