Understanding that the scrap metal shipments to Japan were a major contributor to its rearmament, Henderson was determined to cut them off. He approached the State Department and attempted to persuade Secretary Hull to use his executive powers to halt such shipments. On the advice of the department’s bureaucrats who were loath to upset the volatile diplomatic balance with Japan, however, Hull refused to act. Taking matters into his own hands, Henderson contacted British purchasing agents and helped them (using his price administrator powers) to cut deals to buy up the entire U.S. supply of scrap metal. The State Department howled in protest, but Henderson blithely ignored the shouts.14
On another occasion, Henderson heard the president comment that the United States would find itself short on copper once it began a total mobilization for war. Henderson looked into the matter and, along with Edward Stettinius, went to meet with the man then in charge of the purchase and stockpiling of strategic raw materials, Jesse Jones.15 According to Henderson, “Jesse had his own ideas on what he was going to do and he left Stettinius a bit dejected about how little he seemed prepared to do.” As the meeting ended, Henderson thanked Jones for his time and informed him, “I will go ahead on other fronts to see what I can do.”16
Jones, alerted now to a serious threat to his position, asked, “Young man, what do you have in mind?” Henderson replied, “I am going to ask Congress to amend the law establishing a price administrator to allow me to buy copper.” With that, Henderson departed and went first to visit Will Clayton, who was then setting up a commodities trading organization to purchase strategic materials on a worldwide basis. Henderson outlined the problem to Clayton, who assured him he had come to the right person and that he would take care of it. Henderson asked, “How much do you think you can buy?” To which Clayton replied, “I will start with the entire global supply and go from there.”17
This diversion into Henderson’s activities is necessary because he will later figure prominently at the critical moment in the feasibility dispute to be addressed shortly. When Henderson voiced his opinion, it was impossible for the military to ignore him. He had direct access to the White House, was thoroughly familiar with the intricacies of war production, and was famous for doing whatever was necessary to make sure the services received everything they needed to win. It was widely acknowledged that if Henderson said something was impossible, then there was no use arguing over the matter: if there was anything that would help the war and was even remotely possible, Henderson would roll over any and all opposition to get it done.
Despite the unceasing efforts of men like Henderson, most still deemed NDAC a failed institution. This was mainly Roosevelt’s fault. Although NDAC could advise the president and cajole industry, Roosevelt would not provide it with the authority to force industry to obey its orders nor, in many cases, would he even assist in ensuring that NDAC had the information necessary to be effective. For example, in 1940 when the president called for industry to tool up to build fifty thousand airplanes per year, Roosevelt did not direct the military to tell NDAC what kinds of aircraft to produce or the numbers of each model, so the military did not bother telling industry what it aimed to build. Everybody knew that the Army needed tanks in great numbers after Germany’s lightning war against Poland and France, but nobody told the NDAC what kind of tanks to build, when to build them, or where to deliver them.18
Few were satisfied with NDAC—not its members, nor the president, nor mobilization gurus like Bernard Baruch, who had been the U.S. production czar in World War I. Acknowledging that his own organization was failing, Knudsen proposed to the president in November 1940 that a director of industrial mobilization be placed in charge of all administrative organizations dealing with planning, procurement, export and import control, raw materials, production, transportation, labor, price control, domestic requirements, and statistics. Knudsen’s proposal would have vested the director of industrial mobilization with the power to supervise and direct almost the entire homefront effort. In its essentials, it restated the Army–Navy Industrial Mobilization Plan (IMP), a scheme already rejected by the president.19 It would have placed in the hands of the proposed director of industrial mobilization the functions that eventually came to be performed by the WPB, the OPA, the War Manpower Commission, the Foreign Economic Administration, as well as other agencies. In effect, the position would have created a copresident, and consequently something that Roosevelt was not ready to consider.20
By this time Congress was voicing its concerns and dissatisfaction with NDAC. On 21 November 1940 Senator Robert Taft announced that he would introduce a bill to create a War Resources Board under a single administrator. 21 Unwilling to let Congress dictate how or who should run U.S. war production, Roosevelt preempted Taft and, again by executive order, created the Office of Production Management (OPM). He appointed Knudsen as director general, and, because he considered labor support essential to winning the battle of production, he appointed Sidney Hillman as associate director general. The secretaries of war and the Navy were members of the OPM policy council, but Knudsen and Hillman were to run the office, rationalize war production, and coordinate the many other government agencies involved in producing for rearmament.22
At a press conference on 20 December 1940, the president outlined the structure of the new OPM and ridiculed the idea of an economic “Czar, Poobah, or Akhoond of Swat” who would embody all the characteristics necessary for handling defense mobilization.23 In the president’s analysis the problem had three elements: the element of the buyer and user combined, and the elements of management and labor. Apparently, the OPM was to consist of these “three elements,” divided among four people—the director, Mr. Knudsen; the associate director, Mr. Hillman; and the secretaries of the Department of War and of the Navy. Production, purchasing, and priorities were to be under the policy supervision of these four individuals.24
Economic agencies proliferated like weeds in the first months of 1941, which saw the birth not only of OPM, but also of the OPA, Civilian Supply, the Coordinator of Information, the National Defense Mediation Board, the Petroleum Coordinator, the Office of Scientific Research and Development, the Office of Civilian Defense, and the Economic Defense Board. Most of these agencies came into existence as units of the Office for Emergency Management, and were quartered in the White House. Roosevelt considered that rapidly changing conditions required administrative arrangements that he could make and unmake on the fly, and this in turn called for maintaining presidential initiative in matters of emergency governmental organization. The legal basis for this initiative had been provided in 1939 with the creation of the Office for Emergency Management under presidential auspices. Thus, in addition to serving as a means for assisting the president in general management, the Office for Emergency Management became something of a holding company for emergency agencies and a legal device permitting flexibility in emergency organization.25
For the moment, however, OPM was the center of everyone’s attention. The president chartered the office to increase and regulate the production and supply of defense materials, equipment, and factories. OPM was also tasked to analyze and summarize the requirements of the two services, as well as of foreign governments. Moreover, OPM was charged with ensuring supplies of raw materials, formulating plans to further mobilize defense facilities, and planning for the future creation of new industrial plants.
OPM’s charter made it appear as if the president had centralized his vast powers in a single organization, but once again Roosevelt was playing a smoke and mirrors game. Despite its impressive list of responsibilities, OPM could only “advise”; usually that advice could go only to the president and not to those intimately involved in production matters. As just one more presidential advisory body with no statutory enforcement powers, Roosevelt had doomed it from the start.26 Moreover, the organizational structure of OPM appeared to be designed to run as inefficiently as possible. Instead of one leader, it had two, who were supposed to coordinate the
ir activities and decisions. Because the two men in charge, Knudsen (with a business background) and Sidney Hillman (a labor official), were not forceful leaders and the secretaries of the Department of War and of the Navy remained substantially uninvolved (preferring to work production matters through their own Army and Navy Munitions Board [ANMB]), OPM was ineffective even in areas where it clearly could have contributed.27
A poor organizational structure compounded the leadership failures. Its three divisions—production, purchases, and priorities—each functioned more or less independently, with little interaction.28 In fact, their primary method of contact with each other was Knudsen’s staff conferences, which inevitably focused on the detailed minutiae of production—Knudsen’s strength—and not the establishment of a grand national program.29 The fact that each division was allowed to maintain its own contacts with the armed services, other agencies, and Congress exacerbated the negative effects of this decentralization. With no firm hand on the rudder and with each division possessing its own contacts and base of political support, the inevitable bureaucratic disputes were more drawn out and bitter than they needed to be. Industrialists often had to visit with and gain the cooperation of each division separately in order to ensure that projects would not be held up by OPM’s internecine warfare. Moreover, each of these divisions replicated within itself all of the administrative areas and functions required to make any bureaucratic structure work, with one important exception. There was only one central statistical division to collect and prepare data for all three divisions. To accomplish this, Knudsen formed the Bureau of Research and Statistics, which he tasked to act as a clearinghouse for all statistical and economic information for the entire OPM. It was here that Stacy May ensconced himself.
A snippet of how bad the overall problem was can be seen in the role the executive secretary, Henry Emmerich, a lifetime civil service employee, undertook for himself. With no leadership from the top, Emmerich attempted to fill the void. Since Knudsen had begun keeping his codirector, Hillman, in the dark about production, Hillman stopped informing Knudsen about labor problems. Emmerich began keeping abreast of what was taking place in both areas and then briefing his two bosses about what the other was doing. Emmerich also began acting on his own initiative to try to coordinate the activities of the three main divisions. Without Emmerich’s seizure of the initiative, there is little doubt that the entire OPM apparatus would have collapsed.30 In the end, Knudsen’s leadership style and the competition between the separate divisions crippled OPM.
Although OPM made some progress in coordinating the construction of new munitions facilities, it failed to do much of anything to convert consumer production facilities to munitions production. At its root, this failure reflected the outlook of OPM’s leaders. Although both Knudsen and Hillman agreed that military production was a national priority, they were both reluctant to force consumers to pay for the transition from civilian to military production. Knudsen, with his General Motors background, proved reluctant to force the hand of industry before it was necessary, while Hillman did not want to do anything that might deprive his labor constituency of items they were beginning to demand in quantity as the economy rapidly improved.
By April 1941 “guns and butter”was no longer an option. Critical shortages were developing in basic materials and equipment. Constructing new production facilities was going to take too long, and, by absorbing more resources during construction, would exacerbate both consumer and military production problems. Reducing the production of consumer durables, however, would immediately increase the supply of materials for military production, and would place America’s most modern plants at the disposal of the munitions production authorities. The automobile industry, for instance, was absorbing 18 percent of total steel production, and 80 percent of rubber production. Moreover, it controlled the nation’s largest collection of engineering talent.31
That April, Stacy May concluded that the combined demands of the Army, the Navy, the Maritime Commission, and the British would total $49 billion. This represented almost two-thirds of the country’s GDP and was unachievable without a rapid reduction in consumer production. When these arguments finally worked their way up to the president’s attention in early May, Roosevelt became increasingly insistent that OPM start ordering the curtailment and conversion of civilian industries.32 Roosevelt was brought over to this point of view by his close adviser, Harry Hopkins, who in turn had become convinced of its necessity when he was presented with an early feasibility analysis completed by Stacy May. Because of its importance to future arguments, it should be noted that this was the first time a presidential decision concerning military production was made almost solely on the basis of “national income” statistics; this demonstrates that Roosevelt and Hopkins were convinced of their merit.
The numbers, however, had not convinced Knudsen and he continued to lead the cause for gradual curtailment of the civilian sector. He maintained that the nation should and could meet its defense needs with the least possible disruption of the civilian economy.33 This battle of the bureaucrats lasted through May, but along the way Knudsen made a major error (from the perspective of his own cause) by agreeing to the creation of a separate agency to control civilian prices. The Office of Price Administration and Civilian Supply (OPACS) with Leon Henderson at its head reported directly to the president. The executive order that created OPACS was meant to limit its functions to the civilian area.34 Henderson was not the kind of man, however, to limit himself to the letter of his instructions and soon found an opportunity to expand his authority. When on 31 May 1941 Congress gave the president power to determine priority allocations for the civilian as well as the military sectors, both Knudsen and Henderson immediately claimed this new power for their own organizations. While Knudsen consulted with his confidantes, Henderson acted. In a particularly clever maneuver, Henderson issued orders that protected every consumer sector that his office considered essential to the efficient operation of the economy. By staking out portions of the economy where he was all-powerful and would tolerate no intrusions, Henderson basically had informed OPM that everything he had not fenced off was available for immediate conversion to munitions production. In fact, he was offering a large portion of civilian production for rapid conversion to munitions production.
Still, Knudsen moved slowly. In July he announced that OPM had cut a deal with the automobile industry to gradually reduce production by 20 percent over the course of the coming year. Unimpressed, Henderson ordered Detroit’s announced price increases rolled back and then sent his deputy to Detroit to tell automobile industry executives that OPACS was not happy with the pace of curtailment and that Henderson was not overly solicitous of the industry’s goodwill.35 When industry executives resisted Henderson’s entreaties, on 20 July 1941 he unilaterally ordered a 50 percent cut in scarce materials (e.g., steel) going to the automobile industry. Knudsen objected, but knew he was losing the battle. By August OPM had received industry agreement to begin cutting back production immediately and to make overall cuts of well over 40 percent.36
Soon after this, the president removed Henderson’s power to restrict raw materials from industry. Apparently, the president did not feel himself politically powerful enough to defeat business interests in the Congress over the issue. In order to strengthen his hand for future arguments on this point, on 9 July Roosevelt ordered the Army and Navy to lay out their requirements for a major war—the Victory Program. But the immediate effect of Roosevelt’s temporary limitation of Henderson’s power was to ignite a new round of bureaucratic warfare. As the infighting continued, Roosevelt asked one of his personal advisers, Judge Samuel I. Rosenman, to look into the matter and recommend organizational changes. To Rosenman the answer was obvious: the president needed to combine OPM and OPACS into a single agency with one forceful leader.37 In typically Roosevelt fashion, the president used the parts of the recommendation he liked and discarded the rest. On 28 August 1941 he created the Supply
Priorities and Allocations Board (SPAB). Although World War I industrial czar Bernard Baruch and his own presidential advisers strongly advocated placing this new economic administration under one person, Roosevelt still was not ready to appoint what would in effect be a copresident—at least not until he had been thoroughly tested and proven to not represent a political danger, if not always pliant to Roosevelt’s whims. Instead of doing away with failing organizations, Roosevelt placed SPAB on top of them. The OPM was still supposedly in charge of setting priorities, while the president transformed Henderson’s price control office into the independent OPA.
What really doomed this set-up was the convoluted leadership arrangements, which Roosevelt either created or allowed to stand. Because of his reputation as America’s number one buyer, Donald Nelson became the head of SPAB.38 Within that organization, Nelson was Knudsen’s boss, but Nelson still held his position as the head of purchasing for OPM, where he worked for Knudsen. Within the OPA Henderson was now his own boss, but he also still held his old job at OPM. Nelson then confounded matters further by ordering that SPAB should do most of its work through and in coordination with OPM, although SPAB remained superior to OPM in the power hierarchy. This led to some interesting procedural arrangements. For instance, Nelson as head of SPAB could transmit directives to OPM. Once these directives arrived at OPM, Nelson could then interpret or reinterpret them as he saw fit before transmitting any orders to industry, therefore ignoring, if he wished, the desires of the SPAB board.39 Furthermore, although Nelson was in charge of the board, Roosevelt placed other powerful persons on the board, including Vice President Henry Wallace and Harry Hopkins.40 These arrangments had two major effects: first, Nelson could never be sure of his own power on the board when several of its members had daily exchanges with Roosevelt, and second, they created numerous “unofficial” power centers within a single organization. Any business or military claimant who was unhappy with a decision made by a member of the SPAB had numerous avenues in which to get the decision modified or overturned.
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