Destructive Creation. Mark R. Wilson
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explained a few weeks before Pearl Harbor, “the average banker’s opinion of a government contract is not favorable.”65
Bypassing private banks, the DPC, along with the Navy and War Departments and the USMC, became a giant financier and owner of industrial plant. This was not inevitable. The DPC plant leases, as historian Gerald T. White explained long ago, reflected the efforts of progressive New Deal lawyers to limit the potential gains of war contractors. These mid-level government lawyers, led by Clifford J. Durr and Hans A. Klagsbrunn, saw themselves as protecting the public interest from the excessively probusiness inclinations of their superiors. The latter included Knudsen, the OPM chief, as well as Jesse Jones, the wealthy Houston businessman who had become chair of the RFC back in 1933. (During World War II, Jones continued to oversee the RFC—and its subsidiaries, including DPC—as the federal loan administrator. Beginning in September 1940, Jones also served as secretary of commerce.)66
In 1940–41, the DPC paid for several large new airframe plants, similar to the ones being financed directly by the War Department under the Knudsen Plan. The DPC-owned bomber plants included one run by Boeing in Wichita, where that company already had a small subsidiary. In Dallas, where North American had already started to build a small plant to manufacture trainer aircraft, the DPC paid for a $34 million, million-square-foot bomber plant. Completed in April 1941, the Dallas plant ranked at the time as the biggest fully air-conditioned, artificially lit building in the world.67 The DPC eventually became the owner of an even bigger bomber factory: Willow Run. This was the Ford-run plant, built near Ypsilanti, Michigan, which, under the Knudsen plan, had been designated as the main supplier of subassemblies for the new B-24 plants in Fort Worth and Tulsa. In mid-1941, as the bomber program expanded, Ford officials received the green light to make complete B-24s. By that time, thousands of construction workers were at work on the massive Willow Run complex, which would end with 3.5 million square feet of factory space, built with 38,000 tons of steel and over 1.5 million square yards of concrete.68
Despite Willow Run, the automakers’ most important contributions to the aircraft program were their management of DPC plants that made not airframes but engines. Here they served as licensees of the nation’s top two aero engine manufacturers, Pratt & Whitney (a division of United Aircraft) and Wright Aeronautical (part of the Curtiss-Wright Corporation). In August 1940, a team from the Ford Motor Company, led by Edsel Ford and Charles E. Sorensen, toured Pratt & Whitney’s facilities in Connecticut. That visit led directly to Ford’s effort to mass-produce Pratt & Whitney’s powerful eighteen-cylinder R-2800 engines under a wartime licensing agreement that had Ford pay a fee of $1 for every engine it made. Ford built the engines at a plant within its giant River Rouge campus, built with $10 million of its own money, along with an investment by the DPC that would eventually come to $90 million.69
The Ford–Pratt & Whitney agreement served as the model for the American aero engine expansion program. In October 1940, GM’s Buick division became the second big Pratt & Whitney licensee, as an operator of a new $30 million DPC plant in Chicago. After the expansion of the bomber program in May 1941, the DPC authorized the building of two huge new engine plants. On a site in Tonawanda, New York, GM’s Chevrolet division would make Pratt & Whitney–designed engines used in the B-24. At this point, Wright, which had been far more reluctant to license the manufacture of its engines, now gave in to Air Corps pressure. To supplement Wright’s production of engines for the B-17, Studebaker would run a new DPC plant in South Bend, Indiana. In the end, the DPC plants run by the auto companies, acting as licensees of Pratt & Whitney and Wright, made half of all the aircraft engines produced in the United States during World War II.70
The dramatic expansion of the U.S. aircraft industry required lots of aluminum. At the beginning of World War II, aluminum accounted for about 70 percent of the weight of a military airframe. A single B-17 bomber required about ten tons of it.71 Without enough aluminum, the new airframe plants would be useless.
In the case of aluminum, as in so many other major war industries, expansion was accomplished primarily by building new GOCO plants. Here the story was complicated because of the prewar domestic monopoly held by the Aluminum Company of America (Alcoa). A federal antitrust action against Alcoa was already under way. The outbreak of war, with its huge new demands for aluminum, threatened to turn Alcoa from a midsize monopoly into an immense one. How would mobilization officials deal with this political problem?
The solution, forged in 1940–41, was an awkward compromise. The government nominally broke Alcoa’s monopoly, by arranging large RFC loans and military orders that helped Richard S. Reynolds, Sr., leader of the foil-making Reynolds Metals Company of Richmond, Virginia, to integrate backward into the production of aluminum ingot. Reynolds used the government loans to build new aluminum plants in Alabama and Washington, where cheap electricity was available from public utilities.72 However, the government depended heavily on Alcoa, both as a private supplier and as a GOCO plant manager. Alcoa responded to the war emergency by tripling its own privately owned production capacities, using the “accelerated amortization” tax breaks provided by Congress in the October 1940 revenue act.73 But Alcoa was also enlisted by RFC chief Jesse Jones as the operator of two dozen new DPC plants, in which the government invested half a billion dollars.74 (According to the deal struck with Jones, Alcoa would immediately reduce its prices, from seventeen cents a pound to fifteen cents. It would also handle the construction of the plants on a cost basis, with no additional fees. Alcoa would keep 15 percent of any profits on metal produced at the government-owned plants; the remainder would go to the DPC.)75 So Alcoa, which served during the war as something like a giant semipublic entity in its own right, continued to dominate the industry.
For the critics of Alcoa, including Richard Reynolds, Interior Secretary Ickes, and other New Dealers, the DPC contracts authorized by Jones were a major disappointment. Their profit provisions seemed too generous; more important, they put the for-profit monopolist in charge of a giant public investment. Thanks to the complaints of Ickes and others, the DPC contracts did not offer Alcoa an option to acquire the plants after the war. So Reynolds and other aspiring aluminum makers would have the chance to acquire some of the GOCO plant at war’s end.76 However, Washington’s reliance on Alcoa was remarkable, even in the context of the government’s general practice of turning to big business to manage GOCO facilities across the war economy. In magnesium metal production, where the Dow Chemical Company had held a prewar monopoly similar to Alcoa’s (and in which Henry Kaiser occupied a position almost identical to Reynolds’s), the new GOCO plant was managed by many companies.77 Even in the explosives and ammunition sector, where Du Pont was so important, the government had engaged several firms to manage public plants. Of all the large war industries, aluminum remained by far the most monopolistic, even with the participation of Reynolds.
Alcoa’s dominant role in aluminum production made it an unusual case in the larger universe of American military-industrial arrangements. However, it was perhaps not entirely unrepresentative of the broader pattern of economic mobilization that took place during the eighteen months before Pearl Harbor. During that period, “big business” entered the defense effort in force, mostly as the builders and managers of large new GOCO plants. This development broke sharply with the economics of the rearmament of 1938–40, when most of the expansion was handled by midsize, experienced military contractors. Those companies, which continued to grow, still stood at the center of the war economy. However, they had been joined there, in 1940–41, by industrial giants like Du Pont, GM, Ford, Chrysler, and Alcoa.
Together, the big industrial corporations, along with the specialty military contractors and the War and Navy Departments, had begun, before Pearl Harbor, to oversee an impressive arsenal. Because many of the new GOCO plants were still under construction in late 1941, figures of actual munitions output before Pearl Harbor failed to suggest how much had been done. However, even that output was considerable. From the summer of 1940 through the end of 1941, the United States manufactured 269,000 displacement tons worth of warships, 136 cargo ships, 4,200 tanks, and 23,000 aircraft. Aluminum output had nearly doubled, to about sixty million pounds a month. The U.S. Army’s Ordnance Department, which had calculated back in April 1941 that the new plants under construction would allow it to supply an army of four million men, was already