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access to The Business History Review.
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By Jim F. Heath
ASSOCIATE PROFESSOR OF HISTORY
PORTLAND STATE UNIVERSITY
Business History Review, Vol. XLVI, No. 3 (Autumn, 1972). Copyright O The Presi-
dent and Fellows of Harvard College.
OThe author gratefully acknowledges a grant from the Faculty Committee on Re-
search and Publication of Portland State University for research on this project.
1 The widely publicized Report of the Smaller War Plants Corporation, Economic Con-
centration 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 corpora-
tions had increased their percentage of total usable manufacturing facilities.
2 Among the economists and economic historians who agree that concentration did in-
crease during the war are A. D. H. Kaplan, Big Enterprise in a Competitive System (Wash-
ington, 1964, 2nd ed.), esp. 31; Walter Adams and Horace M. Gray, Monopoly in Ameri-
ca (New York, 1955), esp. 102-105; and Thomas C. Cochran, The American Business
Wartime mobilization may logically be divided into two periods:
the conversion of industry from civilian to military production,
1939-1943; and the gradual reversal of this process - reconversion
- during the last years of the conflict. Since Barton J. Bernstein,
Jack Peltason, and others have trenchantlydescribed the govern-
ment's part in the bitter controversy between big and small busi-
ness during reconversion, the focus here is on the use of small manu-
facturers during the conversion phase.3
* The Army's reasons for favoring big manufacturers are detailed in several volumes
of The U.S. Army in World War II. See Elberton R. Smith, The Army and Economic Mo-
bilization (Washington, 1959), 414-419; Erna Risch, The Quartermaster Corps: Organiza-
tion, Supply, and Services, Vol. 1 (Washington, 1953), 265-66; Harry C. Thomson and
Lida Mayo, The Ordnance Department: Procurement and Supply (Washington, 1960),
40-42. All these writers credit the Army with making a reasonable and generally suc-
cessful effort to see that small business got a fair share of war supply business. They con-
cede that in the first years of mobilization the Army favored big business, but they argue
that this attitude changed. Also see Gen. Levin H. Campbell, wartime chief of Ordnance,
The Industry-Ordnance Team (New York, 1946), 89; Digest of Minutes, OPM Coun-
cil Minutes, May 13 and 20, 1941, August 5, 1941, WPB 014.5.
10 Press release, August 28, 1941, OF 4245C, RL; Samuel I.
Rosenman, ed., The
Public Papers and Addresses of Franklin D. Roosevelt (New York, 1950), X. 349-353.
19Hearings, 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, Febru-
ary 20, 1942, Locke Papers, TL; Business Week, July 4, 1942, 46-62.
WAR MOBILIZATION 303
curtailment of nonessential civilian production until after Guthrie's
resignation. The committee tartly observed that the case indicated
that certain dollar-a-year men were unable to divorce themselves
"from their subconscious gravitations to their own industries."
Nelson stood firmly behind the men, both ranking executives in
major corporations, expressing absolute confidence in their integrity.
But he conceded that airing the affair had produced a positive net
result because it helped to focus attention on the need to speed
conversion.20
Nelson's handling of the prickly dollar-a-year dilemma was
shrewd. His candid testimony on the need for executives in this
category and his issuance of administrative orders strictly governing
their use helped to moderate Congressional opposition initially.
When the Guthrie affair threatened to undermine his efforts, he
wisely asked for a Congressional inquiry, thus stifling possible
charges of a WPB whitewash.
The use of dollar-a-year men from blue chip corporations to set
mobilization policies worried the defenders of small business. Their
fear was intensified by the government's diminishing interest in
vigorous enforcement of the antitrust statutes. As the war emer-
gency worsened, administration officials responsible for maximizing
production increasingly criticized antitrust division chief Thurman
Arnold's enthusiasm for upholding the law. Arnold sharply ques-
tioned the extensive use of dollar-a-year men. And he bluntly
warned that if antitrust investigations were suspended for the dura-
tion, "it would be in effect a license to any company engaged in
national defense . . . to destroy independent business organizations
in order to maintain control after the war." Arnold noted with alarm
situations where companies holding patents refused to license po-
tential competitors, or offered prohibitive terms, for the use of patent
rights to produce necessary war materials. His meaning was obvi-
ous: the threat of antitrust action could be used to further - not
hinder - the war effort.21
2o 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.
WPB 760; Arnold to
"' Thurman Arnold to Francis Biddle, March 6 and 10, 1943,
Nelson, February 7, 1942, WPB 760; Arnold and J. Sterling Livingston, "Antitrust War
Policy and Full Production," Harcard Business Review, XX (Spring, 1942), 265-276; Eliot
Janeway, The Struggle for Survival (New Haven, 1951), 187-89.
304 BUSINESS HISTORY REVIEW
Despite Arnold's arguments, the prevailing sentiment within
Nelson's agency and among big business was summed up by a WPB
staff member who wrote, "The legalistic dead hand [antitrust
laws] must be removed." One of the chief complaints against ag-
gressive antitrust enforcement was that corporation executives were
forced to divert their attention and time from defense activities in
order to defend their firms against antitrust suits. As early as mid-
1940, executives in the NDAC and the military departments had
urged relaxation of antitrust statutes. At that time Attorney Gen-
eral Robert Jackson opposed Congressional action. Urging a case-
by-case approach, he promised to suspend prosecution whenever the
advisory commission certified that a particular case involved actions
essential to national defense. This policy was further clarified by
President Roosevelt in March 1942, when he approved a plan agreed
to by Attorney General Francis Biddle and Arnold to postpone
prosecution when either service secretary stipulated that a suit
would harm the war effort. To insure that no company would
permanently escape legal action, Congress, at the request of the
administration, enacted a law in October 1942 suspending the run-
ning of existing statutes of limitations applicable to antitrust viola-
tions until June 30, 1945. Key mobilization officials, however, were
far from satisfied with this arrangement. Pointing to antitrust suits
pending against major war producers - including Standard Oil, a
vital cog in the synthetic rubber program, Alcoa, the chief supplier
of aluminum, and others - they continued to press for a further
easing of the antitrust laws.22
Small industrialists were obviously interested in antitrust policy,
but they were more directly concerned with securing federal finan-
cial assistance to facilitate converting their plants to military pro-
duction. An estimated 40 per cent of the subcontractors performing
defense work in October 1941 had submarginal credit standing, and
the existing financial machinery - commercial banks, the Recon-
struction Finance Corporation, and the Federal Reserve System -
was inadequate to meet the needs of smaller firms. To solve the
problem, two methods were considered: a federal fund to guarantee
loans made by commercial banks or a new government corporation
2 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.
lease, December 17, 1942, "Preliminary Report of the Committee on Small Business of the
House to the Speaker of the House of Representative," WPB 291C.
87Transcripts 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.
88Holland 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,
WPB 038.12; WPB General Administrative Order 2-75, January 7, 1943, WPB 038.016. 1942,
8Memorandum, 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.
of telephone con-
4oWPB press release, January 19, 1943, OF 4735, RL; transcripts
versations 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.
41Unsigned memorandum to Nelson regarding smaller war plants, February 8, 1943,
WPB 038.014.
CONCLUSION
The evidence is convincing that the federal government failed to
establish a policy firmly and clearly defining how small industrials
were to be utilized in the war program. Efforts to convert small
firms to military production were frequently half-hearted and ap-
of
peared to be more for the relief of distressed companies than part
a clearly conceived plan. As with other aspects of the mobilization
experience, programs to use small plants suffered from the absence
of early planning. World War I provided valuable lessons about
industrial mobilization, but the nation's interwar preparations for
an emergency were sadly inadequate. And foot-dragging by both
valuable
government and business between 1939 and 1942 wasted
time when workable blueprints for full conversion could have been
drawn.49
O. Eby to Wilson, October 2, 1943, WPB 038.12; S. Abbot Smith to Nelson,
48 Herbert
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,
see
January 3, 1944, WPB 038.012. For messages of support for Maverick's appointment,
OF 4735F, RL.
see Catton, War Lords; Jane-
4 For useful accounts of the early mobilization program, The United States at
way, Struggle; Fessler, Industrial Mobilization; Bureau of the Budget,
War; Albert A. Blum, "The Birth and Death of the M-Day Plan," in Harold Stein, ed.,
American Civil-Military Decisions (Birmingham, Ala., 1963). On planning during the
interwar years, see Paul A. C. Koistinen, "The 'Industrial Military Complex' in Historical
819-
Perspective: The Interwar Years," Journal of American History, LVI (March, 1970),
39. For a more detailed historiographical summary of wartime mobilization, see Jim F.
Heath, "Domestic America During the Second World War: Research Opportunities for
Historians," Journal of American History, LVIII (September, 1971), 384-414.