Destructive Creation. Mark R. Wilson
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warships, several members of Congress had been accusing the Navy’s leading contractors of collusion and profiteering.22 Now, with Daniels at the helm in the Navy Department, these critics were in a position to shake up the system.
In 1913, soon after he took up his new post, Daniels began to investigate collusion among contractors for armor plate, which the Navy required for its new vessels. Daniels concluded that the steel companies had been cheating the government. So he worked with Senator Benjamin R. (“Ben”) Tillman (D-SC) to urge Congress to fund a government-owned, governmentoperated (GOGO) armor-plate plant. In 1916, they fought a publicrelations battle over the issue with Charles M. Schwab of the Bethlehem Steel Corporation, which, thanks to abundant European war orders, had become one of the world’s largest military contractors. As Daniels saw it, this fight was a clear-cut contest “between those who stood for the big interests fattening on government favors and those who were hostile to seeing the taxpayers mulcted by profiteers.”23 In the short term, Daniels and Tillman prevailed. In August 1916, President Wilson signed the bill authorizing the GOGO armor-plate plant. Ironically, the growing American role in the war delayed the completion of the $22 million plant, as construction materials were diverted to more urgent projects.24
The armor-plate business was just one of many in which Daniels worked to expand the Navy’s GOGO capacities. Here he was able to build on a strong foundation because the Navy had long operated its own network of shipyards, which dated back to the earliest days of the republic. Daniels believed that the GOGO yards should be expanded, so that they could provide the Navy with even more independent production capacity and more leverage to drive down contractors’ prices. When he entered office in 1913, Daniels appeared at times to favor a full nationalization (that is, government takeover) of warship construction. During the Great War, Daniels told Congress that the Navy should use in-house facilities to produce between a third and two-thirds of its needs, depending on the prices offered by contractors.25 At the end of the war, Daniels used his annual report to Congress to explain that he believed that the Navy should have enough in-house capacity to make it independent of private industry. “The Navy’s policy,” he stated in December 1918, “is that in its own plants it should be able to construct every type of ship and every character of munition required.”26
During the Great War, under Daniels’s leadership, the Navy relied on a combination of public and private yards. Many orders for new warships went to contractors, including Bethlehem Steel, New York Shipbuilding, Newport News, Bath Iron Works, and Electric Boat, which built the vessels in their own yards. In other cases, the Navy—like the Emergency Fleet Corporation and the War Department—paid for large new facilities ($71 million worth, in all) operated by contractors. The biggest of these GOCO warship facilities created during the Great War was an eighteen-acre destroyer yard in Squantum (Quincy), Massachusetts, run by the Fore River Shipbuilding Corporation, a division of Bethlehem Steel.27
The Navy’s own yards also served as an important source of supply. Although they were occupied with the repair and refitting of older ships, the U.S. Navy yards also handled a considerable amount of new construction. Their share of this work had fallen in the 1890s, although the Brooklyn Navy Yard had built some of the new steel battleships. During Wilson’s first term, before the United States entered the war, Daniels pushed to have more new shipbuilding done by the Navy yards.28 He stepped up this effort in 1917–18, when the eight U.S. Navy yards were expanded significantly, with more than $70 million of new construction. At the Philadelphia Navy Yard, which employed fifteen thousand people by war’s end, a $20 million expansion was used to allow the facility to build the largest warships, such as battle cruisers. The Navy used its own yards to build about half of the ninety-nine submarines that it ordered during the Great War, along with several destroyers and dozens of submarine chasers. By the end of 1918, the eight Navy yards employed about a hundred thousand people, four times what they had done in 1914.29
Even outside the Navy’s core business of warship construction, Daniels championed a major expansion of government ownership and operation. He was well pleased with the Navy’s takeover of the nation’s infant radio industry.30 Daniels expanded the Navy’s own smokeless powder plant, so as to make the government less dependent on Du Pont. In 1917, he ordered the creation of the Naval Aircraft Factory, with which the Navy could design and build its own planes. Daniels approved the construction of a new GOGO torpedo-manufacturing plant at Alexandria, Virginia, which complemented the Navy’s existing in-house torpedo works in Newport, Rhode Island. Daniels also laid the groundwork for the Naval Research Laboratory, which would open after the war. Throughout his time in the Wilson administration, Daniels supported the permanent nationalization of the railroads and telecommunication industries. After leaving office, he would continue to support these measures, along with government control of coal mining and hydroelectric power.31
The push for more public enterprise was somewhat more restrained at the War Department, led by Newton D. Baker. A few years before the Great War, as the mayor of Cleveland, Baker had supported municipally owned and operated streetcars and electric utilities. But he was more cautious than Daniels about bypassing the private sector.32 One reason for this was Baker’s greater (and growing) sympathies for capitalism. But it was also related to the different economics of Navy and Army procurement. In peacetime, much of the U.S. Army’s demand for equipment and weapons was handled by its own GOGO arsenals, which included the rifle works at Springfield, Massachusetts; an ammunition plant in Philadelphia (the Frankford Arsenal); and artillery-making operations in Watervliet, New York, and Watertown, Massachusetts. These were modern, efficiently run operations, whose costs were competitive with those of contractors. But most War Department officers did not want these long-standing operations to be the sole source of supply, especially in wartime. In comparison with the Navy, the Army was responsible for outfitting a far larger number of men; it needed a wider range of goods, many of them in huge quantities.
Just before the United States entered the war, an internal War Department inquiry concluded that it would be foolish not to order military equipment from the private sector, especially given that it had already started to produce munitions for European customers. This report recommended a major GOGO expansion only at the Rock Island Arsenal, on the Illinois-Iowa border.33 This was the policy blueprint that Baker’s department followed during World War I. Rock Island, where the workforce rose from about 2,200 people in 1916 to about fifteen thousand by the end of the war, did become a major facility. Meanwhile, the operations of the U.S. Army’s other GOGO arsenals also expanded, but only by a factor of two or three.34 For most needs of the nation’s nearly four million soldiers, the Army would turn to private contractors.
Still, Baker and many Army officers understood themselves as independent of private business leaders, whom they saw not just as friendly partners but as rivals.35 This dynamic was illustrated by a conflict that broke out in late 1917 between the War Department and Du Pont, which had served for decades as the nation’s leading supplier of military explosives. Although the Army and Navy each had small in-house gunpowder plants, most of the national production capacity was held by Du Pont. (The other top private suppliers were the Atlas Powder Company and the Hercules Powder Company, both spun off from Du Pont in 1912 as part of an antitrust settlement.) Before the United States entered the war, it was private companies, led by Du Pont, that met the demand of European customers. Between July 1914 and April 1917, Du Pont expanded output at its own three smokeless gunpowder plants from one million to 33 million pounds a month. By April 1917, Du Pont had already sold the Allies 400 million pounds of smokeless powder, along with 50 million pounds of TNT.36
When the United States entered the war, the jump in requirements for explosives overwhelmed even the greatly expanded capacities of Du Pont and private suppliers. So the Army’s Ordnance Department started a major effort to build large new government-owned plants, most of which were GOCO facilities, designed and operated by the private companies. By the end of the war, the government had spent $350 million on a network of fifty-three explosives plants.37
The explosives-plant program created tensions between the Wilson administration and business executives, who wondered if the government would end up creating a public monopoly. The most serious controversy occurred at the end of 1917. In October of that