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
