Mobilization for WW2 — A Revisionist History Triple Book Review

Most histories of the American World War 2 (WW2) military mobilization are firmly based in Keynesian economics. There is now a new emerging counterpoint evaluation of that era, using the “Regime Uncertainty” school of political economy. The following is a review of three works in that school that provide both a cultural/political context and a nuts and bolts view of how the American military mobilization of 1940-43 was paid for.

See the following book titles/Amazon.com Links:

1) Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity (Independent Studies in Political Economy) by Robert Higgs,

2) The Forgotten Man: A New History of the Great Depression by Amity Shlaes , and

3) The previously mentioned “Keep From All Thoughtful Men: How U.S. Economists Won World War II,” by Jim Lacey

All three books subscribe to the “Regime Uncertainty” school of political economy in evaluating the Great Depression and the World War Two economic rebound. This school challenges the gross domestic product (GDP) measurements of World War Two as highly flawed and contends that while actual consumer GDP increased through out the war, much is what the Federal government counts as GDP — ammunition for instance — was a flat economic loss.

This school of thought also contends the late 1940s post-war economic recovery in America was very much a matter of the dismantlement of FDR New Deal regulatory structure — and removing “Regime Uncertainty” from “Rule of Men” regulatory fiat — as the major factor in the post World War Two private sector economic boom.

Higgs’s and Shlaes’s books concentrate on the Great Depression and the economy. Lacey’s looks at how the historical record (both military and civilian) of how the mobilization was paid for and what effects that had on American war time strategy.
Higgs’ book is very useful because it includes a careful analysis of economic productivity factors underpinning the American economy. There were vast productivity increases in new plant built in the 1920s based on the widespread availability of electric motors, and large ones in conversion to electric power of older plants designed around steam-powered belt transmission. But the new plants with layouts designed around use of electric power were the most efficient.

When the Depression hit, the remaining steam-powered plants were closed and never re-opened. The converted-to-electric-power older plants were gradually closed and not re-opened. All remaining production was then funneled through the newer, most efficient plants with layouts designed around electric power, and those simply did not need the manpower per unit of output that the closed plants, designed around steam power did.

This meant that the industrial output of the early 1920s could be provided solely with physical plant built in the 1920s, but at far lower levels of employment. Furthermore, as Higgs points out, the 1930s saw a vast amount of additional productivity increases as industry “tweaked” the physical plants built in the 1920s based on experience with the then-new all-electric power layouts. This allowed still greater production from the same numbers of workers and electric power use.
When the US got involved in World War Two, industry just added more shifts to the 1920s-built plant as “tweaked” in the 1930s.[1]

Both Higgs’s and Shlaes’s books show that what the Franklin Delano Roosevelt (FDR) administration’s class-warfare policies and rhetoric, plus plain mistaken policies (such as taking money out of the economy for a few years to create the Social Security “trust fund”) accomplished was to throttle the 1937-39 recovery from the Great Depression, and postpone it until World War Two.

As a result of all of that, American industry refused to bid on a very great deal of US government military contracts 1939 – July 1940 because they feared the FDR administration would punish them again with merchants of death rhetoric and punitive legislation. Industry only relented somewhat when the government offered a lot more money.

Government-business relations really were that poisonous.

FDR had to fire many of his New Dealers, and replace them with respected Republicans and businessmen, as the price of getting industry to cooperate with his defense buildup.

What those respected business men had to do to “buy out” that ill will were things like “cost-plus” defense contracts with guaranteed profit based on effort, “Government owned-contractor operated” (Go-Co) defense plants [2] (to remove the risk of post-war confiscatory property taxes), research and development tax write offs and accelerated depreciation of tooling that live with American defense expenditures to this day.

Lacey’s book goes into the “statistical revolution” of how US economists developed the measurement of Gross National Product (GNP and called ‘GDP’ today) and used it to force a “reality check” on the armament program, based upon the feasibility of paying for its goals, through the War Production Board (WPB). These feasibility limitations on mobilization were established just prior to the Casablanca conference.

This reality check took the form of deep cuts in the US Army’s armament program, which in turn influenced US Grand Strategy by reducing the US Army’s build up of ground forces. This moved the logistical feasibility of the invasion of Western Europe from 1943 to 1944.

All of this was known to Gen Marshall prior to the Casablanca Conference, and Lacey makes clear that post war records showing that the US military was four-square in favor of a 1943 invasion and were “out-staffed” by the British was what amounts to a post-war myth. (See Chapters 9 and 10)

The War Mobilization’s armament program was very much constrained by President Roosevelt’s political directives to build planes, ships, and tanks without any knowledge of what American industry could produce, and when, which nearly unhinged the whole war effort.

The other constraint was Pres. Roosevelt’s insistence that American ground troops fight the Germans in 1942 as a part of his “German First” war policy.

Lacey makes a good case that the “Operation Torch” landings in North Africa, the invasion of Sicily and Southern Italy all flowed from this mobilization shortfall.

Several things fall out of KEEP FROM ALL THOUGHTFUL MEN that I was not aware of before.

1) The majority of the Mobilization was paid for not by taxes or bonds, it was paid for by printing money. What we today call “quantitative easing.” (pages 36-40)

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2) The US Military’s inter-war era Industrial War College was worse than useless. It left the US Military unable to say with any certainty what it needed to fight and when it needed it. Worse, it left it with the impression that it would nationalize the civilian economy — per the Army-Navy Industrial Mobilization Plan — to produce what it needed. FDR, indeed no elected American civilian leadership, would allow the military that much control over the US economy. (Pages 17-18)

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3) Any “Green Book” US Army history on American mobilization involving the work of Gen. Somervell as chief of the Army Service Forces or Gen. Wedemeyer “Victory Program” should be checked against original source material in the historical record. The title of Lacey’s book “Keep From All Thoughtful Men” is a direct quote from a Gen. Somervell memo in reaction to the WPB feasibility study. (Pages 108-109) Lacey also documents a “Flat Abby” style injection of Wedemeyer’s “Victory Program” into the US World War Two Green Book historical record by Wedemeyer. (Pages 11-18) [3]

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4) How badly the Post World War One American political establishment treated the American business sector and how that experience reinforced the reputation of the American Federal government not only as a bad customer, but a political enemy of American business. (Pages 66-67)

Taken together, these books make clear the historical maxim that “You don’t begin to get real ideas of what actually happened until 50 years after the event, because the personalities involved and their close associates are spending all their time protecting their reputations to the detriment of what actually happened.”
This applies in spades to the history of America’s World War Two mobilization.

[1] Reviewer Side Note — This fundamental shift in manufacturing technology was also the major and seldom addressed reason why the British economic system could not keep up in the Post World War Two era. British businesses did not make the investments in new electric plants, at the same scale, the USA did in the 1920s. Their converted-to-electric-power older industrial plants — which were subsidized as “Shadow Plant” system prior to World War Two — just could not compete in the post-war era. The British did not have the capital post-war to replace them and their fewer all electric plants had powerful industrial unions that made 1930s style American “tweaking” (AKA work rule changes) much less effective for a host of reasons.

[2] “GOCO: (Government-Owned, Contractor Operated) facility is a manufacturing plant that is owned by the Government and operated under contract by a non-government, private firm. Source: Department of Defense Joint Publication (JP) 1-02.

[3] “Flat Abby” is a flat doll that children send to relatives by postal mail to take pictures in front of various sites, monuments, museums, etc to show all the places it could reach in class. The child does very little of the work and gets all the credit for the efforts of others.