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Chapter 2

Building the Arsenal

When World War II began in Europe in September 1939, the United States had the potential to produce vast numbers of warships, planes, tanks, and other weapons for use in the defense of England, France, Poland, and other allies. The United States possessed the world’s largest national economy, abundant natural resources, and world-class manufacturers. But Americans disagreed about how this potential should be realized. Progressives, recalling the record of corporate profits in World War I, hoped to avoid policies that would boost the fortunes of big business. They believed that the government should maintain tight controls over war production; some even wanted the government to make much of the matériel. By contrast, conservatives worried that the war might reenergize the New Deal. They believed that private industry should lead the production effort, with the government providing the cash to buy the arms but otherwise staying out of the way.

Popular legend holds that conservatives won this political battle. To make this point, historians often relate an anecdote about William S. Knudsen, who, at the start of World War II, was president of the General Motors Corporation (GM). A Danish immigrant and former production manager for Henry Ford, Knudsen left Detroit in mid-1940 for Washington, where he served as a top industrial mobilization official. Just after the Pearl Harbor attacks, in January 1942, Knudsen presided over a meeting of executives from leading American manufacturing companies, including his peers from the automobile industry. As the story goes, Knudsen used the meeting to conduct a sort of informal auction of war contracts. He read from a list of new military requirements, asking the executives to volunteer to convert their plants to make mountains of machine guns, artillery shells, and all sorts of other munitions.¹

The Knudsen story confirms progressive as well as conservative myths about the American industrial mobilization. It describes a business community rolling up its sleeves to lead a patriotic effort to punish the Axis. The story also appears to demonstrate how war contracts were being handed out to big business leaders by their friends in Washington. Indeed, more than half of the aggregate value of all American war contracts, as we are often reminded, went to just two or three dozen big industrial corporations.² Together, the progressive and corporate legends tell how the automakers and other leading industrial corporations converted quickly from civilian to military production, as they secured even more economic and political power.

In fact, the American war economy was not a private affair. Public authorities—civilian and military—managed the work of industrial mobilization. These public officials included not only Knudsen and his peers at agencies such as the War Production Board (WPB) but also public financiers, including the governments of France and Britain, the War and Navy Departments, and the new Defense Plant Corporation (DPC). War and Navy Department officers placed and managed most of the war contracts; they also served as the top managers of wartime industrial supply chains. Military agencies acted as powerful general contractors, as they ordered thousands of components, from hundreds of smaller and midsize manufacturers (those with fewer than ten thousand employees) as well as big corporations, and directed their flow into finished aircraft, ships, tanks, trucks, and guns.³ So, while it is true that American capitalism supplied the Allies with mountains of munitions, it did so with immense amounts of support, supervision, and guidance from the agencies and officers of the U.S. government.

In the end, America’s remarkable war production represented the triumph of compromise. Much to the irritation of many business leaders, the U.S. government went well beyond simply buying munitions, by building acres of public-owned industrial plant and establishing an array of powerful regulatory agencies. Progressives complained that corporations profited too much from the war, but their warnings that the war would promote monopoly proved overblown. The mobilization relied heavily on the contributions of midsize manufacturers, which often dealt directly with the Navy and War Departments as prime contractors, besides serving as subcontractors to bigger corporations. All in all, the American militaryindustrial machine was something much more than the creation of American big business; it was led not just by corporate executives like Knudsen but by a diverse cast of private and public officers. It took the combined efforts of politicians, entrepreneurs, workers, soldiers and sailors, and bureaucrats to build the arsenal of democracy.

Phase 1: Rearmament, 1938–40

One of the most important battles of World War II occurred in June 1942, when the American and Japanese navies faced off near Midway Island, in the middle of the Pacific Ocean. At Midway, American forces managed to sink four Japanese aircraft carriers while losing only one of their own. By winning at Midway, the United States managed to turn the tide of the Pacific War. This victory occurred just six months after the disaster at Pearl Harbor and only weeks after Allied forces suffered humiliating defeats in Southeast Asia.

The results at Midway are difficult to reconcile with stories of American war mobilization that emphasize inaction before Pearl Harbor. Indeed, at Midway, the Americans relied on ships and aircraft that had all been built or developed in the 1930s. Two of the three American aircraft carriers at the battle, Enterprise and Yorktown, had been ordered from the Newport News Shipbuilding Corporation, a Virginia company, in 1934; they were launched in 1936. The third, the Hornet, was ordered in 1939 and—after a speedy construction effort by Newport News—launched in December 1940. These carriers were platforms for what would turn out to be the decisive weapon of the battle at Midway: the “Dauntless” SBD dive bomber, made in southern California by the Douglas Aircraft Company. The Navy ordered twelve dozen of these planes in April 1939, almost half a year before war started in Europe; it bought another large batch in June 1940.⁴

As the provenance of the key weapons used at Midway suggests, the winning American war effort in 1942–45 depended heavily on munitions that had been designed—and, in some cases, even procured—in the 1930s. In hindsight, of course, these early activities seemed inadequate. But during the two years before the German offensives of spring 1940, the United States accomplished a first phase of industrial mobilization. Thanks to American, French, and British orders in 1938 and 1939, the aircraft and naval shipbuilding industries started 1940 in excellent financial health, and in the midst of a major expansion.

This first phase of industrial mobilization took place in the context of very difficult political and economic circumstances, domestically and internationally. In early 1938, the U.S. economy was still in a serious recession, which had begun in the middle of the previous year. Many companies were losing money. Although a recovery started before the end of 1938, the Great Depression lingered. The national unemployment rate, which had been terribly high for the entire decade, would remain close to 16 percent until 1940.⁵ Outside the United States, the Depression had generally been less severe, but the political situation was harrowing. By October 1937, when President Roosevelt offended American isolationists with his “quarantine speech,” suggesting the need for more active efforts to contain international aggression, the Spanish Civil War was under way; Mussolini’s Italy had invaded Ethiopia; and Japan had pushed into China. In March 1938, Germany, led by Adolf Hitler, annexed Austria. By summer 1938, it looked as if Europe was only days away from the unthinkable: another terrible war among the great powers.

The bleak international situation in 1938 made it possible for the American naval shipbuilding and aircraft industries to expand, even before the European war broke out in September 1939. They did so through a combination of domestic and foreign orders. In the case of warships, one key step was a new, $1.1 billion Fleet Expansion Act, passed by Congress in May 1938. This bill allowed the Navy to begin to order vessels that would make the U.S. fleet expand by 20 percent.⁶

By passing the naval expansion act in early 1938, Congress reaffirmed the strong support that it had provided the Navy since Roosevelt entered the White House in 1933. In that chaotic year, Roosevelt managed to use some of the first New Deal appropriations to pay for thirty-two new warships. But this step paled in comparison with the legislation passed by Congress the following year. Sponsored by Georgia Democrat Carl Vinson, the Navy’s greatest friend in Washington, the Vinson-Trammell Act of 1934 allowed the Navy to expand the fleet to the maximum level allowed under the Washington and London naval treaties. This meant 102 additional combatant vessels, which were to be procured over the following eight years.⁷ Navy spending in the later 1930s averaged over half a billion dollars a year. This was 50 percent more than it had been before 1934 and slightly above the annual naval expenditures of Great Britain.⁸

For the fragile naval shipbuilding industry, which had suffered from the end of World War I through the first part of the Depression, the 1934 act provided much-needed cash, as well more stability. In the private sector, only six companies were still making major combatant vessels, including battleships, cruisers, carriers, destroyers, and submarines. The surface vessels were made by Newport News (the builder of the carriers at Midway); the New York Shipbuilding Corporation; the shipyards of the Bethlehem Steel Corporation; the Bath Iron Works; and a U.S. Steel Corporation subsidiary called Federal Shipbuilding. The only private-sector supplier of submarines was the Electric Boat Company, located in Connecticut. Most of these yards had served as Navy contractors since the 1890s, when they had helped build the country’s first world-class steel navy.

Because these for-profit naval shipbuilders managed to survive the doldrums of the interwar period, they stood to gain from new orders. However, they also contended with an unusual degree of direct competition from the public sector. This division of labor continued under Vinson-Trammell, which required that half of the new combatants be built in the public yards. The public-private mix prevailed also in the production of naval ordnance, just over half of which came from the Navy’s own plants during the late 1930s. Certainly, the Navy acted as if it expected its own yards to function as state-of-the art production facilities, capable of competing with the best of the private sector. During the 1930s, the Navy spent $180 million to improve its own eight shipyards. By 1939, they employed 46,000 civilians, or over a third of all American shipyard workers. Like the private yards, the Navy’s in-house facilities were often led by talented engineers, many of whom had advanced degrees in engineering or ship architecture from MIT.⁹

For the private and public shipyards alike, Vinson-Trammell meant steady business, if not an impetus for expansion. During the second half of the 1930s, Electric Boat and the Portsmouth Navy Yard were each able to build two or three submarines a year. Two new destroyers a year were turned out by at least four builders—Bath Iron Works, Bethlehem Steel’s Fore River (Quincy, Massachusetts) yard, Federal Ship, and the Charlestown (Boston) Navy Yard. In October 1937, the Brooklyn Navy Yard laid the keel for the North Carolina, the first new American battleship to be built since the signing of the Washington Naval Treaty in 1922. Altogether, the congressional appropriations from 1933 to 1937 allowed the Navy to order two battleships, three aircraft carriers, three heavy cruisers, nine light cruisers, sixty-three destroyers, and twenty-six submarines.¹⁰

The builders of warships received another boost in May 1938, with the passage of the Fleet Expansion Act. When the war started in Europe in September 1939, American shipyards were in the midst of building two new aircraft carriers, eight battleships, five cruisers, and three dozen destroyers. Of the 1.3 million tons worth of warships available to the Navy in 1940, half had been added to the fleet since 1934.¹¹

The new contracts went to the handful of public and private yards that had been serving the Navy throughout the interwar period. In early 1939, Newport News received the order for the new aircraft carrier Hornet, along with one of the four new 35,000-ton South Dakota–class battleships. The other three ships in this class, which would not enter service until after Pearl Harbor, went to New York Ship, Bethlehem–Fore River, and the U.S. Navy Yard at Norfolk, Virginia. In mid-1939, the Navy ordered two bigger battleships, of the new 45,000-ton Iowa class, to be built in its own yards in Philadelphia and Brooklyn. Among the smaller combatants ordered under the 1938 act were six light cruisers, sixteen destroyers, and fourteen submarines. For Bath Iron Works and the Electric Boat Company, which specialized in destroyers and submarines, respectively, the new orders pushed 1939 sales to $15 million, double what they had been two or three years earlier.¹²

Because warships ordinarily took two to three years to complete, the 1938 orders determined the size and shape of the U.S. Navy fleet that was available for service immediately after Pearl Harbor. None of these orders in the 1930s could fully prepare the Navy’s top shipbuilders for the sort of expansion that they would undertake in wartime, when they would grow temporarily into truly big businesses. However, the 1930s contracts did allow a handful of expert shipyards to thrive. Bath Iron Works, where employment had fallen to fewer than three hundred workers in 1932, boasted nearly two thousand on the payroll by 1938. Newport News saw its workforce grow from about 7,300 in 1937 to 11,500 by 1940.¹³

Besides enlivening individual yards, the rise of warship orders in the 1930s also strengthened the small network of public and private organizations that constituted the naval shipbuilding industry. This network went beyond the half-dozen private-sector shipbuilders and the eight U.S. Navy yards. Besides these shipbuilders, key players included the Navy’s Bureau of Construction and Repair and its Bureau of Engineering, well-informed customers that helped determine the specifications for the vessels. Also critical were private ship architects, the most important of which was Gibbs & Cox, based in New York City. Together with designers at the private shipbuilders and the Navy yards, Gibbs & Cox helped draft new hull designs that could be integrated with improved steam turbine power plants, using high pressures and high temperatures. The builders of these turbines, including General Electric (GE) and Westinghouse, ranked among the most important members of the naval-industrial complex. Thanks to the Navy orders of the 1930s, this tight network—comprising shipyards, designers, engine makers, and Navy procurement bureaus—started World War II able to draw upon several years of collaboration and familiarity.¹⁴

Besides naval shipbuilding, the other major World War II industry most stimulated by orders in the 1930s was the one that made aircraft. Here again, an expansion of orders in the late 1930s was critical for the disposition of forces that would be available by the time of Pearl Harbor. Planes and their engines could be produced somewhat faster than the large warships, but it still usually took at least two years to move from design to quantity production.¹⁵ This lag meant that procurement of most of the planes available to the Navy and the AAF by early 1942 had occurred before summer 1940, when the United States truly ramped up its mobilization efforts.

The aircraft expansion was shaped by a new factor, which had not been significant in the case of warships. This was the role of foreign demand—most notably, in the form of large purchases and capital investments by France and Britain. By spring 1939, when the U.S. Congress authorized expenditures for aircraft expansion comparable with the funds that it had provided previously for warships, the British and French orders had already provided the American aircraft industry with a major stimulus.

The aircraft industry, like shipbuilding, had suffered from the end of military orders after World War I. But it was a less mature industry, with dreams of a future in which air travel would become commonplace. By the mid-1930s, after a wave of consolidation was reversed by antitrust action, the adolescent aircraft industry remained highly competitive. Across the country, at least a dozen viable airframe manufacturers had military contracting experience. With just 36,000 workers in 1938, the aircraft industry was still quite small. Dependent on military sales and exports, it was also fragile. Among the leading aircraft manufacturers, only Douglas—maker of the DC-2 and DC-3—enjoyed much success as a supplier of civilian airliners. From 1935 to 1937, modest orders from the Air Corps and the Navy, most of which offered low profit margins, accounted for 40 percent of the industry’s sales. Another third or so of the industry’s output was absorbed by more profitable export sales, many of them to Latin American nations and China.¹⁶

Exports became far more important from 1938 to 1941, when large orders from France and Britain transformed the American aircraft industry. The British and French purchases, along with smaller orders by a few other foreign customers, amounted to over $1 billion—nearly half of the industry’s sales during those years.¹⁷ By February 1939, before Congress increased funds for U.S. military aircraft procurement, the British and French governments had already ordered more than 1,200 planes from American companies. France alone spent over $300 million on American aircraft and engines in 1938 and 1939—about twice the amount spent by the U.S. military. By April 1940, Britain and France together had ordered nearly six thousand planes and more than fourteen thousand engines, at a cost of $573 million.¹⁸

For individual firms, the British and French aircraft purchases of 1938–40 were electrifying. The buying spree started in summer 1938, a few weeks after a British delegation toured aircraft plants in California. In June, Britain ordered two hundred of Lockheed Aircraft’s two-engine “Hudson” bombers, which would not begin flight tests until year’s end. Eventually, the British would order 1,100 more. But for Lockheed, a small company with two thousand employees, even the first order seemed enormous. With the Hudsons priced at $85,000 each, the initial order promised $17 million in revenue over the next couple of years—far more than the $2–$3 million in annual sales that the company had been recording in the mid-1930s. During the six months after the first Hudson order, Lockheed doubled its workforce and added a second eight-hour shift. Thanks to the British order, Lockheed was able to move more quickly into production of its fast twoengine P-38 fighter, which it started to deliver to the Air Corps in 1939.¹⁹

While Lockheed’s change in fortunes was extreme, many other American airframe makers also grew rapidly. France and Britain ordered dozens of new planes from Douglas, North American Aviation, the Glenn L. Martin Company, and the Curtiss-Wright Corporation. From 1938 to early 1940, these companies and others across the industry tripled their workforces.²⁰

For the airframe makers and aero engine manufacturers, foreign governments were important sources of capital. Britain, as part of its first Hudson bomber order, provided Lockheed with a cash advance of $360,000. This helped tide Lockheed over until early 1939, when the company was able to raise $3 million by issuing more stock. Meanwhile, France provided Martin with $2.4 million to expand the company’s main plant in Baltimore, in order to help Martin fill an order for Model 167 bombers. Foreign capital was even more critical for the early expansion of the two largest engine manufacturers, Pratt & Whitney (part of the United Aircraft Corporation) and the Wright Aeronautical Corporation, the engine-making division of Curtiss-Wright. By the time the European war started in September 1939, Pratt & Whitney had already received $85 million worth of engine orders from France. Then, just after the war began, France agreed to pay $7.5 million to build a whole new facility at Pratt & Whitney’s works in Connecticut. Known as the “French wing,” this doubled the company’s plant space. Soon after, the British paid for their own $8 million “British wing.” Together with a $14 million investment in new plant from the United States, the French and British outlays allowed Pratt & Whitney to increase its plant by a million square feet of factory space, all before January 1941. Something comparable was achieved at Wright Aeronautical’s main plant in Paterson, New Jersey, which used a $5 million direct investment by France to triple its floor space between 1938 and 1941. By mid-1940, France and Britain had provided $72 million worth of direct investment in U.S. aircraft industry plant, nearly 50 percent more than the private investment in plant made by the companies themselves.²¹

Domestic military demand for aircraft also jumped in 1939. Before then, even experienced and talented manufacturers had been struggling to survive. A case in point was the Seattle-based Boeing Aircraft Company, designer of an innovative heavy bomber, the B-17. Enjoying enthusiastic support from Air Corps officers, Boeing received a small contract for thirteen B-17s, which it delivered in 1937. However, the penny-pinching secretary of war, Harry H. Woodring, decided to stop buying B-17, in favor of the cheaper Douglas B-18. This nearly destroyed Boeing, which had been struggling financially throughout the decade. In 1939, Boeing recorded a loss of $3.3 million; the company found itself compelled to take out a $4.7 million loan from the federal government’s Reconstruction Finance Corporation (RFC).²²

A dramatic shift in U.S. military demand for aircraft would not manifest itself until 1939. But it had its roots in the European diplomatic crisis of September 1938, when it appeared that Hitler’s demands for control over territory in Czechoslovakia would throw Europe immediately into a major war. Although that outcome was delayed by the “appeasement” of Hitler via the Munich agreement, President Roosevelt responded to the crisis by asking his advisers to plan for a bigger air force. The planning was led by Harry Hopkins, the veteran New Dealer and top Roosevelt adviser, along with Assistant Secretary of War Louis Johnson, a champion of militaryindustrial preparedness. During the fall of 1938, Hopkins, Johnson, and Roosevelt discussed the possibility of having New Deal public works agencies build as many as sixteen new government-owned aircraft plants. They started to select sites for these new plants all around the country, from Utah to Alabama. Roosevelt unveiled his plans at a meeting at the White House on 14 November. There, he stunned members of his cabinet and top military officers by saying that he wanted the United States to build a tenthousand-plane Air Corps (more than quadruple its current size), along with the industrial capacity to be able to build twenty thousand planes in one year.²³ (Over the weeks that followed, as the White House faced the problem of persuading Congress to pay for such a program in peacetime, these ambitious goals were scaled back.)²⁴

During this early planning for a major expansion of U.S. aircraft output, private airframe company executives worked hard to ensure that the growth would be handled entirely by themselves and not by firms from other industries or the government. To airframe and aero engine makers, the threat of competition from the government seemed very serious. Might the Air Corps end up running the new government-owned plants, thereby setting up a mix of public and private operation such as the one that already existed in naval shipbuilding? This question worried the airframe manufacturers, who lobbied hard to prevent such a possibility. As one Air Corps officer put it, after a meeting with company leaders in early 1938, “all manufacturers interviewed were unfavorable to any scheme whereby the Government would own and operate aircraft facilities.”²⁵

The airframe manufacturers also objected to any scheme that would give large prime contracts for planes to firms in other industries, such as the big automakers. If these firms were to participate in an expansion, the aircraft industry representatives insisted, their role should be limited to that of subcontractors who would make parts, not finished planes. Here the industry was trying to prevent the United States from adopting the British model of “shadow factories”—reserve airframe plants operated by automakers or other outside firms. Throughout 1938 and 1939, aircraft industry leaders, including Glenn L. Martin and Donald W. Douglas, told military procurement officials that they objected strongly to “the shadow factory idea,” as well as to any government-owned plants.²⁶

In these struggles of 1938–39, the aircraft companies mostly got their way. On 3 April 1939, Congress passed the Air Corps Expansion Act, which called for a six-thousand-plane Air Corps, nearly triple its current size. Over the next few weeks, between April and August, the industry was flooded with over $100 million worth of new U.S. military orders.²⁷ Among the other companies receiving contracts for at least $7 million worth of planes or engines in 1939 were Boeing, Consolidated, Curtiss-Wright, Douglas, Lockheed, North American, Pratt & Whitney, Wright Aeronautical, and GM’s Allison Division. This big order jump-started the production of most of the American bombers that would be flown in large numbers in World War II, including the B-17, the Consolidated B-24, North American’s B-25, and the Martin B-26.²⁸

Thanks to the time lag between initial orders and the delivery of finished planes, all the contracting in 1938 and 1939 failed to create impressive results before the German offensives of spring 1940. Unfortunately for France, only a third of the $300 million worth of American planes and engines it had ordered since 1938 had been delivered by then. The U.S. Army Air Corps still had only 2,665 planes, barely a tenth of the size of the fleet operated by the Luftwaffe. But this situation was changing fast, even before Congress provided huge new military appropriations in the summer of 1940. Of all the American military aircraft that would be deployed in significant numbers during World War II, all but four (the Boeing B-29 heavy bomber and the Republic P-47, Grumman F6F, and Chance-Vought F4U fighters) were flying before Pearl Harbor.²⁹

The big new foreign and domestic purchases were reflected in the airframe makers’ financial performance in 1939, which, for most of them, was a banner year. At North American Aviation, net income after taxes jumped to $7 million, about 25 percent of the company’s gross sales for that year. Lockheed’s earnings for 1939 were $3.1 million, on about $35 million in sales. Compared with Lockheed’s performance in the mid-1930s, which averaged only about $150,000 in annual profits and $3 million in annual sales, the 1939 numbers were astonishing. Most other airframe makers were not quite so successful in 1939, but with the notable exception of Boeing, they enjoyed high earnings.³⁰

Thanks to the domestic and foreign orders of 1938–39, the United States started 1940 with its existing naval shipyards and aircraft plants running at full blast. During the first weeks of 1940, with the war in Europe apparently stalled, the future of this military-industrial activity was far from clear. As Americans looked ahead to a presidential election in November, which would see President Roosevelt run for an unprecedented third term, there was plenty of uncertainty on the domestic front to go along with the global chaos.³¹ The situation was soon clarified. During the summer of 1940, the United States would begin an enormous new mobilization push. Unlike the procurement efforts of the late 1930s, which relied on the military’s own plants and midsize specialty contractors in the private sector, this new effort would involve many of the nation’s largest industrial corporations. It also brought a cascade of U.S. government investment in manufacturing plant.

Phase 2: Creating a GOCO Arsenal

Coming after a quiet winter, the news from Europe in May and June 1940 stunned Americans. On 10 May, German forces had begun to smash into Belgium, Holland, and Luxembourg; they soon crossed into France. In late May and early June, Britain barely managed to evacuate more than 300,000 British and French troops from the beaches at Dunkirk. In mid-June came the greatest shock of all: the Germans had rolled into Paris, and France had surrendered. Britain quickly prepared itself for bombings and invasion. For Americans, this news was grim. By the end of May, the U.S. military was already conducting serious discussions of its “Rainbow 4” war plan, which had the United States fighting alone—following a defeat of Britain and France—against the combined forces of Germany, Italy, and Japan.³²

On 16 May, responding to what he called the “swift and shocking” developments in Europe, President Roosevelt presented Congress with a shock of his own. Seemingly pulling numbers out of thin air, Roosevelt demanded that the country quickly create the capacity to build “at least 50,000 planes a year.” Although the aircraft industry had grown significantly in previous months, this target would require another quadrupling of its output. Nonetheless, Congress responded quickly to the president’s call. By mid-July, it had appropriated funds for 24,000 more planes for the Air Corps and Navy.³³

Roosevelt’s call for fifty thousand planes a year was merely the most spectacular piece of what quickly became a massive crash rearmament program. “Had we not done what we did in the eighteen months before” Pearl Harbor, Undersecretary of War Robert P. Patterson would later explain, “there would have been no D-Day in 1944, nor any V-J Day in 1945.” During the summer of 1940 alone, Congress authorized over $6.5 billion in military spending. Total military appropriations for July 1940–June 1941 (the government’s fiscal year 1941) were $12 billion—ten times their level at the end of the 1930s. This money would be used to outfit an expanded American army. Even before the Selective Service Act of 1940, which started a new draft, the War Department started to order equipment for an army of two million soldiers. Because the U.S. Army still had a little more than 200,000 men in the spring of 1940, this two-million-man short-term target would force the War Department to scramble over the next few months to buy nearly $4 billion worth of new goods.³⁴

The expanded mobilization effort of 1940–41 coincided with improvements in the health of the American economy. Starting in early 1940, the unemployment rate dropped dramatically. By mid-1941, it was down to about 4 percent.³⁵ By that time, many American businesses were starting to see profit levels that they had not experienced since the 1920s. Certainly, military spending was an important contributor to this change. But once the economic recovery was under way, it actually threatened to make rearmament more difficult. Military and civilian demand now started to compete for scarce resources; individual firms making good money on civilian orders could become more reluctant to consider military contracting.

The growing potential for conflict between the civilian and military economies gave rise to new initiatives and organizations. Among them were economic mobilization boards, starting with the National Defense Advisory Commission (NDAC). As the months went by, NDAC was succeeded by new bodies, including the Office of Production Management (OPM), established in January 1941, and the Supply Priorities and Allocations Board (SPAB), established in August 1941. These organizations shared a similar cast of top officials, including William Knudsen of GM; Sidney Hillman, a top labor leader; and Donald M. Nelson, formerly of Sears, Roebuck, the giant retailer. Although they left contracting in the hands of the Navy and War Departments, the civilian boards helped to locate new war plants and emerged as the chief regulators of the distribution of key materials, such as steel and aluminum.³⁶

The prospect of business executives running the war economy, which had caused some vocal protests back in 1939, now became even more worrisome to critics on the left. In the eyes of progressives, President Roosevelt seemed far too willing to defer to pro-business conservatives. To fill the position of new civilian chief for the Navy Department, Roosevelt tapped Frank Knox, the Republican newspaper editor who had run as his party’s vice-presidential candidate in 1936. Knox’s top lieutenant was the new Navy Department undersecretary, James Forrestal, a onetime navy pilot who had spent the interwar years as a Wall Street investment banker. For secretary of war, Roosevelt nominated Henry L. Stimson, a seventy-twoyear-old Republican who had held several cabinet positions over the previous three decades. The new undersecretary of war was Robert P. Patterson, a World War I veteran and federal judge. Together, these appointments suggested that Roosevelt was willing to allow enemies of the New Deal to run the most powerful offices in the wartime federal government.

Meanwhile, foreign orders were finally outpaced by domestic appropriations. The change occurred well before the end of December 1940, when the president, in a fireside chat, announced that the United States “must become the great arsenal of democracy.” These words paved the way for the Lend-Lease Act, which Congress passed in March 1941. Lend-Lease paid for $7 billion worth of additional ships, planes, tanks, and other munitions, much of which the United States would effectively donate to Britain. After July 1941, when Germany invaded the Soviet Union, Lend-Lease authorities began to plan for shipments to the Soviet Union as well. By September 1941, the military had already prepared a “Victory Program” plan for a nine-millionman army, which came very close to anticipating the ultimate size of the U.S. armed forces. According to one estimate, between June 1940 and December 1941, $64 billion was spent and promised for defense production. This was a third of the total amount that would be spent by 1945.³⁷

The so-called defense period of 1940–41 also saw the U.S. government displace Britain and France as the leading public investors in war plant. In 1938 and 1939, British and French capital had served as the most important source of funds for the American aircraft industry’s expansion. But now, suddenly, the U.S. government became the world’s most important investor in manufacturing capacity. Between June and December 1940, U.S. government agencies spent at least $1.4 billion on manufacturing facility projects, compared with about $1.0 billion invested in them by the private sector. The government spent another $1 billion to build new Army camps, where recruits could be housed and trained.³⁸

These public outlays in 1940 were just the beginning of a flood of public investment in manufacturing plant. During all of World War II, the U.S. government would spend close to $20 billion on manufacturing facilities and machinery, more than double the amount invested by the private sector. Public capital had financed only about 10 percent of American war plant during World War I; during World War II, it financed over two-thirds of new plant. The construction of new government-owned plant was so widespread that by 1945, the United States would own most of the manufacturing capacity in the aircraft, shipbuilding, synthetic rubber, and aluminum industries, as well as in ordnance production (see Table 1). This massive investment in war plant transformed the shape of the broader American economy: by war’s end, the federal government would own close to a quarter of the nominal value of all the nation’s factories.³⁹

Table 1. U.S. Government Investment in War Plant, by Industry, 1940–45

Industry	U.S. Investment	Capacity Ownedby U.S., 1944–45
Enriched uranium and plutonium	$1.38 billion	100%
Shell and bomb loading	$1.25 billion	100%
Synthetic rubber	$0.70 billion	97%
Aircraft	$3.43 billion	89%
Ships	$2.19 billion	87%
Guns and ammunition	$1.60 billion	87%
Nonferrous metals (aluminum, magnesium, etc.)	$1.72 billion	58%
Chemicals and explosives	$2.26 billion	43%
Aviation gasoline	$0.25 billion	33%
Machine tools	$0.15 billion	26%
Combat and motor vehicles	$0.60 billion	23%
Iron and steel products	$1.20 billion	14%

Sources: WPB, “Selling the Surplus Plant,” War Progress Report 256 (11 Aug. 1945), in folder War Progress Reports, box 208, entry 118, RG 80, NARA; atomic weapons plant cost data from Richard G. Hewlett and Oscar E. Anderson, Jr., A History of the United States Atomic Energy Commission, vol. 1, The New World, 1939/46 (University Park: Pennsylvania State University Press, 1962), 723.

Although the public investment in new war plant would not peak until early 1942, it took shape during the second half of 1940. During those months, the U.S. government started to build a huge new war economy based largely on the form of the government-owned, contractor-operated (GOCO) plant. The GOCO scheme had been used during World War I in the merchant shipbuilding and explosives industries but became much more important during World War II. There were several varieties of GOCO plant arrangements. Most commonly, the government would pay for a large new plant, which was built, leased, and managed by a private contractor. The contractor was paid for his trouble with fees, normally set as a small fraction of anticipated costs.

The GOCO plants financed by the DPC and the military were not the only important form of wartime investment in manufacturing. Government-owned and operated plant, such as the U.S. Navy yards and the Ordnance Department arsenals and armories, received nearly $2 billion in new investment. Private companies (mostly in the steel, oil, rail transport, and electric utility industries), taking advantage of new tax incentives, paid for about $8 billion worth of new plant in 1940–45.⁴⁰ Besides all this new plant, plenty of older private facilities ended up being used to make munitions.

But it was the GOCO plant that constituted the largest part of the wartime investment in manufacturing capacity.⁴¹ All the largest new plants built especially for the war were paid for entirely with public funds. And of all plants, including those that predated the war, that turned out the most finished munitions (by dollar value), all but a handful were entirely government financed, or had been renovated with millions of dollars of new public investment (see Table 2 and Table 3).

Nearly half of the government investment in the new GOCO plant came directly from the War and Navy Departments. The other half flowed through the Defense Plant Corporation (DPC). Created in summer 1940, the DPC was a new subsidiary of the Reconstruction Finance Corporation (RFC), which had been serving since 1932 as the federal government’s biggest bailout machine, infrastructure bank, and multipurpose source of loans and credit.⁴² The DPC became especially important as a financier of new plant in the aircraft and aluminum industries.

As military expenditures ballooned and as the GOCO model took off in 1940 and 1941, the shape of the American industrial mobilization shifted. During the late 1930s, it had been confined mostly to transactions between experienced, midsize contractors and the Navy and War Departments (along with foreign purchasing commissions). Starting in 1940, military procurement began to rely more heavily on larger industrial corporations, many of which started to serve as builders and managers of large GOCO plants. It was at this point, during the months before Pearl Harbor, that critics of the mobilization were perhaps most justified in claiming that the war was serving as an engine of economic concentration. By July 1941, of the $9 billion in current munitions orders, a third of the dollar volume was in prime contracts handled by just six corporations.⁴³ Three of these—Bethlehem Steel, New York Ship, and Newport News Ship—were among the handful of experienced warship builders that had been expanding since the mid-1930s. Another, Curtiss-Wright, was a leading producer of planes and aero engines. But the other two, GM and Du Pont, had not held any significant military orders during the 1920s and 1930s. Their appearance in the top ranks of contractors in mid-1941 indicated the rise of new patterns of government-business interaction. During this second phase of the American industrial mobilization, from June 1940 to December 1941, “big business” became an important player. And its most important role was as builder and manager of the giant new network of GOCO plants.

Table 2. The 25 Most Expensive Plants Built in the U.S. for World War II, by New Investment in Buildings and Equipment, 1940–45 (in millions of dollars)

Sources: Non–Manhattan Project data from CPA-Facilities; atomic weapons program cost data from Richard G. Hewlett and Oscar E. Anderson, Jr., A History of the United States Atomic Energy Commission, vol. 1, The New World, 1939/46 (University Park: Pennsylvania State University Press, 1962), 723.

*The public investment at the Kaiser steelworks at Fontana, California, came in the form of a long-term RFC loan, which Kaiser would need to repay out of future profits; so in this one case, the figures may overstate the degree to which the investment was fully “public.”

Even in the major war industry that made the least use of GOCO arrangements (naval shipbuilding), public-owned facilities were essential. In the summer of 1940, Congress authorized the Navy to spend about $5 billion on more than two hundred new combatant vessels, enough to double the size of its fleet. Most of the new warships were built by a beefed-up version of the same network of Navy-run and private shipyards that had done the job in the 1930s. The Navy spent half a billion dollars to expand the capacity of its own shipyards, which continued to serve as top producers of warships. Of the one million Americans working in the naval shipbuilding industry by the middle of the war, a third worked in the Navy’s own facilities. But the Navy also invested heavily to increase the capacities of its established contractors. In Groton, Connecticut, the Navy paid over $9 million to build a whole new GOCO submarine works. It was operated by Electric Boat, whose own facilities were located next door. The Navy also began to invest large sums at the works of the established warship builders, including the main yards of New York Ship, Newport News, and Bethlehem. By war’s end, each of these facilities had been expanded and improved by about $20 million, using funds provided by the Navy’s Bureau of Ships. Across the industry, the Navy investments in plant typically exceeded the established contractors’ own private investments by a factor of five or ten.⁴⁴

In the merchant shipbuilding industry, GOCO arrangements were even more important. The cargo ship program was overseen by an independent government authority, the U.S. Maritime Commission (USMC), which dated from 1936. By the time the U.S. mobilization effort began in earnest in summer 1940, an expanded USMC program was in place; America’s small merchant shipbuilding industry was already busy. However, it still was nowhere close to having the capacity that would be required for the United States to send large ground forces abroad. (By the end of World War II, the USMC would build 5,700 vessels, at a cost of $13 billion, nearly as much as the $18 billion spent on warships by the Navy.)⁴⁵

Table 3. Leading Privately Managed Plant Sites, by Value of Prime Contracts for Finished Munitions, with Amounts of Wartime Public Investment, 1940–45 (in millions of dollars)

Sources: Calculated from CPA-Contracts and CPA-Facilities. In a few cases, the published figures combine multiple sites operated by the contractor in the same metropolitan area. The largest government-operated Navy yards, such as Brooklyn and Philadelphia, likely produced ships worth more than those made by largest private yards, such as Newport News and Federal Ship, but they are not represented in the contracts data.

The big order that changed the American merchant shipbuilding field followed a visit by a British delegation in October 1940. Working with the USMC, British officials decided to order sixty new merchant ships. These were to be “Ocean”-type vessels—slower, cheaper ships than the “C” types ordered previously by the USMC. One “Ocean” might be built for about $1.5 million, about 40 percent less than the cost of a “C”; each new ship might be completed in just six months, instead of a full year.⁴⁶

The British order of late 1940 would be filled by just two as-yet-unbuilt shipyards, which would be paid for in full by the British. The contracts for the ships would be of the cost-plus fixed-fee (CPFF) variety, with the contractors to be paid a flat fee of $160,000 for each ship, or about 10 percent of its estimated total cost. This meant that each of the two yards selected stood to earn about $5 million, with all costs reimbursed by the British government.⁴⁷ These terms appeared to be favorable. But because the United States had few competent merchant shipbuilders, and even fewer who were not already swamped with USMC business, there was no obvious candidate to take the British order.

The winner of the British contract was a consortium of East and West Coast shipbuilding and construction companies, led by Henry Kaiser. Half of the sixty ships would be built in South Portland, Maine, where the British spent nearly $10 million on a new seven-shipway yard, to be co-managed by Todd Shipbuilding and the Bath Iron Works. The other thirty ships would be built at a new yard in Richmond, California, near San Francisco, where the British invested another $7 million for seven Kaiser-run shipways.⁴⁸

The British order of late 1940 became a model for the giant Liberty ship program, which would account for nearly half of all the vessels built for the USMC. The Liberty ship project started in January 1941, after President Roosevelt announced that the United States needed to build two hundred additional merchant vessels. Like the British “Ocean” types, the Liberties, initially priced at about $2 million apiece, were meant to be relatively cheap, slow ships.⁴⁹

In order to get the two hundred Liberties built, the USMC paid for seven large new GOCO shipyards. Built mostly in the South and the West, these seven new yards were to be operated mostly by companies with some previous experience. The biggest of the new yards, a $35 million facility in Fairfield, Maryland, outside Baltimore, was run by Bethlehem Steel Corporation, a major builder of commercial and naval vessels. In Wilmington, North Carolina, the USMC paid for a $20 million yard run by Newport News, the Navy’s top builder of aircraft carriers. On the West Coast, the USMC spent about $25 million apiece to build big new yards in Los Angeles and Portland.⁵⁰

The nine large new merchant shipyards created to handle the British and American orders of the winter of 1940–41 served as the core of the U.S. cargo ship program throughout World War II. Kaiser’s yards in Richmond and Portland would end up building 821 Liberties. With a total of 197,000 employees at their peak, the various Kaiser yards on the Pacific Coast worked on nearly $4 billion worth of ships, or about a quarter of the value of all USMC construction. On the East Coast, the giant Bethlehem-Fairfield yard in Maryland finished 312 Liberties; Newport News Ship’s Wilmington yard built 126. In Maine, Todd-Bath had serious production problems, especially with a new Liberty shipyard that was built in 1941 alongside the original British-financed facility. However, despite the setbacks, the two South Portland yards together built 244 Liberties.⁵¹

The Liberty shipbuilders, including Kaiser, have been justly celebrated for their innovative use of welding and modern assembly techniques, which allowed them to produce the vessels with astonishing speed. But the miracle of American wartime shipbuilding should also be credited to public actors, who paid for everything and coordinated the larger program. The harddriving leaders of the USMC, Admirals Jerry Land and Howard L. Vickery, were both graduates of the U.S. Naval Academy. Both were experienced builders of ships, thanks to their service at the Navy’s in-house warship yards. Land and Vickery were instrumental in the Liberty program, by coordinating it at the national level and advising the private builders, including Kaiser.⁵²

Above all, the British and USMC contracts and investments of 1940–41 created enormous new capacities. This was difficult to see in the production record of 1941, when the USMC took deliveries of just twenty-one Liberties, a third of the number originally scheduled. Until mid-1942, Germany’s U-boats succeeded in sinking more tonnage of cargo shipping than the Allies were producing. However, even before Pearl Harbor, the USMC was already planning to build five million deadweight tons of new shipping—about five hundred vessels—in 1942, and another seven million tons in 1943.⁵³ These impressive targets were conceivable only because of the network of large, GOCO merchant shipyards that the British and American governments had built in 1941.

New GOCO plants were also the central mechanism for several other military-industrial expansions. One of the most important of these was in the explosives industry, which produced the smokeless gunpowder and TNT needed for ammunition and bombs. During World War II, American explosives plants made over two million tons of TNT and nearly two million tons of smokeless powder. This immense destructive power was manufactured almost entirely by new GOCO plants, representing a government investment of about $3 billion.⁵⁴ These plants were among the largest and most expensive of all the facilities built for the war effort. Even if the socalled Manhattan Project is left out, the GOCO explosives facilities accounted for seven of the twenty most expensive new American war plants. Their operators, including Du Pont and the Hercules Powder Company, ranked among the most important of all the nation’s military contractors (see Table 2).

At the heart of the explosives program was the relationship between Du Pont and the U.S. Army’s Ordnance Department, which had been business partners for decades. In early September 1939, the Ordnance Department chief, General Charles M. Wesson, approached Du Pont to ask if the company would be willing to manage a large new GOCO smokeless powder plant with the capacity to produce 100,000 pounds a day. This level of output would triple the nation’s existing manufacturing capacity. Wesson’s proposal was approved quickly by Du Pont’s executive committee, even though several company officials worried that taking munitions contracts might generate more of the controversy over war profiteering that had bedeviled the company since the Great War.⁵⁵

Meanwhile, Du Pont was negotiating with British authorities over big powder contracts and the financing of new plants. In a deal finalized after the crisis of May 1940, the British government paid for a large new powder plant, which Du Pont would build in Tennessee. This $26 million smokeless powder plant started producing at full capacity in February 1941. (A month later, the American government took it over from the British. Renamed the Chickasaw Ordnance Works, it became part of the Ordnance Department’s growing network of GOCO explosives plants.)⁵⁶

On the heels of the British deal came a bigger one, with the War Department. In late June 1940, Du Pont agreed to build and run a smokeless powder facility on a five-thousand-acre site in Indiana, near the Ohio River. This was the very first big new American GOCO facility contract to be signed in World War II. The Du Pont project in Indiana was a model for the many large greenfield facilities that would spring up all over the country over the coming months. By the spring of 1941, when powder production began, more than 27,000 people were working to finish the construction of the sprawling Indiana plant. After several expansions, the facility would end up costing the U.S. government nearly $180 million. By the second half of 1942, when the plant employed about 9,400 workers, it was making smokeless powder at a rate of nearly a million pounds per day.⁵⁷

These early smokeless powder plant projects, which made Du Pont the leader of the explosives program, were only the first of many similar wartime projects for the company. Indeed, by the time of Pearl Harbor, Du Pont, together with its Remington subsidiary, had become the military’s leading GOCO plant manager. It built and operated huge new explosives plants in Illinois, Alabama, and Oklahoma. Similar GOCO facilities in Kansas, Wisconsin, Virginia, and Tennessee were run by Hercules and Atlas.⁵⁸ All in all, the Ordnance Department’s explosives and ammunition program encompassed seventy-three GOCO plants, which, at their peak, employed about 400,000 people. By the time of Pearl Harbor, seventeen of these facilities were already up and running; another thirty-two were already under way or planned.⁵⁹

The War Department also relied on new GOCO plants for tanks. Here, the lead contractor was the Chrysler Corporation, the highly profitable, younger competitor of GM and Ford. Chrysler’s participation was arranged by Knudsen, the OPM chief, not long after he left GM for Washington. In early June 1940, Knudsen persuaded Chrysler president K. T. Keller to take the tank job. Keller then took a team of engineers to the Army’s Rock Island Arsenal, which provided Chrysler with 168 pounds of old blueprints. By August, Chrysler was breaking ground on a 690,000-square-foot GOCO tank plant on farmland in Warren, Michigan. Like most other operators of big GOCO plants, Chrysler worked under CPFF contracts, in which the government reimbursed all authorized production costs and allowed for profit in the form of a fixed fee.⁶⁰

Figure 2. Photo of M-3 “Grant” medium tank production at the big U.S.-owned, Chrysler-operated tank arsenal outside Detroit, Michigan, ca. 1941. This plant was one of the first, and one of the most important, of the dozens of large new government-owned, contractor-operated (GOCO) factories built for World War II. FSA/OWI collection, Prints & Photographs Division, Library of Congress, LC-DIG-fsa-8b00695.

The GOCO plant managed by Chrysler became known as the Detroit Tank Arsenal (see Figure 2). It ended up manufacturing twenty thousand medium tanks (including M3 “Grant” and M4 “Sherman” models), more than a quarter of total American production. The second-biggest tank builder was another new GOCO facility, built in 1941–42 in Flint, Michigan, and operated by GM. (Another important source of tanks was the long-suffering locomotive and railcar industry, which used British and American tank contracts and direct capital investments to help return to profitability).⁶¹

The big automakers also became major players in the aircraft industry, starting in 1940, as contractors for aero engines, subassemblies, and finished planes. Meanwhile, the established aircraft industry firms, which had been handling the rearmament orders of the last two years, grew into truly big businesses. As in other parts of the growing war economy, this was mostly a GOCO affair: public capital paid for the new plant, which was run by private companies to fill military contracts.

In the aircraft industry, the government paid for nearly all the wartime expansion. One important piece of the effort was the so-called Knudsen Plan, which took shape in the final weeks of 1940, after Knudsen met with executives from the automobile and aircraft industries. The Knudsen Plan provided for four large new GOCO bomber plants to be built in the Midwest—far from the reach of enemy forces. These plants, located in Fort Worth, Tulsa, Kansas City, and Omaha, were paid for by the Army’s Air Corps and built under the direction of the Army Corps of Engineers. They were operated by experienced airframe manufacturers: Consolidated, Douglas, North American, and Martin. The big automakers also joined the effort, as suppliers of large subassemblies, including wing and tail sections.⁶²

Most of the subsequent expansion of the aircraft industry was financed with funds that ran through a civilian entity: the Defense Plant Corporation (DPC). A new subsidiary of the RFC, the DPC was established in early August 1940. It was born amid negotiations between the RFC and the Wright Aeronautical Corporation over the terms of a deal to finance the construction of a giant new aircraft engine plant. This became the first major DPC contract. In October 1940, Wright executives agreed to a deal that had the DPC pay for a 1.7 million-square-foot plant at Lockland, Ohio. The facility would remain government-owned, with the company leasing it for the nominal sum of $1 a year. Dozens of similar $1-a-year lease arrangements were made in the following months by the DPC, especially as it paid for large new plants in the aircraft industry.⁶³

By early 1941, the DPC lease arrangements had almost entirely displaced an alternative, the Emergency Plant Facilities (EPF) contract. Because that scheme required contractors to find private financing for new war plants that would be acquired by the government over a five-year period, it was much less effective than the simpler DPC method of direct government ownership. The EPF contracts were used in the aircraft industry to begin eleven major projects in 1940–41, including an expansion at Boeing’s Seattle plant, to enable it to make more B-17s.⁶⁴ But most of the EPF deals were converted into DPC contracts. Few private bankers were interested in serving as financiers for war facilities, especially those that would eventually be owned by the government. As one aircraft industry executive explained a few weeks before Pearl Harbor, “the average banker’s opinion of a government contract is not favorable.”⁶⁵

Bypassing private banks, the DPC, along with the Navy and War Departments and the USMC, became a giant financier and owner of industrial plant. This was not inevitable. The DPC plant leases, as historian Gerald T. White explained long ago, reflected the efforts of progressive New Deal lawyers to limit the potential gains of war contractors. These mid-level government lawyers, led by Clifford J. Durr and Hans A. Klagsbrunn, saw themselves as protecting the public interest from the excessively probusiness inclinations of their superiors. The latter included Knudsen, the OPM chief, as well as Jesse Jones, the wealthy Houston businessman who had become chair of the RFC back in 1933. (During World War II, Jones continued to oversee the RFC—and its subsidiaries, including DPC—as the federal loan administrator. Beginning in September 1940, Jones also served as secretary of commerce.)⁶⁶

In 1940–41, the DPC paid for several large new airframe plants, similar to the ones being financed directly by the War Department under the Knudsen Plan. The DPC-owned bomber plants included one run by Boeing in Wichita, where that company already had a small subsidiary. In Dallas, where North American had already started to build a small plant to manufacture trainer aircraft, the DPC paid for a $34 million, million-square-foot bomber plant. Completed in April 1941, the Dallas plant ranked at the time as the biggest fully air-conditioned, artificially lit building in the world.⁶⁷ The DPC eventually became the owner of an even bigger bomber factory: Willow Run. This was the Ford-run plant, built near Ypsilanti, Michigan, which, under the Knudsen plan, had been designated as the main supplier of subassemblies for the new B-24 plants in Fort Worth and Tulsa. In mid-1941, as the bomber program expanded, Ford officials received the green light to make complete B-24s. By that time, thousands of construction workers were at work on the massive Willow Run complex, which would end with 3.5 million square feet of factory space, built with 38,000 tons of steel and over 1.5 million square yards of concrete.⁶⁸

Despite Willow Run, the automakers’ most important contributions to the aircraft program were their management of DPC plants that made not airframes but engines. Here they served as licensees of the nation’s top two aero engine manufacturers, Pratt & Whitney (a division of United Aircraft) and Wright Aeronautical (part of the Curtiss-Wright Corporation). In August 1940, a team from the Ford Motor Company, led by Edsel Ford and Charles E. Sorensen, toured Pratt & Whitney’s facilities in Connecticut. That visit led directly to Ford’s effort to mass-produce Pratt & Whitney’s powerful eighteen-cylinder R-2800 engines under a wartime licensing agreement that had Ford pay a fee of $1 for every engine it made. Ford built the engines at a plant within its giant River Rouge campus, built with $10 million of its own money, along with an investment by the DPC that would eventually come to $90 million.⁶⁹

The Ford–Pratt & Whitney agreement served as the model for the American aero engine expansion program. In October 1940, GM’s Buick division became the second big Pratt & Whitney licensee, as an operator of a new $30 million DPC plant in Chicago. After the expansion of the bomber program in May 1941, the DPC authorized the building of two huge new engine plants. On a site in Tonawanda, New York, GM’s Chevrolet division would make Pratt & Whitney–designed engines used in the B-24. At this point, Wright, which had been far more reluctant to license the manufacture of its engines, now gave in to Air Corps pressure. To supplement Wright’s production of engines for the B-17, Studebaker would run a new DPC plant in South Bend, Indiana. In the end, the DPC plants run by the auto companies, acting as licensees of Pratt & Whitney and Wright, made half of all the aircraft engines produced in the United States during World War II.⁷⁰

The dramatic expansion of the U.S. aircraft industry required lots of aluminum. At the beginning of World War II, aluminum accounted for about 70 percent of the weight of a military airframe. A single B-17 bomber required about ten tons of it.⁷¹ Without enough aluminum, the new airframe plants would be useless.

In the case of aluminum, as in so many other major war industries, expansion was accomplished primarily by building new GOCO plants. Here the story was complicated because of the prewar domestic monopoly held by the Aluminum Company of America (Alcoa). A federal antitrust action against Alcoa was already under way. The outbreak of war, with its huge new demands for aluminum, threatened to turn Alcoa from a midsize monopoly into an immense one. How would mobilization officials deal with this political problem?

The solution, forged in 1940–41, was an awkward compromise. The government nominally broke Alcoa’s monopoly, by arranging large RFC loans and military orders that helped Richard S. Reynolds, Sr., leader of the foil-making Reynolds Metals Company of Richmond, Virginia, to integrate backward into the production of aluminum ingot. Reynolds used the government loans to build new aluminum plants in Alabama and Washington, where cheap electricity was available from public utilities.⁷² However, the government depended heavily on Alcoa, both as a private supplier and as a GOCO plant manager. Alcoa responded to the war emergency by tripling its own privately owned production capacities, using the “accelerated amortization” tax breaks provided by Congress in the October 1940 revenue act.⁷³ But Alcoa was also enlisted by RFC chief Jesse Jones as the operator of two dozen new DPC plants, in which the government invested half a billion dollars.⁷⁴ (According to the deal struck with Jones, Alcoa would immediately reduce its prices, from seventeen cents a pound to fifteen cents. It would also handle the construction of the plants on a cost basis, with no additional fees. Alcoa would keep 15 percent of any profits on metal produced at the government-owned plants; the remainder would go to the DPC.)⁷⁵ So Alcoa, which served during the war as something like a giant semipublic entity in its own right, continued to dominate the industry.

For the critics of Alcoa, including Richard Reynolds, Interior Secretary Ickes, and other New Dealers, the DPC contracts authorized by Jones were a major disappointment. Their profit provisions seemed too generous; more important, they put the for-profit monopolist in charge of a giant public investment. Thanks to the complaints of Ickes and others, the DPC contracts did not offer Alcoa an option to acquire the plants after the war. So Reynolds and other aspiring aluminum makers would have the chance to acquire some of the GOCO plant at war’s end.⁷⁶ However, Washington’s reliance on Alcoa was remarkable, even in the context of the government’s general practice of turning to big business to manage GOCO facilities across the war economy. In magnesium metal production, where the Dow Chemical Company had held a prewar monopoly similar to Alcoa’s (and in which Henry Kaiser occupied a position almost identical to Reynolds’s), the new GOCO plant was managed by many companies.⁷⁷ Even in the explosives and ammunition sector, where Du Pont was so important, the government had engaged several firms to manage public plants. Of all the large war industries, aluminum remained by far the most monopolistic, even with the participation of Reynolds.

Alcoa’s dominant role in aluminum production made it an unusual case in the larger universe of American military-industrial arrangements. However, it was perhaps not entirely unrepresentative of the broader pattern of economic mobilization that took place during the eighteen months before Pearl Harbor. During that period, “big business” entered the defense effort in force, mostly as the builders and managers of large new GOCO plants. This development broke sharply with the economics of the rearmament of 1938–40, when most of the expansion was handled by midsize, experienced military contractors. Those companies, which continued to grow, still stood at the center of the war economy. However, they had been joined there, in 1940–41, by industrial giants like Du Pont, GM, Ford, Chrysler, and Alcoa.

Together, the big industrial corporations, along with the specialty military contractors and the War and Navy Departments, had begun, before Pearl Harbor, to oversee an impressive arsenal. Because many of the new GOCO plants were still under construction in late 1941, figures of actual munitions output before Pearl Harbor failed to suggest how much had been done. However, even that output was considerable. From the summer of 1940 through the end of 1941, the United States manufactured 269,000 displacement tons worth of warships, 136 cargo ships, 4,200 tanks, and 23,000 aircraft. Aluminum output had nearly doubled, to about sixty million pounds a month. The U.S. Army’s Ordnance Department, which had calculated back in April 1941 that the new plants under construction would allow it to supply an army of four million men, was already beginning to take delivery of huge amounts of ammunition.⁷⁸ In 1942, the new GOCO plants coming on line would make the United States into the world’s greatest producer of munitions. Most elements for a massive military-industrial mobilization were already in place, even before Japanese planes closed in on their targets in Hawaii.

Phase 3: All-Out Industrial Mobilization

Despite the considerable work that had been done over the previous months, military-industrial planners—like all Americans—were stunned by the Pearl Harbor attacks. Before 7 December 1941, the United States had acted as a giant supplier of munitions to the Allies. Now it became an allout participant, which needed enough military-industrial capacity to fight a two-theater war. The War and Navy Departments immediately called on many existing war plants to add night shifts, so that they could operate round the clock.⁷⁹ Beyond this, clearly, new plants would be needed. But how large was the production gap, and how would the United States manage to close it?

How big a difference did Pearl Harbor make to the trajectory of American military-industrial mobilization? Across the war economy as a whole, the continuities with what had already been done in 1938–41 seem at least as important as any innovations. On 6 January 1942, President Roosevelt used an address to Congress to announce bold new targets: 60,000 planes and 45,000 tanks produced in 1942, and another 125,000 planes in 1943. Roosevelt’s new targets demanded about $50 billion in war spending for 1942, roughly double the amount planned before Pearl Harbor. This was an aggregate figure but still described the experiences of many industries and firms. Immediately after Pearl Harbor, the bomber program was doubled. At the Sperry Gyroscope Company, the nation’s premier designer of complex targeting equipment, executives started 1942 with the task of doubling its production of sights for the .50-caliber machine guns that would be installed in the bombers. Sperry’s output of automatic pilots would need to be tripled. Similar expansions were contemplated by executives in dozens of companies across the country and by the military officers responsible for acquiring the goods.⁸⁰

The task of doubling aggregate munitions output was formidable, but much of it was handled by the same kinds of government-business interactions that had been used to expand the arsenal over the previous months. Procurement officials continued to rely heavily on GOCO arrangements; private investment in new war plant became even less important. Three of the most remarkable post–Pearl Harbor military-industrial efforts—the synthetic rubber program, the B-29 bomber program, and the atomic bomb project—were managed almost entirely with the GOCO method, using experienced military contractors and big industrial firms. Thanks to all the newly authorized GOCO plants, in addition to the ones that had broken ground late in 1941, the months immediately after Pearl Harbor marked the peak of wartime building. Of all war spending in 1942, about a third went to construction. Three-fourths of this plant building and tooling was paid for by government agencies.⁸¹

Despite these continuities, the third phase of arsenal building did bring some changes in the shape of the military economy. One was more genuine conversion of manufacturing, from civilian to military production. Conversion had been much less common during the months before Pearl Harbor, when the civilian economy had been humming. In 1941, the auto industry had sold 4.6 million passenger cars, nearly as many as it had managed back in the banner year of 1929. Now, in early 1942, automakers and other companies were forced to stop much of their production for civilian markets. Managing conversion in 1942 was one of the essential tasks of the War Production Board (WPB), created on 16 January to succeed OPM. In its very first meeting, the WPB agreed that the automobile industry would need to cease its production of civilian passenger vehicles by mid-February. By April, the WPB had issued several orders that prohibited or drastically limited the manufacture of many civilian consumer durables, such as furniture and refrigerators.⁸² Companies formerly producing these goods would now be expected to make goods for the military; indeed, many of them would need to do so, if they wanted to stay in business. So one of the biggest changes in the shape of the war economy in 1942 was the way in which it broadened, to encompass hundreds of firms and plants that had stayed out of the first two phases of industrial mobilization.

As the nation transitioned into an all-out mobilization, hundreds of smaller firms became involved in the war economy, along with the biggest industrial corporations. Major prime contractors, such as Boeing and Chrysler, actually sent about half of their contract dollars to their subcontractors, which provided hundreds of small parts and larger components. Meanwhile, the War and Navy Departments, encouraged by the White House, Congress, and the WPB, used their large, decentralized procurement bureaus to push war orders even wider. By the middle of the war, most American manufacturers had some direct experience with military subcontracting, if not prime contracts. Even the producers of smaller components might become major prime contractors, because the War and Navy Departments provided the assemblers of large weapons systems with a great deal of “government-furnished equipment” (GFE). Ranging from entire aircraft engines to small components such as valves, the GFE often amounted to a quarter or more of the total value of finished weapons, such as aircraft. Indeed, the ubiquity of GFE in the U.S. war economy suggests how heavily it was coordinated by military officers, and not just by civilian officials and prime contractors.

Table 4. From Peacetime to Wartime Production: Expansion Orders of Magnitude, by Industry, 1939–45

Sources: WPB Minutes, 39; “Administration of Cost-Plus-a-Fixed Fee Contracts, for the Operation of Government-Owned, Contractor-Operated Ammunition Plants” (Washington, DC: Office of the Chief of Ordnance, Mar. 1945), copy in folder General Files–General Correspondence (1 of 3), box 4, DPED; Patterson, Arming the Nation for War, 173; Gilbert, “Expansion of Shipbuilding,” 158; Turrell, Rubber Policies, 23; Lane, Ships for Victory, 398; Holley, Buying Aircraft, 548; Koistinen, Arsenal of World War II, 136–49.

One of the biggest mobilization projects of 1942–43 was the creation of a huge new GOCO synthetic rubber industry. After Japan moved quickly after Pearl Harbor to dominate Southeast Asia, it controlled about 95 percent of the world’s natural rubber supply. Suddenly, the Allies faced the real prospect of running out of rubber.⁸³ This was an ugly problem that exposed some corporations’ early unwillingness to relinquish patent rights, as well as poor decisions in 1940–41 by Jesse Jones and President Roosevelt.⁸⁴ Of all major American war industries (outside the atomic bomb project), rubber was the one that required the most extreme expansion of prewar capacities. By war’s end, the United States was making nearly three hundred times as much synthetic rubber as it had done in 1940 (see Table 4).

The big synthetic rubber expansion of 1942–43 was handled almost entirely by the GOCO method. In the opening weeks of 1942, the DPC financed the construction of eleven Buna-S synthetic rubber plants, each at least three times bigger than the four 10,000-ton plants that Jones and Roosevelt had authorized in 1941. The DPC would end up spending $700 million on the synthetic rubber program, which included three dozen facilities. The plants, many of which were located in Texas and Louisiana, were operated by big rubber, oil, and chemical companies, including Goodyear, B. F. Goodrich, Union Carbide, and the Standard Oil Company of New Jersey. (The DPC leased the plants for $1 a year to operators that received management fees that ran from about $6 to $15 a ton, depending on the volume of output.)⁸⁵ While the plants were under construction in 1942–43, anxieties about rubber supply remained high. But once they began to produce, tensions eased. Between June and December 1943, synthetic rubber output nearly quadrupled, to a rate of 36,000 long tons a month. By the winter of 1943–44, the synthetic rubber program was over the hump. Although rising military demand continued to absorb available supply through 1945, Allied military campaigns would not be crippled by a lack of rubber, after all.⁸⁶

In most other major war industries, munitions output was already high in 1942, thanks in large part to the big public investments in GOCO plant before Pearl Harbor. In merchant shipbuilding, Admirals Land and Vickery at the USMC were called on to roughly double their production targets. They paid for a few new shipyards, but most of their orders were met by GOCO facilities and contractors they had helped put into business in 1941, including Henry Kaiser.⁸⁷ Like the USMC, the War Department continued to rely on its established GOCO plant operators. For smokeless powder production, the Army’s Ordnance Department relied almost entirely on eleven GOCO plants, managed by Du Pont and Hercules Powder. In TNT production, the GOCO plants were managed by the big explosives producers—Du Pont, Hercules, Atlas Powder and Trojan Powder—which were now joined by a few other big industrial corporations: Monsanto, American Cyanamid, and U.S. Rubber.⁸⁸

Even the revolutionary new explosive materials used in atomic weapons were produced with GOCO arrangements similar to those already used in many sectors of the war economy. In late 1942, when the Manhattan District of the Army Corps of Engineers faced the problem of how to manage the giant new facilities that it would need to generate atomic bomb fuel, it decided to use experienced GOCO plant operators. One of these was Du Pont, which agreed in November 1942 to take the lead on a plutonium plant—an immense, $330 million complex built in Hanford, Washington. (Under the terms of the deal, Du Pont would be reimbursed for costs, without any additional fees or profits.)⁸⁹ Two more giant atomic fuel production facilities, which would make enriched uranium using different processes, were located in Oak Ridge, Tennessee. One uranium plant, designated K-25, would be run by Union Carbide, the big chemical company that was already the lead contractor on the essential alcohol-to-butadiene portion of the synthetic rubber program. The other, known as the Y-12 plant, was run by Tennessee Eastman, a division of Eastman Kodak, the well-known manufacturer of photographic film. Tennessee Eastman was considered a good candidate for the job because it had recently started work as the operator of a high-explosives GOCO plant in Tennessee.⁹⁰

In the aircraft industry, of all the new projects that took off after Pearl Harbor, the most important was the effort to make the new B-29 bomber. This was the plane that the AAF would use in 1945 to drop the highexplosive bombs and firebombs (and, finally, two nuclear devices) that would destroy large portions of many Japanese cities. By war’s end, the B-29 program turned out about 3,900 planes at a cost about $3 billion—about 50 percent more than the cost of the whole atomic weapons program. Actually, the Army’s Air Corps had ordered 250 of Boeing’s planned superbombers back in 1941. Wright Aeronautical had been engaged to supply its massive R-3350 “Cyclone” engines, which it planned to make in a new $70 million GOCO plant in New Jersey. After Pearl Harbor, however, the AAF worked with Boeing to create a much larger B-29 program. Boeing itself would build many of the planes, at DPC plants in Wichita and in Renton, Washington. But the War Department also paid for a big new $50 million GOCO plant, outside Atlanta, to be operated by Bell Aircraft, a smaller company based in upstate New York. Later, the Martin-managed GOCO bomber plant in Omaha joined the B-29 program, by switching over from B-25 production.⁹¹ The expansion of the B-29 program in early 1942 also created the very biggest of all the new factories built during World War II. This was a $175 million, Chrysler-Dodge-operated plant in Chicago, which manufactured the Wright-designed Cyclone engines. Paid for by the DPC, the Dodge-Chicago plant included 3.5 million square feet of factory space in the main assembly building alone, which stood beside the world’s biggest parking lot, serving the plant’s 30,000 employees.⁹²

The last piece of the puzzle for the aircraft program, which worried mobilization officials all the way through the last months of the war, was to create an adequate supply of aviation gasoline. A standard four-engine bomber like the B-24 could use over three hundred gallons of 100-octane gasoline for each hour it flew; the big B-29s might use as much as ten thousand gallons on one long mission. So by early 1945, when AAF commanders started to use dozens of these planes at a time in raids over Japan, a single operation might require over a million gallons of 100-octane.⁹³

In the high-octane gasoline program, Washington paid for some GOCO plants but also relied heavily on the expertise and investments of the forprofit oil companies. Like their counterparts in the steel industry, the oil companies anticipated that they would be able to find uses for new plant after the war, so they decided to take advantage of the favorable tax amortization rules. Financing new private plant projects was easier for oil companies than for many other firms because they continued to enjoy plenty of civilian business after Pearl Harbor, in addition to their war orders. Even in 1944, when their participation in the war economy peaked, the oil companies—including Standard–New Jersey, Shell Oil, Texas Company, Cities Service, Sun Oil, and others—sent only about a third of their output to the military. And their military sales came mostly from plants they built and owned, or “scrambled” facilities in which public-owned equipment and private plant sat side by side. From 1942 to 1944, as the United States added about 350,000 gallons a day to its 100-octane production capacity, about a hundred new plants were built, at a cost of nearly $800 million.⁹⁴ Only about a third of the funding came from the government (see Table 1).

The big oil companies’ leading role in the growing aviation gasoline program, together with Washington’s reliance on the GOCO model, made it easy for critics of the industrial mobilization to describe it as dominated by big business. The critics cited statistics such as those provided by an OPM study of mid-1941 that found that just fifty-six companies held threequarters of the aggregate dollar value of prime war contracts.⁹⁵ Armed with such data, congressional champions of small business, including Senator Harry S. Truman (D-MO), cried foul. So, too, did many other populists and progressives, from farmers in the heartland to leftist journalists in New York. In June 1942, after a torrent of complaints, Congress created the Smaller War Plants Corporation, intended to help distribute war orders to deserving smaller enterprises. After a year of work, this body would complain to Congress that no matter how much it tried, it was never able to do enough to break through the military–big business alliance that was preventing full participation by small business.⁹⁶

Much of this criticism was misleading. Part of it should be attributed to sour grapes: some members of Congress, as well as officials at the state and local levels, were frustrated by their inability to influence the distribution of contracts and new plant sites.⁹⁷ States and localities, along with their representatives in Congress, worked hard in 1940–41 to attract war plants and jobs. Many states set up their first formal Washington lobbying offices at this time, in an effort to attract more plants and contracts.⁹⁸ In Washington, mobilization officials contended with constant entreaties from politicians such as Congressman Karl Stefan of Nebraska, who reported in November 1941 that he was badgering OPM and the Navy and War Departments “almost daily” to ask for more war plants in his state.⁹⁹

Stefan, Truman, and many of their peers remained dissatisfied and critical of the distribution of war work because their own influence was limited. The location of new plants was influenced less by the pull of congressmen and governors than by the calculations of military and civilian officials in the executive branch. Those officials often did favor the South and West because they endorsed a policy of decentralization, for strategic as well as political reasons.¹⁰⁰ However, even this spreading of the work failed to placate many congressmen because, in most cases, it was the military and its contractors who selected sites, using calculations of available transport, power, water, and local labor supply. Internal Navy correspondence from early 1941 shows that the Navy believed that it, and not Congress or even civilian mobilization officials, controlled the choice of plant sites. Under these conditions, even the most powerful congressmen might be stymied. This was true of Senator Walter F. George (D-GA), who fought in late 1940 to have one of the big new GOCO ammunition plants located in Georgia. When Remington (the prospective operator) said it preferred Denver and the Army’s Ordnance Department agreed, Senator George was denied.¹⁰¹

Leaving aside the question of the location of new plant sites, critics of the distribution of war work decried the evident concentration of orders in the hands of big business. But this problem was also exaggerated. For one thing, the prime contracting numbers obscured the participation of smaller firms via subcontracting. As one Harvard Business School professor observed at the time, it was “politic to champion publicly the cause of small business,” but, in fact, the widespread use of subcontracting meant that smaller enterprises were heavily involved in the defense program, from the beginning. To be sure, some subcontracts—such as those for aluminum, steel plate, or large bomber subassemblies—went to other big businesses. But the leading prime contractors also needed millions of dollars’ worth of smaller items, including nuts and bolts, welding equipment, pumps, and valves. A typical World War II bomber comprised more than 165,000 parts, as well as 150,000 rivets; each of its engines comprised more than 1,400 distinct parts.¹⁰² To acquire many of these goods, prime contractors purchased from smaller manufacturers.

The placement of contracts (prime and sub) with smaller companies was promoted by civilian and military officials in Washington. Well aware that this was favored by Congress, they also regarded it as a way to achieve production goals faster, by reducing the burdens on the overloaded plants of prime contractors. Starting in 1940–41, Undersecretary of War Patterson used strongly worded memos to order the procurement services to do more to spread the work. In February 1941, OPM created a new Defense Contract Service (succeeded later that year by a Division of Contract Distribution), charged with boosting the participation of smaller companies. These efforts by civilian and military officials were redoubled in 1942, before and after Congress passed the Small Business Act, which set up the Smaller War Plants Corporation.¹⁰³

Washington’s policy of enlisting smaller firms was so vigorous that it created opposition among military procurement officers who believed that the initiatives sometimes went too far. In August 1941, General Levin H. Campbell, Jr., then assistant chief of the Army’s Ordnance Department, complained privately that OPM seemed to be pursuing “the objective of having every Tom, Dick and Harry make [armor piercing] cores.” To Campbell, it seemed that trying to get several companies in the auto industry to make the cores might create some jobs but “will be much more costly than it would be were we to build our own plant for this production.” There were similar sentiments in the Navy Department, where some officials tried to push back against subcontracting policies that they believed detracted from efficiency.¹⁰⁴

Subcontracting became even more prevalent after Pearl Harbor, when existing prime contractors were deluged with new orders. Leading airframe makers such as Lockheed and Grumman, whose limited plant space made them eager to find outside vendors, used subcontractors to supply half the total value of the finished airframes. Across the airframe industry as a whole, over a third of the total value of military orders was being subcontracted by 1944. Sperry Gyroscope, the nation’s leading manufacturer of complex avionics and gun directing systems, subcontracted half the value of its orders. Chrysler, a pioneer in subcontracting in the prewar auto industry, claimed that the GOCO tank arsenal that it operated added only about a quarter of the total value of finished tanks. The rest was provided by more than six hundred subcontractors and providers of governmentfurnished equipment, located in twenty states.¹⁰⁵

For many midsize manufacturers, which did not typically act as managers of giant new GOCO plants, World War II required industrial conversion. At a few companies, this transition from civilian to military work started well before Pearl Harbor. One early bird was the A. O. Smith Corporation of Milwaukee, a successful independent manufacturer of automobile frames and pipe that had been a major manufacturer of bombs during World War I. In the late 1930s, A. O. Smith executives were already communicating with the Ordnance Department about future bomb production; before Pearl Harbor, they already had $7 million worth of bomb contracts.¹⁰⁶ Other early converters included the Armstrong Cork Company and the York Safe & Lock Company, both located in south central Pennsylvania. Both began to solicit military orders in the late 1930s; both became important World War II prime contractors, as major suppliers of shells, cartridge cases, and gun mounts.¹⁰⁷

For the hundreds of midsize manufacturers that did not undertake any significant conversion until after Pearl Harbor, the transition was not always associated with expansion or prosperity. Forced to stop their normal business by government, these companies sometimes found the war years difficult. In Bristol, Connecticut, for instance, the E. Ingraham Company, a midsize family-owned manufacturer of clocks and watches, had to stop making those goods in early 1942. The company converted entirely to the production of parts for time fuses for antiaircraft shells, along with bullet cores and other war products. It did so using its existing factory space, which, after its normal business ceased, was more than ample. The number of workers at the company actually decreased during the war; revenues would not recover until the later 1940s, after it reconverted to its normal business.¹⁰⁸

Many important conversions and expansions were accomplished by turning manufacturers of civilian goods into licensee military contractors. Such arrangements had been used in 1940–41 to bring the automakers into the war program. But they also involved independent firms that were merely large, as well as those that were truly modest in size. In 1941, the AAF told the Sperry Corporation that it would need to license the manufacture of its .50 caliber machine-gun turrets, used in B-17 and B-24 bombers. The first of the Sperry licensees was the Briggs Manufacturing Company, a leading auto-body manufacturer in Detroit, which would make the turrets in a new $9 million DPC plant. The second was a smaller firm, the Emerson Electric Company, a manufacturer of small motors, fans, and welding equipment in St. Louis, which already had some small Navy orders.¹⁰⁹

After Pearl Harbor, licensing arrangements continued to bring new companies into the war economy. By the end of the war, two dozen companies were manufacturing complex Sperry-designed products—including gun directors, gyrocompasses, autopilots, bomb sights, and turrets—to fill substantial prime contracts with the military.¹¹⁰ Some of the licensees, including GM, Chrysler, and Ford, were giant corporations, far larger than Sperry itself. But many were midsize corporations whose prewar revenues of between $25 million and $75 million a year made them less than a tenth the size of the giant automakers. Such was the scale of Toledo’s Electric Auto-Lite Company, a supplier of auto parts; it was also the size of many companies in the office equipment industry, including National Cash Register, International Business Machines (IBM), Burroughs Adding Machine Company, and Victor Adding Machine Company. All these companies became licensees of either Sperry or Norden, the other top designer of bombsights.¹¹¹

Besides the several midsize manufacturers that converted to war production as licensees, several dozen firms were transformed by war demand into sizable enterprises. Concentrated in the aircraft industry, many of these “war babies” were suppliers of components for planes. One of these was the Elastic Stop Nut Corporation, founded as a small enterprise in the late 1930s, which became the leading manufacturer of the self-locking nuts used by the millions of airframe manufacturers. (A single bomber required 40,000 of the nuts.) By 1943, Elastic Stop Nut was running two $5 million plants, in New Jersey and Nebraska, which had been paid for by a combination of DPC and private funds; its annual sales had reached $40 million.¹¹² In San Diego, the Solar Aircraft Company specialized in the manufacture of stainless-steel exhaust manifolds for aircraft. During the year ended April 1939, its gross sales were only about $0.5 million. Four years later, Solar Aircraft’s sales were $22.4 million, most of which came in the form of subcontracts with the airframe makers.¹¹³

A more prominent war baby was Jack & Heintz, Inc., a manufacturer of aircraft starters, founded in 1940. Before the end of 1941, this infant independent company had over $22 million worth of military orders. By 1944, Jack & Heintz had eight thousand employees, who worked in several Cleveland-area plants that together amounted to a million square feet of factory space. Financed by a combination of private and DPC funds, the $20 million worth of new war plant managed by Jack & Heintz produced thousands of airplane starters, as well as Sperry-designed autopilots. By war’s end, Jack & Heintz would fill $421 million worth of prime contracts. This made it one of the nation’s top hundred prime contractors.¹¹⁴

As the case of Jack & Heintz suggests, the participation of smaller companies in military contracting is easier to see if we consider the local level. Naturally, if we consider only the very largest plants and contractors at the national level, we cannot help but emphasize the role of big businesses—which by 1942 included the major airframe and aero engine makers, along with established industrial giants. However, by examining the local (micro) level, it is possible to appreciate the very considerable involvement of smaller enterprises as prime contractors and operators of publicly financed plant. The Cleveland area, where Jack & Heintz had its plants, is a case in point. Cleveland was home to two large GM facilities, as well as plants owned by other large corporations, including GE, Kennecott Copper, Republic Steel, and Standard Oil of Ohio. But forty other companies in the Cleveland area held at least $10 million worth of prime contracts. And there were forty-three plants in Cleveland that saw at least $1 million in new investment in buildings and equipment during the war years. Several midsize independent companies in Cleveland, including Jack & Heintz, Thompson Products, Cleveland Pneumatic Tool, Ohio Crankshaft, and Cleveland Graphite Bronze, were important suppliers of aircraft components. These items included engine valves, crankshafts, bearings, and cylinder heads, as well as landing gear struts. Each company ran plants built or overhauled with $8 million to $32 million of government money.¹¹⁵

The situation in Cleveland was somewhat unusual because that city was home to a large number of midsize independent manufacturers. However, there were comparable patterns in other localities, including Chicago, Milwaukee, and Los Angeles. Especially in these places, but also across the nation, the war economy had expanded enough by 1942–43 to directly engage all sorts of manufacturers, large and small. Hundreds of smaller, privately held firms held significant prime contracts and ran plants built with large sums of government money. Thousands more participated as subcontractors. Far from being monopolized by the largest corporations, the business of war was distributed broadly and deeply.

The local-level data from places like Cleveland merit close attention because they suggest something important about the organization of the American war economy. As the government’s micro-level records of prime military contracts demonstrate, many components that went into the larger finished weapons, such as ships and planes, were supplied directly by the military bureaus, as “government-furnished equipment” (GFE). The War and Navy Departments contracted directly with the manufacturers of many key components, including aircraft parts, avionics instruments, landing gear, fire control systems for shipboard guns, and hundreds of other items. In many cases, these goods were made in plants paid for directly by the military or the DPC.

All this public involvement reduced the responsibilities of the contractors. GFE, ordered by the military and delivered to the prime contractors’ plants, accounted for about a third of the dollar value of World War II aircraft, including the B-29.¹¹⁶ To be sure, the prime contractors were extraordinarily busy with their own production and subcontracting; they were also responsible for installing much of the GFE. However, a war economy in which so much GFE was used was necessarily one in which the War and Navy Departments had a great deal of responsibility over project management. It required military agencies to deal directly with hundreds of smaller firms, as plant financier and buyer. They also used their power and knowledge of national supply networks to help contractors troubleshoot bottlenecks and other production problems.¹¹⁷ So despite the large orders that they placed with the biggest prime contractors and GOCO plant operators, the War and Navy Departments were far from content to sit back and let a handful of big businesses meet their needs. Instead, they developed huge procurement organizations that dealt face-to-face with thousands of suppliers, large and small.

As the record of prime contracting and the extensive use of GFE suggests, military officers served during World War II as the national managers of weapons production projects. Some of them were based at the AAF’s Materiel Command, at Wright Field in Ohio. Thanks to New Deal public works outlays, Wright Field at the end of the 1930s was already a significant research and testing facility, boasting the world’s largest wind tunnel and its most sophisticated propeller-testing equipment.¹¹⁸ During World War II, Wright Field expanded into an immense engineering and procurement organization. (The AAF’s Materiel Command, like the Army’s Ordnance Department, had tens of thousands of employees, which made them far larger than the WPB.) Wright Field’s Production Division, led by Major (later General) Kenneth B. Wolfe, became well known among aircraft industry contractors for its aggressive demands for quick design changes and faster output.¹¹⁹ Wright Field served as the primary public authority over contracting, design specifications, testing, and inspection. It also interfaced with contractors to facilitate group projects. Early in the war, for instance, Wolfe and his team coordinated the expanded B-17 bomber program, which required Douglas and Vega-Lockheed to rearrange their California plants to make thousands of the Boeing-designed planes.¹²⁰

* * *

As the record of U.S. industrial mobilization from 1938 to 1944 suggests, the American war economy was complicated enough to provide plenty of evidence for any number of stories about its workings. Probably the most common shorthand account, at the time and afterward, emphasized the role of the nation’s leading industrial corporations, such as GM and GE. Because executives from several of the big corporations became top mobilization officials in Washington, they invited close scrutiny. However, the focus on the biggest businesses and their leaders has made it difficult to generate an accurate picture of the whole American war economy.

The largest industrial corporations were indeed important, but not until the middle phase of the mobilization, in 1940–42, when the government commissioned dozens of new GOCO plants. That new capacity was built atop an already substantial military-industrial base, which had been created in 1938–40, when increased Allied orders and direct plant investments boosted the operations of warship and aircraft manufacturers. Although those military contractors would become giant enterprises in wartime, before 1940 most of them qualified as midsize specialty manufacturers in competitive fields.

Even after Pearl Harbor, there was not much of the so-called monopoly capitalism that progressive critics of the U.S. war economy have long decried. In most of the major war industries, including airframes, ships, tanks, trucks, ordnance, and electronics, there were at least a dozen major prime contractors. And as the record of the expanded war economy of 1942–44 suggests, plenty of formerly small or midsize companies—not just the largest corporations—became important subcontractors and prime contractors.

A close look at the workings of the arsenal of democracy also suggests the complexity of government-business relations. As we might expect, given the structure of the American economy, the wartime state was extraordinarily dependent on the managerial and manufacturing expertise of private firms. Only in warship construction, in which the Navy itself managed large production facilities, did the public sector obviously hold the capacity to make a large fraction of the weapons required in wartime. (Even there, the critical job of building the propulsion systems was handled by private firms, including GE and Westinghouse.) Otherwise, even when the government built giant new facilities that it owned completely, it turned to for-profit companies to manage production and personnel. In theory, the Navy and War Departments and the USMC might have drafted enough engineers and prospective managers to staff most of the new government-owned plants with public employees. In practice, military and civilian officials chose an easier path, which was to give private firms the job of managing most of the war economy.

Despite its obvious dependence on private expertise, the American industrial mobilization also relied heavily on energetic public entities. The public contribution was perhaps most obvious in plant finance. Even during the rearmament phase of 1938–40, British and French government orders and direct investments, along with some from the United States, underwrote the expansion of the aircraft industry. The predominance of GOCO plant, paid for with public dollars via the DPC and the War and Navy Departments, was an even more obvious manifestation of the critical role of government. The work of civilian-led coordinating boards such as the WPB (see Chapter 4) helped the war economy avoid devolving into a chaotic scramble for scarce materials. Less obvious, but no less critical, was the economic work of the War and Navy Departments. The military bureaus contributed a great deal to weapons design. Perhaps most important, they were the top awarders and managers of contracts. They also helped build and coordinate supply chains, promoted the sharing of information among suppliers, and provided many prime contractors with huge amounts of GFE. Because the military and the public understood the military’s core mission as fighting in combat theaters, its work on the home front was seldom fully appreciated. But the military’s business divisions, together with a variety of civilian authorities, made the war economy work.

It may seem too obvious to point out that the dynamics of the American war economy were too complex to sum up in a few words. But we need to appreciate its complexity in order to evaluate the business community’s efforts to influence public understanding of the subject. During World War II, these efforts took the form of a multimedia public-relations campaign, designed to highlight the private sector’s leadership of an awesome war production achievement. There was more than a little truth to this claim. But it was also a selective account, which ignored important dimensions of the real industrial mobilization that played out in the late 1930s and early 1940s. This selectivity was to be expected, because the business community had already decided what lessons Americans should learn from industrial mobilization, even before the arsenal was up and running.