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Industrial Concentration and World War II: A Note on the Aircraft Industry

Published online by Cambridge University Press:  11 June 2012

Otto H. Reichardt
Otto H. Reichardt
Affiliation:
Graduate Student in History, University of California, Santa Barbara
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Abstract

Although some scholars argue that the United States government's procurement policies in World War II resulted in greater industrial concentration, this study indicates that such was not the case in the aircraft industry.

Type
Research Article
Information
Business History Review , Volume 49 , Issue 4 , Winter 1975 , pp. 498 - 503
Copyright
Copyright © The President and Fellows of Harvard College 1975

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References

1 U.S. Congress, Senate, Economic Concentration and World War II, Report of the Smaller War Plants Corporation to the Special Committee to Study Problems of American Small Business prepared by John M. Blair, Harrison F. Houghton, and Mathew Rose (Washington, D.C., 1946), 21, 27, 29, 31–32.

2 Gray, Horace M. and Adams, Walter, Monopoly in America: The Government as Promoter (New York, 1955), 102Google Scholar, 105. Recently, radical historians have accepted and extended the Adams and Gray analysis. See Bernstein, Barton J., “America in War and Peace: The Test of Liberalism,” in Bernstein, Barton J., ed., Towards a New Past: Dissenting Essays in American History (New York, 1968), 289–290Google Scholar, 294–295, 302–303, 312; Graham, Otis L. Jr. ed., From Roosevelt to Roosevelt: American Politics and Diplomacy, 1901–1941 (New York, 1971), 9Google Scholar. Other scholars also believe that concentration increased. See Cochran, Thomas C., The American Business System: A Historical Perspective, 1900–1955 (Cambridge, Mass., 1960), 160Google Scholar; Baldwin, William Lee, Antitrust and the Changing Corporation (Durham, N.C., 1961), 115Google Scholar; and Kaplan, Abraham D. H., Big Enterprise in a Competitive System (Washington, D.C., 1954), 31Google Scholar.

3 Adelman, Morris A., “The Measurement of Industrial Concentration,” Review of Economics and Statistics, XXXIII (November, 1951), 282–284Google Scholar.

4 Means, Gardiner C., “Thoughts on Concentration,” Proceedings of the Business and Economic Statistics Section, American Statistical Association, 1962 (Washington, D.C., 1962), 121–126Google Scholar. In agreement with Means are Blair, Paul M., Economic Concentration: Structure, Behavior and Public Policy (New York, 1972), 67–68Google Scholar; and Bain, Joe S., Industrial Organization, 2nd. ed. (New York, 1968), 109–110Google Scholar.

5 U.S. Bureau of the Budget, Technical Committee on Industrial Classification, Office of Statistical Standards, Standard Industrial Classification Manual, 1967 (Washington, D.C., 1967), 181–183Google Scholar. U.S. Technical Commission on Industrial Classification,Standard Industrial Classification Manual, Vol. I: Manufacturing Industries Part I: Titles end Descriptions of Industries (Washington, D.C., 1945), 66Google Scholar.

6 Stekler, Herman O., The Structure and Performance of the Aerospace Industry (Berkeley, Cal., 1965), 46–47Google Scholar. Supporting Stekler is Chandler, Alfred D. Jr., who notes that the process of diversification was not adopted by most firms until after World War II. See Chandler's Strategy and Structure: Chapters in the History of The Industrial Enterprise (Cambridge, Mass., 1962), 133–144Google Scholar; and Chandler, , “The Structure of American Industry in the Twentieth Century: A Historical Overview,” Business History Review, XLIII (Autumn, 1969), 266Google Scholar.

7 Wartime histories of the aircraft industry are basically descriptions of the changing relationship between private firms and the government. See Rae, John B., Climb to Greatness: The American Aircraft Industry, 1920–1960 (Cambridge, Mass., 1968), 101–172Google Scholar;Craven, Wesley F. and Cate, James L., eds., The Army Air Forces in World War II: Vol. VI, Men and Planes (Chicago, 1955), 263–361Google Scholar; and Holley, Irving B. Jr, Buying Aircraft: Matériel Procurement for the Army Air Forces, United States Army in World War II, Special Studies, Vol. VII (Washington, D.C., 1964)Google Scholar.

8 The estimates were based on data in Craven and Cate, Men and Planes, 354–355; and Holley, Buying Aircraft, 548. Unfortunately, data indicating the total value of airframe production was unavailable. Most of the data on the total value of production published by the Bureau of Internal Revenue, the Bureau of the Census, and the War Production Board included aircraft engine, propeller, and parts manufacturers. Also unhelpful was Modley, Rudolf, ed., Aviation Facts and Figures, 1945 (New York, 1945)Google Scholar.

9 Lack of data led to the exclusion of some companies, while other firms were excluded for not being primarily engaged in aircraft production.

The Herfindahl-Hirschman index is expressed as:

where Pi is the percentage of total assets or sales for the firm of rank i. The index necessarily gives added weight to larger firms. As a result, the measure is sensitive to changes in the size of dominant firms but is relatively insensitive to smaller firm changes. See Hall, Marshall and Tideman, Nicolaus, “Measures of Concentration,” Journal of the American Statistical Association, LXII (March, 1967), 165–166Google Scholar.

Federal amortization policies helped to raise concentration levels. Especially between 1945 and 1947, smaller firms, taking full advantage of accelerated wartime depreciation schedules, understated their total assets to a greater extent than did larger companies. If businesses had not been allowed to write off assets, then the share of assets controlled by the smaller firms would have been larger and concentration levels would have been lower.

10 As concentration declines, the areas between the curves and the chart's axes become greater. Note in particular that the Lorenz curves showing the concentration of sales during 1943 and 1947 exhibit the downward trend. Visual inspection reveals that the area below the curve for 1947 is greater than the area below the curve for 1943.