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The War Industries Board, 1917–1918; A Study in Industrial Mobilization

Published online by Cambridge University Press:  02 September 2013

Randall B. Kester
Randall B. Kester
Affiliation:
Columbia University Law School
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Extract

With the advent of “total war” in Europe, America was shocked into a realization of the inadequacy of her defense measures in the event of becoming involved. While ideas conflicted sharply as to what our attitude toward the war should be, most schools of thought united in urging increased preparedness, and Congress appropriated staggering sums for defense. But the realization likewise came that preparedness involves more than mere appropriations—it takes time, and men, and materials, and industrial plants, and above all, coördination, in order to maintain defenses ample by modern standards. So as we contemplate the possibility of war, the spotlight focuses on our industrial system as perhaps the most important single factor in defense.

The entrance of this country into the last war found us similarly unprepared, from both a military and an industrial standpoint, and it was almost a year before the industries of the nation were meeting the tremendous demands thrust upon them, with production just reaching its peak at the time of the Armistice.

Type
Research Article
Information
American Political Science Review , Volume 34 , Issue 4 , August 1940 , pp. 655 - 684
Copyright
Copyright © American Political Science Association 1940

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References

1 The question is frequently raised whether “preparedness,” in a military sense, may not be a force tending to involve a nation in war rather than a safeguard against involvement. Whatever the answer to that may be as to peace-time armament, as long as war is actually rampant in the world, the advocates of preparedness dominate public opinion. Likewise it is occasionally urged that merely thinking about war and preparing in a non-military way for that event may develop a state of mind that could be too easily swayed to a war mood if the choice should come. It is argued for such planning that an awareness of the consequences of war would strengthen the determination never to incur another one. Current experience indicates that if public officials were to ignore the possibility of war, they would be considered derelict in their duties.

2 Preliminary report of Baruch, chairman of the War Industries Board, to President Wilson, Dec. 24, 1919, printed in Baruch, , American Industry in the War (Final report of War Industries Board, 1921—cited hereafter merely as Final Report), p. 8.Google Scholar See also foreword by General Pershing to Baruch, , Taking the Profits out of War (1936), p. 4.Google Scholar For strong criticism of the lack of preparedness in 1917, see Crowell, , How America Went to War—The Giant Hand (1921), pp. xii–xxvi, 2–5.Google Scholar

3 “It would perhaps have been impossible to have anticipated these shortages and provided against them beforehand because of the extreme difficulty of defining military needs. The war was constantly developing new needs so that a comprehensive undertaking in war manufacture, inaugurated five years before we entered the war, might have been largely wasted. The program of supplies had to be developed in closest harmony with the military program proper.” Final Report, p. 19.

4 Note especially the civilian War Resources Board formed on August 10, 1939, to advise the War and Navy Departments on industrial mobilization; and the National Defense Commission appointed by President Roosevelt in June, 1940. The War Resources Board submitted its report on November 4, and was disbanded on November 25, 1939. N. Y. Times, Aug. 10, p. 1, col. 4; Nov. 4, p. 3, col. 7; Nov. 25, p. 2. col. 6 (1939). The report has never been made public. The National Defense Commission was established under the act of Aug. 29, 1916, establishing the Council of National Defense, still on the statute-books. 39 Stat. 649 (1916). For current discussion, see Time magazine, June 3, 1940, pp. 11–15, 65.

5 Final Report, p. 19. For a contemporary account of the early history of the War Industries Board, see Hitchcock, , “The War Industries Board,” Journal of Political Economy, Vol. 26, p. 545 (1918).CrossRefGoogle Scholar

6 Authorized by 39 Stat. 214 (1916). The Kernan Board reported advising against the government manufacture of arms and munitions, Sen. Doc. No. 664, 64th Cong., 2d Sess. (1917). When steel prices were extremely high in the summer of 1917, there was serious talk of commandeering the whole iron and steel industry, but it was never attempted. Final Report, p. 115.

7 39 Stat. 649 (1916).

8 Ibid.

9 Final Report, p. 20.

10 Id., p. 22.

11 The resolution of the Council creating the War Industries Board is set out in full in Garrett, , Government Control Over Prices (War Industries Board and War Trade Board publication, 1920), p. 203Google Scholar, n. 1. It is reprinted in part in Final Report, p. 22.

12 The various divisions and sections of the Board and their membership are set out in full in Final Report, pp. 291–316.

13 The functions of the commodity sections are described at some length in the circular of the War Industries Board creating the Requirements Division, Final Report, p. 320. Also printed in 56 Cong. Rec. 5560–1 (1918). It may be wondered why the control of the iron and steel industry, which was so directly important to warfare, was not intrusted to a separate body, as were foods, fuels, and trans portation, rather than to a commodity section of the Board. Apparently the only answer is that the organization developed in response to the needs of the moment rather than as the result of a preconceived plan, and since this industry was so im portant, its control was already under way before the separate administrations were developed.

14 A pamphlet of the War Service Executive Committee of the United States Chamber of Commerce, Feb. 28, 1918, set forth the advantages of this type of organization. Reprinted in Final Report, p. 288.

15 The War Service Committees and their membership are listed in id., pp. 395–409.

16 Final Report, p. 25. Also in 56 Cong. Rec. 5559 and 10554 (1918). It will be worth while to summarize briefly the contents of the letter, since it was the source of the Board's authority. The functions of the Board should be: (1) the creation of new facilities and opening up new sources of supply; (2) conversion of existing facilities to new uses, where necessary; (3) conservation of resources and facilities; (4) advice to purchasing agencies of the government on prices to be paid; (5) determination of priorities of production and delivery and of rationing; (6) making of purchases for the Allies. The duties of the chairman were to be: (1) to act for the benefit of all supply departments of the government; (2) to interfere with normal processes as little as possible; (3) to guide and assist wherever necessary; (4) to iron out conflicts of interest between departments as to supplies; (5) to see that contracts and deliveries under (3) and (4) above were followed up; (6) to anticipate prospective needs as far in advance as possible. The ultimate decision of all questions except the determination of prices should rest with the chairman. The membership of the price-fixing committee was specified, and a suggested committee to advise on priorities was named.

17 Exec. Order No. 2868, 65th Cong., 2d Sess. (1918); 56 Cong. Rec. 10555 (1918); Final Report, p. 26.

18 40 Stat. 556 (1918).

19 Final Report, p. 104.

20 Id., at p. 106

21 Final Report, p. 33.

22 “That much of the confusion experienced in collecting the supplies of this war could have been avoided by a more painstaking, thorough, and comprehensive effort on the part of the government supply bureaus to work out a program of re quirements, even a program tentative in many of its details, there is little doubt. That such a program would have been exceedingly difficult to frame is quite cer tain.” Final Report, p. 37.

23 The circular of the War Industries Board creating the Requirements Division and setting forth its duties is printed in id., p. 320; also 56 Cong. Rec. 5560 (1918).

24 The importance of properly placing orders was strikingly shown during 1918 when the transportation tie-up was hampering essential production, especially of iron and steel. For example, a Buffalo steel plant was manufacturing projectile steel to be shipped to Cincinnati for forging and to be returned to Buffalo for final machining, while a Cincinnati plant was making projectile steel which was being sent to Buffalo for forging and machining. The Board rearranged the contracts so as to eliminate the cross-hauls and supply each with materials from its own area. This was but one of many contracts which had been placed on a competitive basis, without regard for transportation factors, before control was established, and which required revision by the Board. Final Report, p. 122.

25 An example of the method used in actually allocating orders is found in the organization of the lumber industry. The producing areas were divided into districts, each handled by a “lumber emergency bureau,” and whenever a government order was to be placed, the section would allot it to one or more of these bureaus, each bureau in turn allocating its share to the various mills under its jurisdiction. Under this system, emergency orders could be placed in a few hours. One order for five million feet was distributed in Louisiana and Texas in five or six hours, and the materials were all shipped within four days. Of course the lumber industry did not suffer from shortages, because during the war building construction was less than fifty per cent of normal, and its chief problem was to discourage production for the sake of economies in labor, capital, and transportation. Id., pp. 211, 212.

26 The clearance list of June 24, 1918, is set out in id., p. 319; also in Garrett, , Government Control Over Prices (War Industries Board and War Trade Board, 1920), p. 217, n. 1.Google Scholar

27 The War Industries Board defined the purpose and test of priorities as follows: “The paramount purpose of priorities is the selective mobilization of the products of the soil, the mines, and the factories for direct and indirect war needs in such a way as will most effectually contribute toward winning the war. In requesting priority the petitioner should join with the committee in applying the test: ‘To what extent, if at all, will the granting of this application contribute, directly or indirectly, toward winning the war; and if at all, how urgent is the need?’” Sec. 41, Priority Circular No. 4, July 1, 1918, Final Report, p. 337; also Garrett, op. cit., at p. 220, n. 1.

28 Id., Final Report, p. 330.

29 Id., p. 331.

30 Final Report, p. 56. Priorities Circular No. 20, containing Preference List No. 2, excluding the list of 7,000 plants, appears id id., p. 342.

31 The agreement and rules for its administration were set out in a Joint Circular of Parker and Replogle, July 3, 1918, printed in Final Report, p. 368.

32 Judge Parker's famous Circular No. 21 of Sept. 3, 1918 (id. at 381, 56 Cong. Rec. 10554), which virtually put an end to non-war construction work, was naturally met by a storm of protest from the building industry and allied trades. The Senate adopted a resolution introduced by Senator Calder of New York (Sen. Res. 304, 65th Cong., 2d Sess.), Sept. 13, 1918, asking the Board to explain why the order was issued and by what authority. Baruch replied in a letter to the Senate (Final Report, p. 365; 56 Cong. Rec. 10553) in which he referred to the powers and duties outlined in the letter of the President which set up the Board; pictured the shortages in iron and steel, fuel, transportation, and labor; and showed the necessity of the order to the successful meeting of the war needs. See also, Crowell, , How America Went to War—The Giant Hand (1921), pp. 49–55.Google Scholar

33 The report of the committee is set out in Final Report, p. 350.

34 For further examples, see Final Report, p. 42.

35 Id., pp. 62, 65–67.

36 See also, Taussig, , “Price-Fixing as Seen by a Price-Fixer,” Quarterly Journal of Economics, Vol. 33, pp. 205, 210–11 (1919).CrossRefGoogle Scholar

37 The following table prepared by the Price Section of the War Industries Board shows the average price of all commodities during the four-year period, the average price from July, 1913, to June, 1914, being taken as the base with an index number of 100. Garrett, , Government Control Over Prices (War Industries Board and War Trade Board, 1920), 27Google Scholar:

38 39 Stat. 1000 (1917); 40 Stat. 302 (1017). Official Treasury figures showed that these taxes, plus the normal income tax, often ranged as high as 82.4 per cent of the excess book profits for the war years. Sullivan, , “Work of the War Policies Commission,” Current History, Vol. 35, p. 240 (1931).Google Scholar

39 That the price was fixed at this level was not a justification of the economic theory that normally the cost of the marginal producer determines price, for it was due solely to the necessity of maintaining the output. Taussig, supra note 36, pp. 222–228.

40 “The action of the committee in every case had its origin in the circumstance that government purchases were on a great scale and threatened to disturb market prices. The extension of the function of the committee to the regulation of prices for the public was, if not an afterthought, at all events not among the things con templated at the start. The committee stepped in when government purchases threatened to upset the market, but soon found itself compelled to protect the public also.” Id. at p. 210.

41 “The prices fixed were in all cases reached by agreement with the representa tives of the several industries. In strictness, they were agreed prices rather than fixed prices. The agreements were usually reached in cordial cooperation with the producers concerned, and thus were in reality voluntary. There were cases, however, in which they were agreements only in name. The representatives of some industries, though they accepted them, did so virtually under duress. In these cases the committee to all intents and purposes decreed prices and was enabled to impose them, under the form of agreements, by a more or less veiled threat of commandeering, and also by the certainty that public opinion would condemn those who failed to accede.” Id. at p. 209.

42 Final Report, p. 78.

43 Id., p. 115.

44 Garrett, op. cit., note 37 above, at p. 27.

45 See note 41 above.

46 Taussig, note 36 above, at p. 214.

47 See chart in supra note 37.

48 Final Report, p. 27. The only such proposal to reach the floor of Congress was a resolution (Sen. Joint Res. 181, 65th Cong., 2d Sess.) authorizing the Board to aid in equipping and expanding power plants for the manufacture of munitions and the construction of ships and to advance money to private owners. The resolution was reported from the Committee on Commerce and placed on the calendar. 56 Cong. Rec. 11513.

49 39 Stat. 649 (1916).

50 40 Stat. 556 (1918).

51 39 Stat. 213 (1916).

52 39 Stat. 1193 (1917).

53 40 Stat. 182 (1917).

54 40 Stat. 720 (1918).

55 40 Stat. 276 (1917).

56 39 Stat. 604 (1916).

57 39 Stat 649 (1916).

58 40 Stat. 101 (1917).

59 40 Stat. 272 (1917).

60 Monongahela Navigation Co. v. United States, 148 U. S. 312 (1893) (private lock and dam condemned by the United States). That the power of eminent domain is legislative, see Nichols, , Law of Eminent Domain (2d ed., 1917), I. p. 63Google Scholar, sec. 19. In the cases cited below, note 70, involving the measure of compensation under the Lever Act, the validity of mandatory government requisitions was necessarily assumed.

61 In The Federalist (Sesquicentennial, ed., 1937), no. 23, p. 142Google Scholar, Hamilton argues that war powers should be unlimited because of the impossibility of forseeing national exigencies. Under the doctrine of implied powers as set forth in McCulloch v. Maryland, 4 Wheat. 316 (1819), all means not prohibited by the Constitution are available for a legitimate end—in this case the prosecution of the war—if the means are plainly adapted to the end. In Ex parte Milligan, 4 Wall. 2, 139 (1866), it was stated that congressional power to provide for carrying on war necessarily extends to all legislation essential to the prosecution of the war with vigor and success, except such as interferes with the command and conduct of the forces, the latter being executive in nature. This must be qualified by the statement in United States v. Cohen Grocery Co., 255 U. S. 81, 88 (1921), that war does not suspend the constitutional guaranties. In this case, the assurance that the commandeered goods are for a public purpose, and the payment of just compensation, properly ascertained, fulfill the constitutional requirements.

62 U. S. Constitution, Art. I, Sec. 8.

63 Mt. Vernon Cotton Co. v. Alabama Power Co., 240 U. S. 30 (1916); Union Lime Co. v. Chicago & N. W. Ry. Co., 233 U. S. 211 (1914).

64 See United States v. McFarland, 15 F(2d) 823, 826 (C.C.A., 1927).

65 Monongahela Navigation Co. v. United States, 148 U.S. 312 (1893); United States v. National City Bank of New York, 275 Fed. 855 (D.C. S.D. N.Y., 1921) affmd. 281 Fed. 754 (CCA. 2d, 1922); United States v. New River Collieries Co., 262 U.S. 341 (1923); United States v. McFarland, 15 F(2d) 823 (C.C.A., Md., 1927).

66 39 Stat. 1193 (1917) (50%); 40 Stat. 183 (1917) (75%); 40 Stat. 279 (1917) (75%); 40 Stat. 720 (1918) (75%).

67 Orgel, , Valuation Under Eminent Domain (1936)Google Scholar, Sec. 16 and cases cited thereunder.

68 Id., Sec. 22 and cases cited thereunder.

69 40 Stat. 276 (1917).

70 United States v. New River Collieries Co., 262 U.S. 341 (1923); Vogelstein v. United States, 262 U.S. 337 (1923); Davis v. Newton Coal Co., 267 U.S. 292 (1925); C. G. Blake Co. v. United States, 275 Fed. 861 (D.C. Ohio, 1921) afimd. 279 Fed. 71 (CCA. 6th, 1922); United States v. National City Bank of New York, 275 Fed. 855 (D.C N.Y., 1921) affmd. 281 Fed. 754 (C.C.A. 2d, 1922); Prince Line Ltd. v. United States, 283 Fed. 535 (1922). But see E. I. DuPont DeNemours & Co. v. Hughes, 50 F(2d) 821 (CCA. 3rd, 1931); Highland v. Russell Car Co., 279 U.S. 253, 262 (1929).

71 Government Regulations for Handling Wool Clip of 1918, Final Report, p. 383.

72 41 Stat. 267 (1919), reënacted substantially the same in succeeding years.

73 274 Fed. 131 (D.C. Mich. 1921).

74 287 Fed. 565 (D.C. Ohio, 1922) affmd. on procedural question, 9 F(2d) 394 (C.C.A. 6th, 1925).

75 2 F(2d) 290 (D.C. Mich., 1924).

76 285 Fed. 751 (D.C. Mass., 1923). 32 F(2d) 901 (1929) affmd. 39 F(2d). 851 (C.C.A., 1st, 1930).

77 15 F(2d) 823 (C.C.A. Md., 1926) cert.; granted 273 U.S. 688 (1927), revoked, 275 U.S. 485 (1927).

78 273 U.S. 688 (1927).

79 275 U.S. 485 (1927).

80 See statement in U.S. v. Smith, 39 F(2d), at p. 858.

81 32 F(2d) 901 (1929), affmd. 39 F(2d) 851 (C.C.A. 1st, 1930).

82 30 F(2d) 728 (D.C. N.Y., 1927).

83 33 F(2d) 406 (C.C.A. 7th, 1929).

84 48 F(2d) 258 (D.C N.Y., 1930).

85 262 U.S. 337 (1923).

86 See Time magazine, June 3, 1940, p. 65.

87 House Doc. 264, 72d Cong., 1st Sess. (1932).

88 Sen. Com. Print No. 2, 74th Cong., 1st Sess. (1933).

89 N. Y. Times Oct. 2, p. 2, col. 8 (1939).

90 See note 4 above.

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