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American War Mobilization and the Use of Small Manufacturers, 1939-1943*

Published online by Cambridge University Press:  11 June 2012

Jim F. Heath
Jim F. Heath
Affiliation:
Associate Professor of History, Portland State University
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Abstract

Despite political pressure from their Congressional champions, small businesses were never effectively utilized in the American mobilization for World War II. The Roosevelt administration followed an ambivalent policy designed to placate the proponents of small business while giving the lion's share of contracts and scarce raw materials to big business.

Type
Research Article
Information
Business History Review , Volume 46 , Issue 3 , Autumn 1972 , pp. 295 - 319
Copyright
Copyright © The President and Fellows of Harvard College 1972

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References

1 The widely publicized Report of the Smaller War Plants Corporation, Economic Concentration and World War II, 79th Cong., 2d Sess., Senate Committee Print No. 6, issued in January 1946, warned that firms with less than 500 employees accounted for only 32 per cent of total manufacturing in 1944 compared with 52 per cent in 1939. The publication also charged that during the conflict the 250 largest manufacturing corporations had increased their percentage of total usable manufacturing facilities.

2 Among the economists and economic historians who agree that concentration did increase during the war are Kaplan, A. D. H., Big Enterprise in a Competitive System (Washington, 1964, 2nd ed.), esp. 31Google Scholar; Adams, Walter and Gray, Horace M., Monopoly in America (New York, 1955), esp. 102–105Google Scholar; and Cochran, Thomas C., The American Business System (Cambridge, Mass., 1957), esp. 160CrossRefGoogle Scholar. Strong disagreement is expressed by Adelman, M. A., “The Measurement of Industrial Concentration,” The Review of Economics and Statistics, XXXIII (November, 1951), 279–285Google Scholar; and Means, Gardiner C., “Thoughts on Concentration,” Proceedings of Business and Economic Statistics Section, American Statistical Association, 1962 (Washington, 1962), 120–21Google Scholar.

3 Bernstein, Barton J., “The Debate on Industrial Reconversion: The Protection of Oligopoly and Military Control of the Economy,” American Journal of Economics and Sociology, XVI (April, 1967), 159–172CrossRefGoogle Scholar and “The Removal of War Production Controls on Business, 1944–1946,” Business History Review, XXXIX (Summer, 1965), 243–260Google Scholar; Peltason, Jack W., “The Reconversion Controversy,” in Stein, Harold W., ed., Public Administration and Policy Development (New York, 1952), 215–283Google Scholar; Fessler, James W. and others, Industrial Mobilization for War, Vol. 1, Program and Administration (Washington, 1947), 717–862Google Scholar; Bureau of the Budget, The United States at War: Development and Administration of the War Program by the Federal Government (Washington, 1947), 467–502Google Scholar; Catton, Bruce, The War Lords of Washington (New York, 1948), 211–288Google Scholar; Nelson, Donald M., Arsenal of Democracy (New York, 1946), esp. xv, 410Google Scholar.

4 For especially valuable commentaries on the position of small business in the American society and economy see Zeigler, Harmon, The Politics of Small Business (Washington, 1961)Google Scholar, quotation from 145; Phillips, Joseph D., Little Business in the American Economy (Urbana, III., 1958)Google Scholar; Kaplan, A. D. H., Small Business: Its Place and Problems (New York, 1948)Google Scholar; Bunzel, John, The American Small Businessman (New York, 1962)Google Scholar; Lynch, David, The Concentration of Economic Power (New York, 1946)Google Scholar; and Mayer, Kurt, “Small Business as a Social Institution,” Social Research, XIV (September, 1947), 332–349Google Scholar.

5 Zeigler, Politics, 13–20.

6 For letters from small businessmen to Roosevelt and the President's answers, see OF 172, FDR Library, Hyde Park, N.Y. (hereafter cited as RL); Minutes of the Advisory Commission to the Council of National Defense (Hist. Reports on War Admin., No. 1), 95, 100, 106Google Scholar.

7 Minutes of the Council of the Office of Production Management (Hist. Reports on War Admin., No. 2), 4Google Scholar; Robert L. Mehornay to Guy L. Moser, March 31, 1941, WPB Policy Document Files in RG 179, National Archives, Washington, DC, 291C (hereafter cited as WPB followed by numbered file). Also see WPB Information Letter No. 47, “Coordination Between Defense Councils and Defense Contract Service Offices,” April 16, 1941, WPB 291C.

8 Hearings before the Senate Special Committee Investigating the National Defense Program (hereafter cited as Truman Committee), Part 6 (July 22–23, 1941), 77th Cong., 1st Sess., 1605–1620, 1639–1641; John D. Biggers to Harry S. Truman, July 23, 1941, Senate Files, Truman Papers, Truman Library, Independence, Mo. (hereafter cited as TL). Roosevelt expressed concern about people in the Defense Commission who might tend to profit by their interests in particular businesses. He asked Budget Director Harold D. Smith to check into the situation. Conferences with the President, February 6, 1941, Harold D. Smith Papers, RG 82, RL.

9 The Army's reasons for favoring big manufacturers are detailed in several volumes of The U.S. Army in World War II. See Smith, Elberton R., The Army and Economic Mobilization (Washington, 1959), 414–419Google Scholar; Risch, Erna, The Quartermaster Corps: Organization, Supply, and Services, Vol. 1 (Washington, 1953), 265–66Google Scholar; Thomson, Harry C. and Mayo, Lida, The Ordnance Department: Procurement and Supply (Washington, 1960), 40–42Google Scholar. All these writers credit the Army with making a reasonable and generally successful effort to see that small business got a fair share of war supply business. They concede that in the first years of mobilization the Army favored big business, but they argue that this attitude changed. Also see Gen. Campbell, Levin H., wartime chief of Ordnance, The Industry-Ordnance Team (New York, 1946), 89Google Scholar; Digest of Minutes, OPM Council Minutes, May 13 and 20, 1941, August 5, 1941, WPB 014.5.

10 Press release, August 28, 1941, OF 4245C, RL; Rosenman, Samuel I., ed., The Public Papers and Addresses of Franklin D. Roosevelt (New York, 1950), X, 349–353Google Scholar.

11 Executive Order 8891, September 4, 1941; Minutes of SPAB Meeting No. 4, September 23, 1941, WPB 017.5M; Herbert Emmerich to Donald M. Nelson, September 15, 1941, WPB 291C. WPB staff members suggested several variations of the plan to allocate raw materials to businesses with small numbers of employees. See WPB 291.02. Senator Truman repeatedly expressed disgust during 1941 about the state of industrial mobilization in general and the position of small business in particular in letters to Judge Lewis Schwellenbach, a former Senate colleague. See Senate Files, TL, especially letter dated November 27, 1941.

12 Floyd B. Odlum to Nelson, October 10, 1941, WPB 291C; Nelson to Odlum, October 13, 1941, WPB 291C; Odlum to Nelson, November 27, 1941, WPB 291.01.

13 Nelson to SPAB, December 10, 1941, WPB 291C.

14 Odlum to William S. Knudsen, December 1, 1941, WPB 261.23; Odlum to Knudsen, December 23, 1941, WPB 261.23; speech, Odlum to American Business Congress, December 9, 1941, WPB 291.1; Minutes of SPAB Meetings No.'s 16, 17, 19, December 9, 12, 23, 1941, WPB 017.5M; Frederick Strauss to Joseph L. Weiner, December 19, 1941, WPB 291.01. Odlum achieved considerable success in publicizing the subcontracting program by use of three red, white, and blue-painted “Defense Special Trains” which toured America with exhibits. Where the trains could not go, trucks were used to carry the displays.

15 Report on manufacturing establishments by Stacy May, November 12, 1941, WPB 291R; A.C.C. Hill, Jr. to Nelson, December 19, 1941, WPB 291.01. The President's views undoubtedly influenced the decision of SPAB, and he consistently urged that every doubtful case between non-essential civilian and military production be resolved in favor of the latter. Roosevelt to Nelson, February 11, 1942, OF 4735, RL.

16 Odlum to Knudsen, January 1, 1942, WPB 291.01; William E. Levis to Knudsen, January 2, 1942, WPB 291.01; Odlum to Knudsen, January 13, 1942, WPB 291.01.

17 Ibid.

18 Executive Order 9024, January 16, 1942; memorandum signed by Harry Hopkins, January 14, 1942, Hopkins Papers, RG 24, RL; WPB Press Release for January 28, 1942, OF 4735, RL; Odlum to Nelson, February 6, 1942, WPB 291.01.

19 Hearings, Truman Committee, Part 10 (January 28, 1942), 77th Cong., 2nd Sess., 4025–4030; Nelson, Arsenal, 329–335; Edwin A. Locke, Jr. to Sidney J. Weinberg, February 20, 1942, Locke Papers, TL; Business Week, July 4, 1942, 46–62.

20 Nelson to Truman, March 16, 1942, Senate File, TL; Truman to Nelson, March 17, 1942, Senate File, TL; Minutes of the War Production Board (Hist. Reports on War Admin., No. 4), 34–35; Hearings, Truman Committee, Part 12 (April 14–21, 1942), 77th Cong., 2nd Sess., 4957–5097 passim; Senate Report No. 480, Additional Report on Charges of Robert R. Guthrie in Connection with Administration of Dollar-a-Year Men of the War Production Board, 77th Cong., 2nd Sess.; Nelson, Arsenal, 337–340. Knowlson and Reed were the chief executive officers of Stewart-Warner and General Electric, respectively. Guthrie was originally a Paducah, Kentucky retailer. Subsequently he participated in several corporate reorganizations and promotions in New York.

21 Thurman Arnold to Francis Biddle, March 6 and 10, 1943, WPB 760; Arnold to Nelson, February 7, 1942, WPB 760; Arnold and Livingston, J. Sterling, “Antitrust War Policy and Full Production,” Harvard Business Review, XX (Spring, 1942), 265–276Google Scholar; Janeway, Eliot, The Struggle for Survival (New Haven, 1951), 187–89Google Scholar.

22 Memorandum, June 17, 1940, “Relationship of Antitrust Laws to Defense Program,” unsigned but pencil notation: Blackwell Smith; memorandum for files by Blackwell Smith, June 20, 1940; Robert H. Jackson to O'Brian, April 29, 1941; memorandum for the President initialed JLOB [John Lord O'Brian], March 3, 1942. All in WPB 760. Also see Minutes, NDAC, 2–3, 6–10. Smith to Nelson, February 5, 1942; letters from businessmen and business groups such as the National Association of Manufacturers urging the removal of antitrust restrictions on defense production; Frederick Eaton to O'Brian, February 16, 1942. All in WPB 760. Also see Rosenman, Roosevelt Papers, XI, 181–85; 56 Stat. 781.

23 D. H. Silberberg to Odlum, accompanied by report by Bradley Nash, “Financing Submarginal Prime and Subcontractors by a Revolving Fund,” October 16, 1941, WPB 291C; Lincoln Filene to Roosevelt, October 1, 1941, OF 172, RL; Roosevelt to Filene, October 29, 1941, OF 172, RL.

24 Jesse Jones to Odlum, January 6, 1942; Jones to All Banks and Bankers in the United States, January 1, 1942; Charles B. Henderson to All Banks and Bankers in the United States, January 15, 1942; Henderson to Odlum, January 15, 1942; Silberberg to Odlum, January 8, 1942; Odlum to Nelson, January 21, 1942; Lawrence Clayton to Weinberg, January 30, 1942; Marriner Eccles to Nelson, February 16, 1942; Nelson to F. J. Bailey, March 13, 1942. All in WPB 291C.

25 Executive Order 9112, March 26, 1942; Rosemnan, Roosevelt Papers, XI, 186–89. Senator Truman was skeptical about the value of the Executive Order, calling it “mostly for the purpose of a sop…to the little business men.” Truman to Lou E. Holland, March 26, 1942, Senate Files, TL.

26 John Lord O'Brian to Nelson, February 11, 1942, 291C; summary of testimony by Odlum before the Senate Banking and Commerce Committee on the Murray Small Business Bill, February 26, 1942, WPB 291C.

27 Memorandum, “Small Business Under the Defense Program,” by Seymour Graham, February 10, 1942; C. I. Gregg to Nelson, February 10, 1942; Clinton Scilipot to Hill, April 3, 1942. All in WPB 291C.

28 WPB report, “One Hundred Corporations or Independent Companies Holding Greatest Amount of Prime War Supply Contracts,” WPB 260.51S; Graham memorandum, February 10, 1942, WPB 291C; Gregg to Nelson, February 10, 1942, WPB 291C; Fessler, Industrial Mobilization, 314–324; Robert R. Nathan to Nelson, July 1, 1942, WPB 038.16. The contention that the share of military business received by the 100 largest companies far exceeded their share of prewar production is supported by the fact that in 1939 the 176 firms with 2,501 or more employees (0.1 per cent of all manufacturers) accounted for only 11.388 per cent of total manufacturing output measured by the amount of value added. Nutter, G. Warren and Einhom, Henry A., Enterprise Monopoly in the United States, 1899–1958 (New York, 1969), Table 14, 68Google Scholar. Not all WPB officials agreed that using small business more fully would contribute effectively to winning the war. Philip D. Reed suggested shutting down small firms and releasing all labor, tools, and materials to large plants, with the government paying the fixed charges of the closed companies. This would win the war in the quickest time and preserve the “backbone of American industry and private industry in the post war reconstruction period.” Reed to James S. Knowlson, May 26, 1942, WPB 291.1.

29 Minutes, WPB, 45–46; Philip F. Maguire to Nelson, May 23, 1942, WPB 038.11; Hearings, Truman Committee, Part 10 (April 21, 1942), verbatim transcript, 3768–69, Senate Files, TL; Report of the Senate Special Committee to Study Problems of American Small Business, Pooling for Production, 77th Cong., 2nd Sess., Senate Committee Print No. 12, 1–2.

30 56 Stat. 351. Compared to federal funds already expended or earmarked for big business facilities, the SWPC loan total was indeed modest. But the small amount was probably not significant, since historically the credit needs of small business have often served as a foil to cover more crucial infirmities of small operators, such as differential market power compared to large firms.

31 Patterson, Forcestal, and Nelson to Senator Frederick Van Nuys, May 1 and 19, 1942, WPB 760. For presidential support of Section 12, see Wayne Coy to the Secretary of War May 18, 1942, WPB 760.

32 Minutes, WPB, 125–26; Nelson to Biddle, September 5, 1942, WPB 760.

33 Arnold to Biddle, September 9, 1942; Arnold to Nelson, September 9, 1942; Biddle to Nelson, September 12, 1942; Nelson to Arnold, September 19, 1942; Nelson to Biddle, September 19, 1942. All in WPB 760. Roosevelt to Arnold, January 8, 1943, PPF 8319, RL.

34 Nelson to Holland, July 10 and 15, 1942, Lou E. Holland Papers, TL; WPB press release, “Biographical Sketch of Holland,” October 30, 1942, Holland Papers, TL.

35 Houlder Hudgins to Senate Special Small Business Committee, December 30, 1942, WPB 291.1C; Joint Hearings before House Select Committee on Small Business and Senate Small Business Committee, A Study and Investigation of the National Defense Program in its Relationship to Small Business, Vol. 2, revised (December 15, 1942)Google Scholar, 77th Cong., 2nd Sess., 1986–2068.

36 WPB press release, November 19, 1942, WPB 038.017; agreements between Holland for SWPC and other federal procurement agencies, Holland Papers, TL; Business Week, October 10, 1942, 20–22; Wade T. Childress to Holland, November 27, 1942, WPB 038.16; O. M. Jackson to John W. Hubbell, December 10, 1942, WPB 038.1; press release, December 17, 1942, “Preliminary Report of the Committee on Small Business of the House to the Speaker of the House of Representative,” WPB 291C.

37 Transcripts of telephone conversations between Holland and Gen. Brehon Somervell, December 7, 1942 and December 26, 1942, Holland Papers, TL. Transcript of telephone conversations between Holland and James V. Forrestal, December 16, 1942, WPB 038.017; Sen. James Murray to Holland, December 16, 1942, WPB 038.017; Rep. Wright Patman to Roosevelt, December 16, 1942, WPB 038.12; Patman to Nelson, December 24, 1942, Holland Papers, TL.

38 Holland to Nelson, December 16, 1942, WPB 291.1C; Holland to Nelson, December 22, 1942, WPB 038.12; Holland to Nelson, December 23, 1942, WPB 038.17; memorandum detailing Holland's attempts to secure a stronger board of directors for SWPC, undated, Holland Papers, TL; telegram, Sen. Alben W. Barkley to Nelson, December 28, 1942, WPB 038.12; WPB General Administrative Order 2–75, January 7, 1943, WPB 038.016.

39 Memorandum, Francis Goodell to Files, notes on monthly meetings with Mr. Lou Holland, January 28, 1943, WPB 038.012; Smaller War Plants Corporation and Division, Operations for the Year Ending December 31, 1942, OF 4735, RL; Patman to Nelson, January 12, 1943, WPB 038.17.

40 WPB press release, January 19, 1943, OF 4735, RL; transcripts of telephone conversations between Holland and Colonel Robert W. Johnson, January 20, 1943; Weinberg, January 22, 1943; Nelson, January 22, 1943; Truman, January 23, 1943; Jones, January 20, 1943; and Morris L. Cooke, January 29, 1943. All in Holland Papers, TL. Also see, Holland to Rufus Crosby Kemper, January 22, 1942, Holland Papers, TL; Johnson to Nelson, February 14, 1943, WPB 038.12; Holland to Nelson, February 16, 1943, WPB 038.12.

41 Unsigned memorandum to Nelson regarding smaller war plants, February 8, 1943, WPB 038.014.

42 Patman to Johnson, January 23, 1943, WPB 038.002; transcripts of telephone conversations between Holland and Weinberg, January 22, 1943, and Holland and Nelson, January 22, 1943, Holland Papers TL.

43 Johnson, Robert W., But General Johnson— (Princeton, N.J., 1944), 3–4, 28–30, 51 53, 71–72Google Scholar; Nelson to Johnson, March 12, 1943, Senate Files, TL; Johnson to Weinberg, April 6, 1943, WPB 291C; Johnson to Hill, April 29, 1943, WPB 291C; Johnson to Donald D. Davis, June 2, 1943, WPB 038.16.

44 Information memorandum signed by Johnson, March 19, 1943, WPB 291.1C; Johnson, But General, 33, 55; Minutes, WPB, 218–19; Moguíre to Nelson, May 23, 1943, WPB 038.11; SWPC Field Letter No. 57, June 30, 1943, WPB 038.18.

45 Johnson, But General, 61; bi-monthly reports of the Smaller War Plants Corporation, OF 4735, RL; Johnson to Nelson, April 5, 1943; Minutes of the Production Executive Committee of the WPB, meeting No. 32, June 16, 1943, WPB 291.1C; Johnson to Charles E. Wilson, June 17 and June 21, 1943, WPB 251C. The War Department was unhappy about a military officer pushing publicly for more civilian production. The Army believed that Johnson's plan imperiled the war effort. Under Secretary of War Robert P. Patterson to Nelson, June 21, 1943, WPB 038.12. Johnson refused to desist in his demands, but he did agree to request the Army to transfer him to inactive status. Johnson to Nelson, July 2, 1943, WPB 038.12.

46 Minutes, WPB, 188–89, 210–11, 223; Civilian Requirements Policy Committee, Documents No.'s 1, 2, 5, WPB 035.125; Minutes of the Civilian Policy Requirements Committee, meeting No. 1, July 9, 1943, WPB 035.125; Joseph L. Weiner to Wilson, March 20, 1943, WPB 812; Johnson to Nelson, August 24, 1943, WPB 291C; Nelson to Johnson, September 14, 1943, WPB 291.1C; Policy memorandum, Wilson to Vice Chairmen, Bureau, and Divisional Directors, “Implementation of Office of Civilian Requirements Program and Designation of Smaller War Plants,” October 21, 1943, WPB 291.01. By mid-1943 reconversion studies were being made by numerous federal agencies. See Rosenman, Roosevelt Papers, XII, 341; Henry Morgenthau to Roosevelt, August 12, 1943, OF 172B, RL.

47 Johnson to Nelson: August 30, 1943, WPB 038.17; September 10, 1943, WPB 038.12; September 17, 1943, WPB 038.17; September 29, 1943, WPB 038.12; Nelson to Wilson, September 18, 1943, WPB 038.

48 Herbert O. Eby to Wilson, October 2, 1943, WPB 038.12; S. Abbot Smith to Nelson, October 30, 1943, WPB 038.12; November 22, 1943, WPB 038; Harry W. Colmery to Nelson, November 12, 1943, WPB 038; Johnson to Nelson, December 16, 1943, WPB 038.12; Murray to Nelson, November 22, 1943, WPB 038; Nelson to James F. Byrnes, January 3, 1944, WPB 038.012. For messages of support for Maverick's appointment, see OF 4735F, KL.

49 For useful accounts of the early mobilization program, see Catton, War Lords; Janeway, Struggle; Fessler, Industrial Mobilization; Bureau of the Budget, The United States at War; Blum, Albert A., “The Birth and Death of the M-Day Plan,” in Stein, Harold, ed., American Civil-Military Decisions (Birmingham, Ala., 1963)Google Scholar. On planning during the interwar years, see Koistinen, Paul A. C., “The ‘Industrial Military Complex’ in Historical Perspective: The Interwar Years,” Journal of American History, LVI (March, 1970), 819–39CrossRefGoogle Scholar. For a more detailed historiographical summary of wartime mobilization, see Heath, Jim F., “Domestic America During the Second World War: Research Opportunities for Historians,” Journal of American History, LVIII (September, 1971), 384–414CrossRefGoogle Scholar.

50 Emmerich to Nelson, September 15, 1941, WPB 291C; Reed to Knowlson, May 26, 1942, WPB 291.1.

51 For examples of Nelson's early support of proposals to insure the postwar health of small business, see Nelson to Murray, December 11, 1942, and November 23, 1943, WPB 291C.

52 Zeigler, Politics, esp. 87–115; Trow, Martin, “Small Businessmen, Political Tolerance, and Support for McCarthy,” American Journal of Sociology, LXIV (November, 1958), 270–281CrossRefGoogle Scholar; Bunzel, American Small Businessman, esp. 246–277; Phillips, Little Business; Hofstadter, Richard, “What Happened to the Antitrust Movement?,” in Cheit, Earl F., ed., The Business Establishment (New York, 1964), 113–151Google Scholar.