Keep From All Thoughtful Men

by James G. Lacey

  In short, Nathan was no shrinking violet and in situations where Nelson was reluctant to enter into the political fray, Nathan either took on the job himself or propped up Nelson with enough backbone at least to continue inching forward. His writings and comments after the war left no doubt that Nathan understood that Nelson was not up to facing the Somervell challenge. But he also saw Somervell as the source of most of their problems: General Somervell never ceased to attack the War Production Board and undermine the authority of Donald Nelson. He truly was a constant thorn in Nelson’s activities. Nelson was intelligent, dedicated and a committed leader. But he was not tough enough to cope with Somervell’s maneuvers and manipulations and dubious scruples. Nelson was not the only target damaged by Somervell. The highly competent General Aurand was another victim whose level of contributions to the war effort were diminished by Somervell’s dominating demeanour.74

  Nelson was commonly referred to in the press as the Economic Czar because of the authority delegated to him by the President. But Nelson never had the slightest intention to take over and operate the procurement function of the Services. He was a practical man with a lot of business experience and was sensitive and sensible about the essential role of government in the mobilization challenge. He was fully aware of the adverse consequences of divided and uncoordinated functions and responsibilities.

  The same cannot be said of General Somervell. He seemed to believe there were two enemies. One included Germany, Italy, and Japan on the military front and the other included civilians on the home front. He felt that the civilian population was being coddled. But his principal enemy was the War Production Board and the other non-military government agencies. Nelson agreed that procurement for military purposes should be in the hands of the military. But Somervell never ceased to demand expansion of that function to embrace practically every aspect of war production. He never acknowledged or accepted any responsibility for delays, or failures, or problems attributable to his endless manipulations. I used to say that Somervell would come into a meeting with a knife in his hand, which he would stick into Donald Nelson’s back; Nelson would pull it out and say, “pardon me General; isn’t this yours?” and Somervell would reply, “Yes, Don, thank you.” Immediately Somervell would place it in his other hand and stick it into the other side of Nelson’s back. And Nelson would repeat the same response.75

  According to Ginsberg, Nathan and Henderson both loathed Somervell. Along with Somervell’s detestation of Nelson as a weak and ineffective administrator, this mutual hatred was to prove a volatile brew in the feasibility dispute, which came to a head in October 1942 after simmering for most of the year.76

  CHAPTER 7

  War and Feasibility

  Upon his return from London with the Anglo-American Consolidated Statement, Stacy May combined that document with projected Lend-Lease orders and initial procurement figures resulting from the recently passed Defense Aid Supplemental Appropriations Act to begin building the outline of the actual Victory Program. Before this, both military and production experts had been working with estimates based on planning assumptions with little reference to actual orders. The start of mobilization brought real orders and a more practical, experience-based understanding of what building a military force capable of fighting on a global scale required from the economy.

  As discussed earlier, throughout most of 1941 the military still maintained a culturally based aversion to ordering anything near what the Victory Program would require. It was only after Stacy May completed his first feasibility study in early December 1941, however, that anyone knew just how far the procurement process had fallen behind requirements. May forwarded his findings to the head of the War Production Board (WPB), Donald Nelson, on 4 December 1941.1 Because this study became the baseline document for most of the debates between the civilian production experts and the military it deserves a careful analysis. In its opening paragraph, May admitted that it would have been desirable to have more and better data. He also maintained, however, that time was of the essence and that it was doubtful if more intensive analysis would yield additional results that would be commensurate with the time involved with a new analysis.

  It was the second paragraph of the report’s conclusion that should have captured the immediate attention of military planners, however, but it failed to do so: “As you will observe, it is our conclusion, after carefully reviewing all of the important limiting elements, that three-fourths of the Victory program can be achieved by September 1943. We believe the entire program can be accomplished by the spring of 1944” (emphasis added).2 Note that this document demonstrates that as early as December 1941 the economists in WPB already knew that sufficient munitions to conduct operations in northern Europe would not be available until approximately May 1944!

  By assuming that the military would be in an all-out offensive against the Axis by spring 1943, May made some rough estimates of materiel the military would require, based on military estimates matched against his Anglo-American Consolidated Statement. After tabulating what was already on order by both the U.S. military and foreign powers, May matched the plan to what the government could reasonably expect the American economy to produce.

  What he found was extraordinary. The entire military program as then outlined by military sources could be completed by the spring of 1944, and three-quarters of it could be completed in the summer of 1943, without any all-out push to increase U.S. economic output. Furthermore, such an effort would grow the U.S. economy by about $10 billion annually through 1943 without any extraordinary effort. If the United States was to undertake a mobilization effort equal to what it achieved upon entering World War I, however, it could grow the economy to $140 billion by the end of 1943—a 60 percent increase over 1941. Such a massive effort to maximize national income would mean the United States could spend $45 billion on defense in 1942 and $65 billion in 1943 out of a total national income of $130 billion. May believed that this defense spending level was achievable since both Britain and Germany were currently devoting similar percentages of their national income to war production. Moreover, May contended that this level of spending would not cause undo suffering among the general population. Even under the maximum war production effort scenario, he advocated that there would still be $60 billion available for civilian consumption. This was more civilian consumption than was achieved in the first years of the Depression and was about the average of 1935–39 consumption.3

  In short, three days before the United States entered the war, a small number of key economists and statisticians within the war planning boards already knew exactly how much of the materiel called for by the current Victory Plan estimates could be produced and when it would be available. They also knew that the United States was capable of a far greater effort than was currently being called for and that this could be accomplished without severely curtailing consumer consumption. Moreover, if anything, the civilians were grossly underestimating the materiel and munitions the nations would require in order to win the war. In reality, the completion of the original Victory Program would be just sufficient to start waging major offensive operations in 1943. It would take much more to actually win the conflict. Therefore, May’s 4 December 1941 report informed Nelson that the United States would not have all that it required to reenter the continent of Europe until 1944. All the planning by the Joint Chiefs of Staff (JCS) and their respective staffs to launch Allied forces onto the European continent in 1942 or 1943 represented nothing more than a pipe dream to the economic experts. They could concoct all the plans they liked for a 1943 invasion, but the economists could have told them in 1941 that the forces they planned for would not be there.

  May’s Victory Program, which rested on the data Nathan and Kuznets had collected on national income and on May’s own Anglo-American Consolidated Statement, also included all Lend-Lease appropriations and his best estimate (as a civilian with no military training or education) of requirements for an all-out offensive. In order
to achieve a common reference point and to make the study align with the way national income accounts were tabulated, May translated the estimates into a financial basis, as seen in Table 7.1.4

  To make his estimates work, May made three important assumptions. First, that the munitions required in the future but not yet contracted would be similar to the items already contracted for. Second, that there would be no new large merchant shipping program and that ship production would remain stable through September 1943. Finally, that all production and disbursement would continue at the rates already scheduled or contemplated. In the event, none of these assumptions was to be realized, but for the time being America had the embryo of a war production plan.5

  It is important to remember that May finished this report before the outbreak of war and that there was no way for May or Nathan to foresee how America’s entry into the war would confound each of these assumptions. As he stated in the report, however, “To the extent that there may be substantial increases in requirements for new merchant ships beyond present contemplations or in the disbursements for other purposes, the Victory Program will call for larger outlays.”6 In the event, America’s entry into the conflict also saw an almost immediate doubling in requirements for merchant ship production and a marked ramp-up in the speed of production capabilities and financial disbursements.7

  Table 7.1 Financial Analysis of the Victory Program

  Source: Memorandum from Stacy May to Donald Nelson, 4 December 1941, Planning Committee Document, National Archives, Record Group 179, Box 1.

  Another key conclusion of the report did capture the military’s attention and later became the basis of the Army’s resistance to cutting back on its production requirements for the war. May found that the military had programmed less than $75 billion in spending through September 1943. Achieving the goals of the Victory Plan, however, required at least $150 billion. “Thus,” May announced, “The entire program to date must be doubled and achieved by September 30, 1943, if the Victory objectives are to be attained.” This was not the end of it. Although May had called for a doubling of the overall spending program, he also stated that for many items meeting the Victory goals would require a five-fold increase.8

  In the succeeding section May, using Nathan’s work, placed his translation of the Victory Program onto a financial basis and determined its feasibility in terms of national income accounts. In 1942 May stated that total national income would slightly exceed $100 billion and would not be much higher in 1943 if present plans were adhered to. But he strongly advocated scrapping present plans in favor of a maximum economic effort that would raise national income to $140 billion in 1943. He also pushed for an immediate increase of 1942 spending plans from $30 billion to $40 billion, and for an increase in military spending for the first six months of 1943 to $65 billion out of an annual income of more than $130 billion. In his conclusion, May stated, “Under such an effort our total defense production by September 30, 1943, would aggregate approximately $115 billion, or over 75 percent of the Victory Program.” 9

  Despite these massive projected outlays, May was adamant that American consumers would feel only minimal effects on their standard of living. His analysis claimed that the increased spending on the Victory Program could be met without any substantial sacrifice by the American people. May claimed that consumer consumption would never fall below $60 billion a year, and, although the availability of durable goods would be curtailed, there would be an abundance of food, clothing, furniture, and services.10

  Virtually every bit of production needed to fight the war was to be paid for out of increases to national income. While many households would have to postpone the purchase of a new car or refrigerator, the availability of most other consumer items actually increased. In fact, the amount of GDP spent by consumers for their own use increased throughout the war, and by 1945 it far exceeded what consumers spent in 1941.11

  Real consumption per capita rose sharply in 1940 and 1941 before dropping slightly in 1942. It rose again in 1943, however, and by 1944 personal civilian consumption was at an all-time high.12 While there were some bottlenecks in items such as housing (particularly in locations where new war industries were springing up) and certain edible commodities (especially sugar and butter), the often-told tales of personal sacrifice to help win the war are largely myth. Furthermore, because expensive durable goods were actually in short supply and household income was rising throughout the war, circumstances (and stark memories of the Depression) encouraged consumers to save large amounts of personal income—much of it in war bonds. This huge savings pool coupled with pent-up consumer demand for durable consumer items was what would propel America’s vast postwar economic expansion.

  May’s report did not end there. It went on to lay out in depth the feasibility of the Victory Program in relation to raw materials, labor supply, and industrial facilities. While each of these components of feasibility is important, an in-depth analysis of each would divert us from the main point: that the economy could support only a certain level of production growth regardless of the increasing availability of labor, raw materials, and facilities.13 When the great disputes over feasibility took place, they were almost all fought in financial and national income terms.

  In essence, May’s report plainly stated that if America were committed to a Victory Program capable of winning a global war then the military procurement officials were not asking nearly enough of American industry. Although May listed a number of specific areas that required production increases ranging as high as five times military estimates, his overall plan called for doubling the overall scope of military orders to date. Unfortunately, he did not deliver his report until three days before Pearl Harbor, too late to affect the tidal wave of production demands about to descend on industry.

  Furthermore, it was obviously not possible in 1941 to foretell the nature and duration of America’s participation in the war. Whatever May’s study implied as necessary in monthly or quarterly scheduling over the two-year production period, it was exceedingly hypothetical. Thus, while the date set assumed for planning purposes a start of an all-out offensive against the Axis powers in 1943, this timing was extremely uncertain since it had no foundation in any strategic decisions. This lack of a firm time schedule, of course, had been one of the chief stumbling blocks in the development of usable requirements totals all along. Still, although the requirements under the Victory Program were more complete than any other statements had been thus far in the run-up to war, they were also enormous by any previous standard. For the two-year period outlined in the beginning of the program, the total projected outlay was close to $90 billion more than Congress had yet authorized.14

  The unique value of the Anglo-American Consolidated Statement in pointing up basic problems now became apparent. With this programming document in hand, and despite some uncertainty about its ingredients or premises, production chiefs had a comprehensive base for its plans. This was fundamental to increasing output because industrialists could not appraise demand or expand production facilities intelligently without objectives laid out far in advance of actual production schedules. Moreover, fiscal policy also depended on knowledge of the future program since Congress could only provide continuing large funding authorizations on the basis of demonstrated real future requirements. In addition, the setting of manpower goals in terms of how many people would be in uniform and how many would remain behind to enable production goals to be met relied completely on the establishment of production objectives. Similar considerations applied to the expansion of raw material production, as well as to importing and stockpiling programs. Finally, appraisal of the program for internal balance could only begin when the national authorities had stated the totals for major components of all facets of the Victory Program.

  Thus, the balance sheet was a mirror of production policy. Working with it, during the months and years that followed, lent progressively more substance to the previously amorphous conception of an all-ou
t effort. It facilitated the interpretation of data and provided a means of measuring actual munitions production against a number of significant yardsticks—requirements for defeat of the Axis, maximum production possible under complete mobilization, and the like.15

  In summary, when May forwarded his memorandum to Nelson in December 1941, the production schedules for all defense items represented a financial commitment of $27 billion in 1942 and $34 billion in 1943. Both May and—after being convinced—Nathan believed that these totals could be reasonably increased to $40 billion–$45 billion for 1942 and $60 billion–$65 billion for 1943 without unduly stressing the American economy or denying the consumer crucial goods or services.16 Still, all of this rested on estimates and assumptions. No one in the government or in the military had yet sat down and formulated firm production schedules based on real wartime requirements. This was about to change, out of suddenly urgent necessity.

  The Japanese attack on Pearl Harbor brought an end to the period of speculation and forcefully demonstrated the desperate need to start basing war production on a strategy to win the war. The time had come to make real and serious plans, but as yet there was still no consensus on how to do it.