Destructive Creation. Mark R. Wilson
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1936. Not surprisingly, this move led to clashes between the government and executives at French companies that had been serving as military suppliers, including Renault and Schneider.98
In the United States, the largest and best-publicized of the efforts at defense-sector reform in the mid-1930s was the Senate’s munitions inquiry, chaired by Gerald Nye. A populist Republican from North Dakota, Senator Nye had done some work in the late 1920s in the later stages of the Teapot Dome investigations. His munitions investigation originated with the efforts of the Women’s International League for Peace and Freedom, which in 1919—when it was still led by the celebrated American progressive and pacifist Jane Addams—had pushed for a global ban on the private production of munitions. In 1932, a new president of the Women’s International League, Dorothy Detzer, pushed Congress to investigate the issue. At first, Detzer hoped that the investigation would be led by Senator George Norris, the patron of the TVA. In the end, Norris helped her to enlist Nye.99
From the beginning, Nye made it clear that he wanted to use the hearings to persuade Congress to enact strict controls on the defense sector. In August 1934, just before the hearings started, Nye gave well-publicized speeches, one at the World’s Fair in Chicago, and one on the CBS radio network. In these talks, Nye called attention to the enormous profits that had been collected during the Great War by Du Pont, among other companies. He also suggested that Congress should consider imposing a “government monopoly” over munitions manufacture. Two months later, after the hearings had started, Nye went back on the radio with more specific proposals. In the event of war, he declared, any incomes over $10,000 should be taxed at a rate of 98 percent. In addition, Nye said, the United States should nationalize its peacetime defense sector, so that private contractors had no role in making munitions.100 These proposals went beyond what the War Policies Commission had suggested three years earlier; they were also more radical than the reforms demanded by the American Legion, which was still calling for a 95 percent EPT.101
Although the Nye Committee criticized a wide range of arms traders and military contractors, it was especially hostile to Du Pont. Senator Nye’s speeches portrayed the Du Pont brothers as the greatest of the Great War profiteers. In the early hearings, which focused on collusion and bribery in the international arms trade, the committee criticized Du Pont for its cozy relationship with its British counterpart, Imperial Chemical Industries (ICI). Later, Nye used the investigation to publicize the Du Ponts’ generous political contributions to conservative groups, including the American Liberty League—which had been founded just as the Nye investigation got under way.102
For their part, the Du Pont brothers regarded the Nye Committee as the creation of irresponsible radicals who knew nothing about the economics of defense.103 But they realized that the attacks threatened the company’s reputation and its future. Certainly, Congress and the Justice Department might try to cancel Du Pont’s recent acquisition of Remington, an important American manufacturer of rifles and ammunition. More broadly, the Nye Committee’s assault seemed to require an energetic public-relations counteroffensive. Du Pont prepared one, with the help of Bruce Barton, a top consultant in the field. In August 1934, Barton assured Du Pont executives that “most of the reckless charges against munitions makers have originated not with the great body of unselfish peace-lovers but with muckraking journalists.”104 But Barton and Du Pont still needed to prepare a careful rebuttal to educate Congress and the public. They prepared talking points for the executives called before the Nye Committee. These stressed that although some economic regulation in wartime was necessary, the country also needed to remember that “the profit motive,” as “one of the strongest incentives to endeavor,” should be understood as “a powerful weapon” in its own right, “which should not be tossed away.” And in an open letter to stockholders, the company stressed its great contributions to national security in the Great War, the overwhelmingly commercial character of its business since 1919, and its interest in promoting peace.105
As Nye and the Du Ponts battled over public relations, the Nye Committee worked on formal recommendations. These did not depart much from the suggestions that Nye had made in his early speeches. Even before the majority of the committee issued its final report, in 1936, Nye and his colleagues had urged Congress to create steep wartime price and profit controls. Many of these details were written up by John T. Flynn, a journalist and sometime congressional staffer who became an important part of Nye’s team. Flynn’s plan went well beyond the recommendations of Bernard Baruch, the former WIB chief, who testified regularly in Washington about the need to impose heavy price controls in wartime. The Nye Committee also wanted strict price control but added to this the Flynn plan for ultrahigh wartime income taxes and EPT, which would impose rates of 98 percent or 100 percent. These proposals became part of several bills that circulated in Congress in 1935. Meanwhile, President Roosevelt, who angered veterans in May 1935 by vetoing a bill that would have paid them a cash bonus a few years ahead of schedule, promised in more vague terms that in any future conflict, there must be strict profit controls.106
The other element of the Nye Committee’s call for radical reform in the defense sector was its recommendation that the national state monopolize peacetime—if not wartime—munitions production. A minority of the committee’s members, who issued their own final report, disagreed. According to the minority, there should be “rigid and conclusive munitions control” but not “complete nationalization.”107
The majority, however, called for an end to the government’s peacetime use of private contractors to supply key military goods such as weapons, ammunition, explosives, and warships. In doing so, they combined emotionally charged rhetoric with colder economic calculations. Both were used by Senator Homer Bone (D-WA), a well-known champion of public utilities. When contractors testified that the private sector was always more efficient, Bone responded that the record of the power industry in the Pacific Northwest had taught him otherwise. But Bone also made more moralistic arguments. In 1917–18, he recalled, some American “boys were butchered in the war, and thousands of men made multimillionaires overnight.” Given this record of such reprehensible inequalities, Bone asked, “Why should we blink at socialization?”108
Such suggestions were actually less radical than they might seem because peacetime munitions manufacture was already semi-nationalized. After 1918, the War Department’s own arsenals had returned to their traditional role, which was to supply the Army with most of its needs for small arms, artillery, and ammunition. Meanwhile, the Navy was sending a large fraction of its modest orders for new warships to its own yards, which Secretary Daniels had worked so hard to expand. These GOGO munitions facilities were examined carefully by the Nye Committee, which determined that they were competitive with private sources. The committee also asked the ICC to estimate what it would cost to expand the GOGO operations enough to supply all the peacetime needs of the Army and Navy. According to the ICC, it would take only about $24 million in additional investment in the Navy shipyards to fully nationalize peacetime warship construction. For an additional $23 million, the ICC estimated, the Army and Navy could expand their GOGO operations enough to create a peacetime government monopoly in the manufacture of finished small arms, smokeless powder, and aircraft.109
As the results of the Gallup poll in March 1936 suggest, most Americans supported some kind of increased regulation of the arms industry, if not all the Nye Committee’s specific proposals. Surveys of college students and church groups in 1935, when the committee’s hearings were widely publicized in the national media, found that more than 80 percent of those surveyed favored heavier government controls over munitions. First Lady Eleanor Roosevelt supported the Nye Committee’s recommendations, including the call for nationalization.110
Veterans, who had been calling for major reforms since 1918, continued their efforts. At VFW-sponsored dinners across the country in 1935, officers demanded a policy of “profit for none” in any future war. Two years later, the American Legion was still pushing Congress to pass powerful wartime profit controls, so as to avoid any repetition of the Great War, when “some twenty-two thousand individuals at home stepped from the shadows of financial obscurity into the millionaire class.” Such language continued to prevail among veterans, well after the Nye Committee hearings came to an end. At a local VFW event in 1937, Louisiana state senator Ernest