War & Peace

Before the U.S. business year of 1944 was well into its second half, it was already on its way to becoming a museum piece. In August President Roosevelt commissioned a full-length statistical portrait of the year. He asked that the regular Census of Manufactures, scheduled for 1945, be moved up to 1944: "The record should include an account of our industrial system while it is geared up for maximum production. This may well be the peak year of production for many years to come."

As such, 1944 would take its place in the economist's gallery alongside other statistically famous vintage years: 1913, 1926, 1929, 1939. But even these were thin, sour wines alongside the full-blown, fabulously rich year of 1944. The cold figures, such as the gross national product of $196 billion, were almost too big to grasp. The significant fact of the year was that the U.S. could pour out some $90 billion for war, and another $100 billion for consumer goods and services (see chart).

In 1943, the U.S. proved that it could supply both guns and butter. But few expected that 1944 would be the annus mirabilis that would not only see an increase in the supply of guns, but no material reduction in the ration of butter (or a reasonable facsimile thereof).

The Butter. Money flowed freely. It flowed into department stores. Their sales were a big 10% over the year before. It flowed into real estate. Homeowners sold out at high profits--until they found that all profits were not enough to buy another roof for over their heads. Money flowed into the stockmarket, bulling up stocks month after month until they reached their highest point since 1940. There was money for everything, for jewels, for mink coats, for Broadway shows.

Not all the money was slipping through loose fingers. There were $35 billion in savings tucked away, more or less reluctantly, because there were no autos, refrigerators, etc. to spend the money on. The best barometer of the nation's wartime spending--and inflation--came from restaurants, nightclubs and taverns. There was an anguished cry when Congress slapped a 20% tax on nightclubs. But their take for the year, along with all other amusement enterprises, was up a billion dollars over 1943.

The Guns. The flow of money was a necessary evil to the manufacture of astronomical numbers of guns, shells, tanks, etc. By early 1944, the miracles of production were no longer news. Nor were the men who performed them. The men of the year in business could be numbered by hundreds.

No one could say whether Shipbuilder Henry J. Kaiser was doing more than Planebuilder Donald Douglas or G.M.'s Charles E. Wilson or Big Steel's Ben Fairless. All together, they had sweated and strained to get war production to its peak and keep it there. The production lines spewed out so many tanks, planes and materiel of all kinds that, by midyear, the problem was considered no longer one of production but of cutbacks.

Outside Philadelphia, Edward G. Budd Manufacturing Co. opened its spick-&-span $26,000,000 plant with a blare of publicity. A month later the Navy canceled its contract with Budd.

In less spectacular fashion ammunition plants were shut down all over the nation, at least one of them before a single pound of powder had been made. The cutbacks hit aluminum, magnesium, pocketed the nation here & there with jobless. And they stirred up the fracas of the year between WPBoss Don Nelson and his tough, big-jawed vice chairman, Charlie Wilson.

The False Armistice. The issue was simple: had the time come for the U.S. to begin to reconvert to peace? Eyeing the mammoth stockpiles for war and the progress of the Allied armies across France, WPBoss Nelson thought it had. Charlie Wilson did not think so. Reconversion won. And Charlie Wilson tacitly admitted that perhaps Don Nelson had been right. For he promptly reconverted himself back to General Electric, remarked that G.E.'s reconversion was "one hell of a job."

When he left Washington scores of other businessmen-in-government thought it was time to leave too. Even sage old Bernie Baruch, who had warned in February that "the bloodiest, costliest fighting in Europe still lies ahead," now wrote Home-Front Czar Jimmy Byrnes : "Hurry, hurry, hurry, not only in winning the war, but in being ready for the peace." Byrnes's answer was less a plan than a promise. In effect, Jimmy Byrnes promised that virtually all of the shackles would be dropped from business when Germany quit on V-E day. The momentum of war production in 1944 would practically be enough to win the war against Japan. And WPB, which controlled the U.S. industrial economy, would shrivel to a vermiform appendix, which the end of the Jap war would snip off.

So when burly, black-haired Julius Krug came back to head WPB his coming was like the arrival of a friend to attend the last rites. In this governmental frame of mind, the lid was pried off civilian production, ready to be thrown away when V-E day came tomorrow -- or the day after.

The New War. But tomorrow did not come in 1944. U.S. war spending, which reached its peak in June, and then was expected to start down, stayed at $250,000,000 per day, near the peak. Almost unnoticed, tight-shut ammunition plants were reopened, big new contracts were loaded on businessmen who had once worried about cutbacks. At first the explanation was that new Army & Navy tactics, plus new discoveries, demanded new weapons. But when WPBoss Krug, who walked the tight line between civilian and military demands, slapped a "freeze" on any more civilian production, the explanation of new tactics was not enough.

The complex explanation boiled down to a grim fact: the productive miracle of industry was being outdone by the wasteful miracle of war. The shortages were still not at the front, but war was devouring the stockpiles faster than industry was replenishing them. Perhaps war was eating its last meal and would soon die of a surfeit--or perhaps not. Until the outcome was known more production was needed.

The Old Problems. More production meant the building of more plants, although Nelson had said smugly: the war machine is built. In August WPB still thought no new plants would be needed. But from November on as German resistance stiffened into a crashing offensive, the Army hastily reconsidered. WPBoss Krug had dumped on his desk plans to build one billion dollars' worth of new war plants. These would be for high-octane gas (the octane shortage had been "solved" months ago), for tires (the rubber problem had been "solved"), for jet motors and scores of brand-new weapons.

Few of these plants would be operating for at least seven months. In the meantime, WPB planned to take facilities out of civilian production. This would hurt. Much of the fat was gone from the civilian cupboard. For example, the hoard of new passenger cars (530,000 in 1942) was below 15,000. After three years of war, civilians might finally be pinched hard.

How long the pinch would last, no one in WPB would guess. The Department of Commerce predicted that war production this year, based on present schedules, will drop below that of 1944. But this will happen only if present schedules remain unchanged. The probabilities are that many of them will be changed--upwards. As the year closed the lesson was plain for all the U.S. to read: in war there is never enough.

The New Problems. But if false hopes of an early peace had faded, the existence of those hopes had induced the U.S. to face an ugly fact. In peace as in war there has never yet been enough. For although man cannot live by bread alone, he cannot live in peace without bread.

When 1944 as a year of production has receded to a position of a mere statistical measuring stick, it may become famous as a year of economic thought. The unfulfilled promise of peace set off a furious wave of planning. Those who make the U.S. economy what it is--businessmen and labor leaders, primarily, and, secondarily, government officials and economists --were forced to face up to three problems.

The Road to Peace. The first was the problem of the transition to peace. As the year opened, this looked mountainous. As it closed, it was not yet a molehill, but the bulldozers were at work. As a result, reconversion was no longer a bogey to frighten businessmen. In the days when the collapse of Germany was expected momentarily, the basic rules for reconversion had been hastily laid. Under them, some 95% of U.S. industry could see the path cleared to shift from war to peace production within two months after the green light was given.

The auto industry, which has the toughest job of all, had its own private incentive for speed. Spry old Henry Ford expected to be turning out new cars within two months after he got the signal. Others could not afford to be too far behind. Most important, U.S. industry probably would not be hampered by any complex system of quotas which would protect established companies at the price of freezing out new companies and competition. At the beginning of the year business was highly suspicious that wartime controls would somehow be kept shackled on them in peace. But at year's end this seemed to be more shadow than substance.

Charting the Way. The second big idea was that the peace, when it comes, is not one for diplomats or military men to plan alone. It must also be planned by business. Their stake in the peace is to do what has not been done before: try to operate profitably the economy of the world as a whole. In the past, almost without exception, the world economy has never been operated; rather it has been operated on by nations in the process of trying to improve their individual economies--a procedure as shortsighted as the long-outdated notion that a company can be operated without regard to the welfare of its customers or its suppliers.

At the Bretton Woods monetary conference, 44 nations undertook to devise a scheme to prevent some kinds of individual tinkering with the world economy. They proposed a monetary fund to regulate the exchange value of currencies and a reconstruction bank to secure international loans for nations which needed capital to get back on their feet. The merits of the plans were debatable. But the significant fact was that attention was being given the biggest problem: making the whole world's economy work. And U.S. businessmen, if critical, were still open to argument.

Likewise, U.S. businessmen announced again & again during the year that they like their own idea of free competitive enterprise better than international cartels, which have often constricted the world's economy. On this they should have found common ground with the Administration, which is vigorously prosecuting antitrust suits against match manufacturers, potash producers, etc. as cartelists. But some Government trade experts, studying international business prospects, were beginning to flirt with the idea that long-term agreements on prices and markets were necessary, especially if the U.S. is to compete effectively with western Europe. Others laid plans to try to impose the anti-cartelism of the U.S., which many foreign businessmen consider naive, on the world.

The Great Adventure. The third big idea which many men for the first time considered as a practical possibility was one which commonly goes by an inadequate name: full employment. Its implication is not only a job for everyone who wants to work but also continuous full productivity for the economic machine and the abolition of an evil which mankind has long considered far less avoidable than war: depression. In 1944, the U.S. made a platitude of the question: "If everyone can have a job in war, why not in peace?"

Any attempt to achieve this goal is in its nature the greatest of economic adventures. For good or ill, 1944 is likely to leave a permanent impression on the course of American affairs because it was the year in which each of four short documents (the longest of them only 48 printed pages) attempted to trace an outline* of means to attain permanent full employment. All four of the proposals, two from the U.S., two from Britain, acknowledged implicitly or explicitly a revolution in economic thinking that has been in progress since the depression: the belief that the state--and only the state--can create conditions in which productivity and the standard of living will continuously rise without severe periodic reversals.

Cautious Proposal. The first of the U.S. plans offered was cautious. Wholly unofficial, it was the work of Businessmen Beardsley Ruml and Hans Christian Sonne. Their key proposal: tax revenues that would balance the budget only at "high" employment, defined as 55 million people working 40 hours weekly. Their greatest concession to the "spending" theory: public works to keep the construction industry on an even keel. But, although they made a sound banking system, a sound dollar and free enterprise their prime goals and regarded high employment only as something to be "promoted," they gingerly crossed the Great Economic Divide when they wrote: "We . . . accept . . . federal cooperation ... to maintain adequate effective' demand."

Less equivocal was the opening sentence of Britain's official plan. Lord Woolton's white paper on Employment Policy. It read: "The Government accept as one of their primary aims and responsibilities the maintenance of a high and stable level of employment after the war." The paper proposed to fulfill this aim by countercyclical spending on public works and by countercyclical manipulation of social-security contributions made by workers and employers, lowering contributions required in bad times, raising them in good times.

Radical Proposal. This also was a conservative document, by comparison with that of white-thatched, vigorous, 65-year-old Economist Sir William Beveridge, author of Britain's "cradle-to-grave" social-security plan. The white paper's policy, he wrote, "is not practical and it is not radical--does not go to the root of the matter. . . . Whether private ownership of means of production to be operated by others is a good economic device or not, it must be judged as a device. It is not an essential liberty in Britain, because it is not and never has been enjoyed by more than a very small proportion of the British people."

Sir William insisted that the touchstone of Government policy should be not the perpetuation of any given economic order. It should be to prevent the waste of that most perishable and essential commodity: human labor. The Government budget, therefore, should be based not on money but on manpower available.

Double Budget. The closest U.S. counterpart of this plan is a bill published last month by Montana's lean, well-heeled Senator James E. Murray. Murray's bill, released frankly to stimulate discussion, calls for the President to submit to Congress along with his regular budget a National Production and Employment Budget. This would contain a careful estimate of public and private spending in prospect for the coming year and make proposals for bringing the total of both, if deficient, up to the amount necessary to provide full employment. In short, the Murray proposal does not intend to take up economic slack, once formed; it intends that there shall be no slack.

Here it parallels Beveridge's idea of more jobs than men so that the opportunity of finding work is not only theoretical but real for everyone--as it is in wartime. But Murray puts far more emphasis on encouragement to private enterprise to supply as many jobs as it can, and brings in the Government--through private contractors and hence without a WPA--only to fill the gap. Like Beveridge, Murray proposes a manpower budget first, a money budget second.

The Great Divide. If when 10,000,000 war veterans come home wanting jobs the U.S. accepts the theory of Government responsibility for keeping the economy running at capacity, the U.S. will cross a great divide. For on the other side, whether the attempt succeeds or fails, the landscape will be very different.

During the '30s this idea of government responsibility for maintaining prosperity was very close to acceptance. The great argument over the idea of full employment--and the great question mark over the future of the U.S. if the idea is accepted--hinges on what government responsibility for full employment will mean.

If it means an AAA for every industry telling each man what he shall produce and what price he shall get for it, if it means direct government control over every businessman and worker, then full employment will be at worst a kind of socialistic totalitarianism, at best a benevolent form of complete state paternalism.

If government responsibility means stabilization of high business volume by control of the overall volume of spending and other general measures which do not dictate how men shall earn their livings, it would be a capitalistic blessing.

As yet the proponents and opponents of the four plans that 1944 brought forth have not made this distinction sharp. Most of the opponents assume the former; most of the proponents assume the latter. If the U.S. accepts the idea--as seems likely, sooner or later--it will doubtless do so on the second assumption. It will then have to find out whether the means adopted under that assumption 1) are what they seem to be, 2) can produce the desired result.

Knocking at the Door. All these discussions, plans and proposals that characterized 1944 made one assumption unavoidable in all planning: that the basic elements constituting the economic world would not change. But the way of man with man changes from generation. to generation, and the way of man with a machine changes sometimes overnight. The war was bringing forward a new generation of men, and with them almost a new world of machines.

This new world of machines, which may well play a key part in furnishing some of the millions of postwar jobs needed, is by necessity a young man's world. In electronics, synthetic rubber, radar, aviation gas, etc. the young men were in at the start. By the time they were proven, it was too late for the older men to catch up. Company after company, totting up the average age of its new experts, found it as low as 25. Probably 50% of the engineers and chemists in the synthetic-rubber industry are under 26. Some 7% of all chemical engineers in industry are under 22.

Thus in 1944, the war had turned into a young man's war on the production front, just as it had turned into a young man's war on the battlefront (the Army reported 15,000 majors or above were under 30). But none of these men, in industry or the services, had yet time to think out, much less plot out, the kind of a world they were fighting to create. The sort of economy these young men would make in the U.S. could be only a matter of conjecture, even to them. What for instance, would be the attitude toward unions of a young industrialist who never in his life had been in a plant without unions? Certainly it would not be the same as that of a Sewell Avery. What would be the attitude toward wage rates of a man who never knew an hourly rate below $1.10, who could not remember that 25-c- an hour was once standard pay in the good old days? What would be their attitude towards taxes, when they had known only heavy ones, or toward the national debt (at $230 billion), when they could hardly remember that economists had quaked when it first reached $50 billion? What would be the attitude toward foreign trade and investment of a man who had come to regard the Delhi-Cairo, Dakar, Brazil-Miami run as a glorified ride to the suburbs?

Their attitudes were unpredictable. But the year had brought forth a vision of the economic breadth of the U.S.--and the world--which was as new as anything which they were encountering. The biggest question about this future economy concerned the contribution still to be made by the men who were fighting to make any plans possible. Until this was known, the prospects opened up by 1944 would not be plumbed. The great hope was that a young man's war would usher in a young man's peace.

*Beardsley Ruml and Hans Christian Sonne, Fiscal and Monetary Policy, Planning Pamphlet No. 35 (25-c-), National Planning Assoc.; Employment Policy (60-c-), Macmillan; Sir William Beveridge, Full Employment in a Free Society (sixpence), New Statesman and Nation and Reynolds News; Full Employment Bill of 1945, 78th Congress, and Session.

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