Destructive Creation. Mark R. Wilson
would give large prime contracts for planes to firms in other industries, such as the big automakers. If these firms were to participate in an expansion, the aircraft industry representatives insisted, their role should be limited to that of subcontractors who would make parts, not finished planes. Here the industry was trying to prevent the United States from adopting the British model of “shadow factories”—reserve airframe plants operated by automakers or other outside firms. Throughout 1938 and 1939, aircraft industry leaders, including Glenn L. Martin and Donald W. Douglas, told military procurement officials that they objected strongly to “the shadow factory idea,” as well as to any government-owned plants.26
In these struggles of 1938–39, the aircraft companies mostly got their way. On 3 April 1939, Congress passed the Air Corps Expansion Act, which called for a six-thousand-plane Air Corps, nearly triple its current size. Over the next few weeks, between April and August, the industry was flooded with over $100 million worth of new U.S. military orders.27 Among the other companies receiving contracts for at least $7 million worth of planes or engines in 1939 were Boeing, Consolidated, Curtiss-Wright, Douglas, Lockheed, North American, Pratt & Whitney, Wright Aeronautical, and GM’s Allison Division. This big order jump-started the production of most of the American bombers that would be flown in large numbers in World War II, including the B-17, the Consolidated B-24, North American’s B-25, and the Martin B-26.28
Thanks to the time lag between initial orders and the delivery of finished planes, all the contracting in 1938 and 1939 failed to create impressive results before the German offensives of spring 1940. Unfortunately for France, only a third of the $300 million worth of American planes and engines it had ordered since 1938 had been delivered by then. The U.S. Army Air Corps still had only 2,665 planes, barely a tenth of the size of the fleet operated by the Luftwaffe. But this situation was changing fast, even before Congress provided huge new military appropriations in the summer of 1940. Of all the American military aircraft that would be deployed in significant numbers during World War II, all but four (the Boeing B-29 heavy bomber and the Republic P-47, Grumman F6F, and Chance-Vought F4U fighters) were flying before Pearl Harbor.29
The big new foreign and domestic purchases were reflected in the airframe makers’ financial performance in 1939, which, for most of them, was a banner year. At North American Aviation, net income after taxes jumped to $7 million, about 25 percent of the company’s gross sales for that year. Lockheed’s earnings for 1939 were $3.1 million, on about $35 million in sales. Compared with Lockheed’s performance in the mid-1930s, which averaged only about $150,000 in annual profits and $3 million in annual sales, the 1939 numbers were astonishing. Most other airframe makers were not quite so successful in 1939, but with the notable exception of Boeing, they enjoyed high earnings.30
Thanks to the domestic and foreign orders of 1938–39, the United States started 1940 with its existing naval shipyards and aircraft plants running at full blast. During the first weeks of 1940, with the war in Europe apparently stalled, the future of this military-industrial activity was far from clear. As Americans looked ahead to a presidential election in November, which would see President Roosevelt run for an unprecedented third term, there was plenty of uncertainty on the domestic front to go along with the global chaos.31 The situation was soon clarified. During the summer of 1940, the United States would begin an enormous new mobilization push. Unlike the procurement efforts of the late 1930s, which relied on the military’s own plants and midsize specialty contractors in the private sector, this new effort would involve many of the nation’s largest industrial corporations. It also brought a cascade of U.S. government investment in manufacturing plant.
Phase 2: Creating a GOCO Arsenal
Coming after a quiet winter, the news from Europe in May and June 1940 stunned Americans. On 10 May, German forces had begun to smash into Belgium, Holland, and Luxembourg; they soon crossed into France. In late May and early June, Britain barely managed to evacuate more than 300,000 British and French troops from the beaches at Dunkirk. In mid-June came the greatest shock of all: the Germans had rolled into Paris, and France had surrendered. Britain quickly prepared itself for bombings and invasion. For Americans, this news was grim. By the end of May, the U.S. military was already conducting serious discussions of its “Rainbow 4” war plan, which had the United States fighting alone—following a defeat of Britain and France—against the combined forces of Germany, Italy, and Japan.32
On 16 May, responding to what he called the “swift and shocking” developments in Europe, President Roosevelt presented Congress with a shock of his own. Seemingly pulling numbers out of thin air, Roosevelt demanded that the country quickly create the capacity to build “at least 50,000 planes a year.” Although the aircraft industry had grown significantly in previous months, this target would require another quadrupling of its output. Nonetheless, Congress responded quickly to the president’s call. By mid-July, it had appropriated funds for 24,000 more planes for the Air Corps and Navy.33
Roosevelt’s call for fifty thousand planes a year was merely the most spectacular piece of what quickly became a massive crash rearmament program. “Had we not done what we did in the eighteen months before” Pearl Harbor, Undersecretary of War Robert P. Patterson would later explain, “there would have been no D-Day in 1944, nor any V-J Day in 1945.” During the summer of 1940 alone, Congress authorized over $6.5 billion in military spending. Total military appropriations for July 1940–June 1941 (the government’s fiscal year 1941) were $12 billion—ten times their level at the end of the 1930s. This money would be used to outfit an expanded American army. Even before the Selective Service Act of 1940, which started a new draft, the War Department started to order equipment for an army of two million soldiers. Because the U.S. Army still had a little more than 200,000 men in the spring of 1940, this two-million-man short-term target would force the War Department to scramble over the next few months to buy nearly $4 billion worth of new goods.34
The expanded mobilization effort of 1940–41 coincided with improvements in the health of the American economy. Starting in early 1940, the unemployment rate dropped dramatically. By mid-1941, it was down to about 4 percent.35 By that time, many American businesses were starting to see profit levels that they had not experienced since the 1920s. Certainly, military spending was an important contributor to this change. But once the economic recovery was under way, it actually threatened to make rearmament more difficult. Military and civilian demand now started to compete for scarce resources; individual firms making good money on civilian orders could become more reluctant to consider military contracting.
The growing potential for conflict between the civilian and military economies gave rise to new initiatives and organizations. Among them were economic mobilization boards, starting with the National Defense Advisory Commission (NDAC). As the months went by, NDAC was succeeded by new bodies, including the Office of Production Management (OPM), established in January 1941, and the Supply Priorities and Allocations Board (SPAB), established in August 1941. These organizations shared a similar cast of top officials, including William Knudsen of GM; Sidney Hillman, a top labor leader; and Donald M. Nelson, formerly of Sears, Roebuck, the giant retailer. Although they left contracting in the hands of the Navy and War Departments, the civilian boards helped to locate new war plants and emerged as the chief regulators of the distribution of key materials, such as steel and aluminum.36
The prospect of business executives running the war economy, which had caused some vocal protests back in 1939, now became even more worrisome to critics on the left. In the eyes of progressives, President Roosevelt seemed far too willing to defer to pro-business conservatives. To fill the position of new civilian chief for the Navy Department, Roosevelt tapped Frank Knox, the Republican newspaper editor who had run as his party’s vice-presidential candidate in 1936. Knox’s top lieutenant was the new Navy Department undersecretary, James Forrestal, a onetime navy pilot who had spent the interwar years as a Wall Street investment banker. For secretary of war, Roosevelt nominated Henry L. Stimson, a seventy-twoyear-old Republican who had held several cabinet positions over the previous three decades. The new undersecretary of war was Robert P. Patterson, a World War I veteran and federal judge. Together, these appointments suggested that Roosevelt was willing to allow enemies of the New Deal to run the most powerful offices in the wartime federal government.
Meanwhile,