McNair Paper Number 50, Chapter 5, August 1996

With the defeat of Poland and the onset of the Sitzkrieg (between October 1939 and May 1940) during the so-called Phony War period, there was little bureaucratic momentum in Washington affecting industrial mobilization, although the General Staff, the Office of the Assistant Secretary of War, and the Joint Board were busy. There was no "referee of claims made by either armed service except the Army and Navy Munitions Board."(Note 1) With the attack on the Low Countries and France, however, several key industrial mobilization decisions were made. On 25 May 1940, Roosevelt established by Executive Order the Office of Emergency Management inside the Executive Office of the President. This new organization helped coordinate and direct emergency agencies that were beginning to proliferate, and it spawned a number of important war organizations like the National Labor Relations Board, Office of Civilian Defense, Office of Defense Transportation, War Food Administration, War Manpower Commission, National Housing Agency, and Office of Price AdministrationCall of which germinated in the Office of Emergency Management, headed by William H. McReynolds, as Liaison Officer for Emergency Management. He was to assist the president in information clearance and to maintain liaison between the chief executive and the Council of National Defense and its Advisory Commission, which was reestablished 3 days later, also by Executive Order, and any other agencies, public or private, the president might direct to meet the demands of an emergency. (Note 2)

Immediately after creating the Office of Emergency Management, Roosevelt resurrected the Council of National Defense and its Advisory Commission. The Office of Emergency Management served as a secretariat for the Advisory Commission. (Note 3) These bodies had been sanctioned by legislation in 1916, and Congress had never repealed the authorization. The president, therefore, could recreate these agencies without congressional approval, an important element in Roosevelt's political tactics. The Council was made up of key cabinet officials: Secretaries of War, Navy, Commerce, Interior, Agriculture, and Labor-those departments essential to mobilizing for warCbut the Advisory Commission "made no pretense of reporting to the Council." (Note 4) Its seven civilian leaders (chosen with "political astuteness" by Roosevelt)CEdward R. Stettinius, Jr., (advisor for industrial materials matters), William S. Knudsen (advisor for industrial production), Sidney Hillman (labor), Leon Henderson (price stabilization), Chester C. Davis (agriculture), Ralph Budd (transportation), and Harriet Elliot (consumer protection)-reported individually and directly to Roosevelt. The National Defense Advisory Commission (emphasis on the third word in the title) did meet often, but it had neither a chairman nor decisionmaking authority. (Note 5)

The members of the Commission organized into many divisions and subdivisions to be productive. Knudsen's industrial production element had subdivisons run by senior, experienced industrialists: W.H. Harrison (of American Telephone and Telegraph) advised on construction, Harold S. Vance (of Studebaker) on machine tools and heavy ordnance, Dr. George Mead (inventor of the Wasp aircraft engine) on aircraft, E. F. Johnson (retired executive from General Motors) on small arms and ammunition, Rear Admiral Emory S. Land (chairman of the Maritime Commission) on shipbuilding, and George M. Moffett (of the Corn Products Refining Company) on food and chemicals. Stettinius, who ran the Industrial Materials Division had three subdivisions: mining and mineral products, chemical and allied products, and agricultural and forest products, all of which were run by big businessmen. (Note 6)

However it was divided and subdivided, and no matter the caliber of the people in it, the Advisory Commission was not the agency to supervise industrial mobilization-it had no formal leader (critical in an organization with powerful men who see themselves as equals), and more importantly, no authority. And it is indicative of Roosevelt's frame of mind and approach to bureaucracy and domestic politics that this organization existed for more than a year, (Note 7) even after subsequent organizations were founded. This is not to say, however, that the Advisory Commission accomplished nothing.

Airplanes, especially bombers, were central to Roosevelt's strategic viewpoint, and the president turned to a key member of the Commission, William Knudsen, to help him generate the facilities that would eventually lead to construction of the greatest air armada in history, before or since. Purchases by the British and French before 1940 and by the British after 1940 helped lay the foundation for the unprecedented growth in the aviation industry, but Knudsen's work on the conversion of the automobile industry for aircraft production was certainly essential. (Note 8) Creative funding to build the necessary aircraft manufacturing plants was also an initiative of the Advisory Commission. Unlike Germany, the United States mobilized by building armaments in depth rather than in width by first spending money and allocating resources to build factories. By contrast the Germans pushed more arms out of existing facilities by allotting materials for manufacture of munitions. (Note 9) Leon Henderson, a commission member, and Donald M. Nelson, an adviser to the Commission, came up with a 5-year amortization scheme to permit industrialists to write off plant construction costs if these were expended for building munitions. Knudsen carried the ball in testimony before the Senate Finance committee where it passed 11 to 10 in July 1940, spurring new construction at a critical time. (Note 10) After Pearl Harbor was attacked, the government generated the funds for most factory construction, (Note 11) but Roosevelt would have found it impossible to get this kind of funding in 1940. There was more to the Commission, though, than gearing up industry.

The Advisory Commission, perhaps because Sidney Hillman was a commissioner, perhaps because the industrialists were sensitive to labor anyway, made a pronouncement on labor to the president, who sent it to Congress on 31 August 1940. The Commission called for fair treatment of labor during the emerging crisis and for using the emergency to sop up unemployment. It insisted on a 40-hour week with overtime pay for extra work; demanded compliance with the Walsh-Healy Act, the Fair Labor Standards Act, and the Labor Relations Act; called for adequate housing for the labor force, and asserted the need for nondiscrimination in the labor force on the basis of age, race, or gender. The Commission understood the relationship between a happy labor force and efficiency. (Note 12)

Though the Commission industrialists could advise the president and cajole industry, especially their own, the group failed because Roosevelt would give them neither the authority to succeed nor, in many cases, even the information they needed. The president, for example, called in 1940 for industry to tool up to build 50,000 airplanes per year (in 1944 the United States produced 96,000, but at the time of Roosevelt's call 50,000 seemed out of reach). But nobody told the Commission what kinds of airplanes to produce or the numbers of each model. Everybody knew that tanks would be needed in great numbers after Germany's lightning war in Poland and France, but nobody told the Commission what kind of tanks to build. (Note 13)

Nobody was satisfied with the results of the Advisory CommissionCneither its members nor the president nor mobilization gurus like Bernard Baruch. (Note 14) Congressional dissatisfaction was reflected in Senator Robert Taft's 21 November 1940 announcement that he would introduce a bill in the legislature to create a War Resources Board under a single administrator. Others outside of government were also disturbed. Alfred P. Sloan, Jr, Chairman of the Board at General Motors, called in late November for a single person to direct a National Defense Board, and several weeks later National Association of Manufacturers president J.W. Prentis made a strong plea for a single civilian leader with decisionmaking authority. (Note 15)

This general dissatisfaction led Roosevelt to create, by Executive Order on 7 January 1941, the Office of Production Management, a "curiously blended compromise of many pressures" designed to stimulate production. Knudsen was appointed Director General, a logical choice it appeared at the time, and because labor support was essential to winning the battle of production, Sidney Hillman was made Associate Director General. Presumably the president thought that two heads were better than one. The Secretaries of War and Navy were members of the Office of Production Management policy council, but Knudsen and Hillman were to run the office, rationalize war production, and coordinate the many other government agencies involved in producing for rearmament. (Note 16)

The office was chartered to increase and regulate the production and supply of defense materials, equipment and factories. It was also to analyze and summarize the requirements of the two services as well as foreign governments, now a major demand. The office also was charged with ensuring the supply of raw materials, formulating plans to mobilize defense facilities further, and planning for the future creation of industrial plants. The office was to establish a priorities mechanism, but the Director General could only advise the president on industrial priorities and all other mobilization matters. Once again, because Roosevelt created this office as only an advisory body to the president, it was doomed. (Note 17)

The office had three functional divisions: purchases, production, and priorities, and two staff divisions: a Bureau of Research and Statistics and a Production Planning Board. But there was extensive overlap in these functional and staff divisions, which caused friction, and also much duplication between the Office of Production Management and a proliferation of liaison groups. "Businessmen, industrial representatives, and Army and Navy procurement officers seeking decisions were shunted back and forth from division to division, sometimes for days and weeks." (Note 18) It was ineffective from the start and lasted only about a year.

The key problem with this new office was similar to the central difficulty with the Advisory CommissionCthe lack of clear authority. To make matters worse, several parts of the Advisory Commission were spun off as independent entities, such as the Office of Defense Transportation and the Office of Price Administration. These operated as equals to the Office of Production Management. There were other agencies established by the president that had not been a part of the Advisory Commission. The Petroleum Coordinator for National Defense, for example, was established in May 1941 and run by White House insider Harold Ickes. This was only the first of the many parallel entities created by Roosevelt.(Note 19) There developed factions, frictions, prejudices, and parochialisms, and Knudsen and Hillman were not able to cope with the resultant clashes, (Note 20) perhaps because Roosevelt did not give his support when these inevitable disputes occurred. Another crucial problem was this new office never had control over civilian production, (Note 21) and from the time the Office of Production Management was founded, munitions production competed fiercely with manufacturing items for the civilian population. Industry would rather produce for civilians than for the government. (Note 22)

Even Roosevelt's declaration of an unlimited national emergency on 27 May 1941 did nothing to improve Knudsen's lot. That act on the part of the president was supposed to create a merger of the Army and Navy Munitions Board and the Office of Production Management, but nothing like that occurred. (Note 23) However, some progress was made. On 22 March the Office of Production Management issued Order M-1 requiring that producers of aluminum give preference to defense orders and specified the sequences in which nondefense orders should be filled. In the following months copper, iron, steel, cork, certain chemicals, nickel, rayon, rubber, silk and other materials were brought under similar controls. The office also prohibited the use of affected materials for less essential purposes. While the Army and Navy Munitions Board was permitted to give priorities to military products, the Office of Production Management could assign ratings to indirect defense and essential civilian products. Although this system did not cover the entire industrial system, and broke down in time, it demonstrates where the Office of Production Management fit in early 1941. (Note 24)

Additionally, the office began to survey industry during this period to explore what production capacity existed. For example, Merrill C. Meigs, chair of the Joint Aircraft Committee for the Office of Production Management surveyed the aircraft industry to explore its potential output. Meigs also began to examine standardization potentialities so that something like mass production could be achieved in an industry that heretofore had resisted such approaches. Meigs, like other industrialists, found that the most serious shortage confounding defense production was the scarcity of machine tools. (Note 25)

As defense production was accelerating, moreover, manufacturers began to complain that they faced training problems and labor discontent. New skills were needed. Labor leaders tried to use the looming emergency to bid up wages. Roosevelt appointed a National Defense Mediation Board in March 1941 to settle controversies between employees and employers. This 11-member board had four representatives each from labor and management and 3 appointed by the Federal Government. The agency was instructed to act when the Secretary of Labor certified that a dispute threatened production or transportation of equipment or materials essential to national defense that could not be adjusted by a conciliation commission inside the Department of Labor. (Note 26) As an example of Roosevelt's management style and his penchant for creating competing institutions, the Office of Production Management was not a partner to this Mediation Board, nor were its successor organizations. This structure plagued the war effort until 27 May 1943, when the Office of War Mobilization was founded, and the president decided to support its director explicitly. Until then disputes between agencies like the Office of Production Management (or the War Production Board later) and any other significant organization could only be settled by Roosevelt himself, and he was too busy and burdened before Pearl Harbor to adjudicate disputes between powerful departments, bureaucrats, or personalities. After Pearl Harbor, such an effort by the President was out of the question.

The Office of Production Management was obviously concerned about the labor pool and initiated large retraining programs. Also, in August 1941, the office urged manufacturers to employ women and entreated women to enter the laboring force. Roosevelt made public and private statements to help ensure that minorities received a fair deal from industry and labor unions. In June 1941 he created the Committee on Fair Employment Practices to investigate and redress grievances growing out of departures from his policy against employment discrimination on grounds of race, creed, color or national origin. (Note 27) This was more than political, however; it was pragmatic. If the United States was to be the Arsenal of Democracy, it needed to eliminate barriers to employment. Typical of Roosevelt, in April 1941 he established an organization that had, within its portfolio, elements the leaders of the Office of Production Management believed properly belonged to them. Under Leon Henderson, a New Dealer bureaucrat and not an industrialist, Roosevelt established the Office of Price Administration and Civilian Supply. This newest entry was responsible for recommending procedures to dampen inflation and also to ensure that civilian needs received adequate attention. Civilians were not to have priority during the defense buildup; at the same time they were not to be neglected, because to do so could destroy morale and weaken health and safety standards. But they could not be pampered. Unemployment, while still high, was in sharp decline, and many people had money to spend at a time when industry was supposed to be gearing up for war. Henderson, called an "all-outer" because he believed in an all-out war effort, one that paid attention to victory before considering business profits and civilian discomforts. Henderson believed he had the power to curtail civilian production, in order to promote industrial conversion. But the Office of Production Management thought it had this authority. The latter was staffed by industrialists who wanted to produce for the civilian market. Henderson was disturbed by widescale automobile manufacturing and production of appliances that were consuming steel and other materials needed for the war effort. In July 1941, when he took the initiative and ordered curtailment in future production of raw material devourers like automobiles, the Office of Production Management forced Roosevelt to mediate. In August Roosevelt ruled that the civilian supply function was to be broken off from Henderson's office and given to the Office of Production Management. (Note 28) It was all a matter of priorities, and clearly the business leaders who predominated in the Office of Production Management had different priorities from Henderson and perhaps even the president. The political moment had not yet arrived for Roosevelt when he could ask civilians and their suppliers for sacrifices.

Establishing grand priorities was essential in the summer of 1941 because it was during this period, on 9 July 1941, that Roosevelt directed the War and Navy Departments to collaborate on a report "on the munitions and mechanical equipment of all types which . . . would be required to exceed by an appropriate amount that available to our potential enemies. From your report we should be able to establish a munitions objective indicating the industrial capacity which this nation will require." On 30 August he told the services to factor Lend-Lease requirements into their analysis and wanted a final answer in 10 days. (Note 29)

The War Department's answer, the "Victory Plan," called for 61 armored divisions and 61 mechanized divisions, but the Army created only 16 of the former and none of the latter, although American infantry divisions were, by comparison to any other country's, lavishly mechanized. The requirements of Lend-Lease frustrated this. The Army estimated that the United States sent enough equipment to the United Kingdom and other parts of the British Empire, the Soviet Union, France, Italy after it switched sides, China, and other allied and associated states to create 101 United States type divisions. Because of Lend-Lease it was impossible for the War Department to create as many United States armored divisions as the Victory Plan demanded. Where the Victory Plan called for 215 Army divisions of all kinds, only 89 were created. (Note 30)

Remarkably, however, the size of the Army the Victory Plan called for was close to the number actually mobilized. The Victory Plan called for an Army of 8.8 million (reaching 8.3 million at its peak), a ground force of 6.7 million (which peaked at 6 million) and an Air Force of 2 million (which peaked at 2.3 million). The Victory Planners were assisted by Army Air Force planners, who determined that the United States would need 6,680 heavy bombers, 3,740 very heavy bombers, and 13,038 bombers for replacements. They also called for 8,775 fighters and an equal number of replacement fighters. (Note 31) The Navy had been building since the mid 1930s and had a two-ocean Navy that dwarfed Hitler's (except for submarines) and Mussolini's and was larger than Japan's. It was not until 17 December 1941 that the Bureau of Ships presented its first "Master Plan for Maximum Ship Construction," which became the guiding document for the president and his agencies devoted to munitions production. (Note 32)

By this time, however, Roosevelt and his advisors believed that the Office of Production Management was failing. Production was not accelerating as necessary, and the most nagging problem was establishing prioritiesCwhat was to be built first, to whom would it go (domestic or overseas military) and for which armed service in the United States, what essential civilian items were to be manufactured, who got which raw materials and when? The office had limited priority-setting authority, although after August it could set military priorities above producing civilian goods. Bernard Baruch and the Director of the Bureau of the Budget called for the creation of a single agency to centralize priority authority over all production, civil and military. Because of such advice, Roosevelt created the Supply Priorities and Allocations Board, under the leadership of Donald Nelson, a key member of the Office of Production Management, as Executive Director. Vice President Henry Wallace was Chairman of the Board and there were other powerful people on the Board, like Harry Hopkins. But Nelson was in charge.

This new Board was to be both a part of the Office of Production Management and superior to it in matters of allocating resources and setting priorities. Thus William Knudsen's subordinate, Donald Nelson (Knudsen's Director of Purchases and later Director of Priorities) was now his superior in the most important control element: establishing priorities and allocations. The Executive Order establishing this new agency was explicit: "to assure unity of policy and coordinate consideration of all relevant factors involved in the supply and allocation of materials and commodities among the various phases of the defense program and competing civilian demands." The Board could also "determine policies and make regulations governing allocations and priorities with respect to the procurement, production, transmission, or transportation of materials, articles, power, fuel, and other commodities among military, economic defense, defense aid, civilian and other major demands of the total defense program." But there were other agencies that had been granted similar responsibilities. Not only were there entanglements with other departments not subordinate to the BoardCfor two critical examples, the War and Navy DepartmentsCbut the relationship of the Board to the Office of Production Management was snarled. (Note 33) The Board's first meeting was on 2 September 1941 and its last on 13 January 1942 (when it was absorbed in the War Production Board). In that time production indeed increased. (Note 34)

The Supply Priorities and Allocations Board recognized early that efficiency lay in establishing an allocation system versus spending time on priorities. Trying to establish priorities corrupted the system, because everybody wanted everything now and certainly ahead of everyone else. Because too many systems received A-1 ratings, the Office of Production Management established a higher rating, A-1-A. Then too many systems got that rating, so a new priority rating system was established that rated materiel from A-1-A through A-1-J. And when that system became clogged, an AA band had to be superimposed. Then the system broke down. It took time for the Board to become cognizant of the fullest dimension of the priorities program breakdown, and then to understand completely the availability (or really, the unavailability) of raw materials. (Note 35) Many agencies were in the business of establishing requirements and the order in which they would be manufactured. The Joint Chiefs of Staff, of course, played a major role and beneath them the Army and Navy Munitions Board. But the Army and Navy, which did their own procuring, might not always agree with the decisions of the chiefs. Other powerful agencies were also involved in this process: the Maritime Commission, Lend-Lease, and the War Production Board. The last was, "in theory, empowered to make decisions on reductions if its Planning Committee indicated the necessity for such a step. Because of its composition, however, the Board itself could rarely agree on such matters, and it never claimed authority to determine the order of strategic necessity." Grand strategy was supposed to be the governor, the province of the Joint Chiefs, which would send its munitions priorities to the War Production Board based on it. (Note 36)

The Board's task was enormous. Once the needs for the military and the civilian economy were known, and of course these essentials changed, how much steel, aluminum, copper, rubber, and dozens of other materials was needed to build the millions of weapons and other necessities? It was crucial not to manufacture too much of a munition, because with the people and facilities stretched tight, superfluous production would cost money, effort, energy, and most importantly time. All the money in the world will not buy time. Sequencing was also critical; there was no sense in allocating steel for aircraft engines if there is insufficient aluminum to build airframes. The board, like the Office of Production Management, found that the estimates of the Army and Navy Munitions Board of raw material requirements were "practically worthless." For example, the Munitions Board estimated the requirement for copper for the first 2 years of the war to support a 4-million person army was 25,000 tons, when the real requirement turned out to be nearly 1 million tons. The Navy had been no more realistic in its estimation of raw materials. (Note 37)

The Army and Navy were not comfortable with civilians responsible for prioritization and allocation, and in November 1941 made a move to put a super priorities committee above Nelson's Supply Priorities and Allocations Board. The military constructed this new agency in such a way that uniformed people would be dominant, but President Roosevelt rejected the idea. As the president got increased funding from Congress in summer and fall 1941, Nelson's Board began in August 1941 (effective 30 November that year) to reduce production for civilian goods. Automobiles were first to be cut back. (Note 38) On 9 October, nonessential building and construction was stopped so that the Board could allocate building materials to war plant construction. On 21 October manufacturers were told to stop using copper in almost all civilian products. The Board sharply limited the production of refrigerators, vacuum cleaners, metal office furniture, and other "nonessential" products. (Note 39) On Pearl Harbor Day, Nelson and other principals from the Supply Priorities and Allocations Board agreed that complete conversion of the automobile manufacturing industry was the "first and biggest item" on their agenda. (Note 40)

In the end, the Supply Priorities and Allocations Board also failed to solve the problem. Adding it to the Office of Production Management in many respects made decision-making more difficult than it had been in the past, but the bigger problem was getting decisions once made to stick without further appeal to department secretaries and, ultimately, the president. This problem was not solved until May 1943, and only then because Roosevelt allowed it to be solved. Herman Somers wrote: "From the beginning, the ever resounding demand for reform centered around the absence of coordination, centralized authority, and central policy-makingCall facets of the same problem." (Note 41) Unfortunately, the War Production Board was to suffer from the same fatal flaw.