I recently read Alexander Field’s book The Economic Consequences of U.S. Mobilization for the Second World War. Field argues that, contrary to popular belief, wartime production substantially reduced the productivity of the U.S. economy, and the effects of the wartime economy continued to hamper economic productivity for years after the war ended. He makes a persuasive argument, but what I found most interesting about the book was how it presents a case study into the pitfalls of top-down planning.
Throughout the book I continued to find jaw-dropping examples of planning decisions that defied all reason. For example, Allied military efforts were severely hampered by a lack of landing craft – the kind of boats used to offload soldiers and equipment directly onto shores and beaches. Field quotes Winston Churchill as saying “How it is that the plans of two great empires like Britain and the United States should be so much hamstrung and limited by a hundred or two of these particular vessels will never be understood by history.”
Historians may struggle to understand it, but few economists would be surprised. The number and mix of ships being built was centrally dictated by planners. So the outcome would only be as good as the knowledge or assumptions that could fit into the individual heads of the planners making the call. And, unfortunately, far too few landing craft were built because planners assumed they’d be unnecessary. Field cites a “lack of interest in the navy, which assumed that operable ports would quickly be secured following initial assaults, which would allow men and material to be easily unloaded.” Many major campaigns were called off or severely delayed, because planners simply didn’t know – and had no way of knowing – what kind and amounts of equipment would be best.
Another decision that seems mind-boggling in retrospect was regarding the very serious threat posed by the disruption of rubber – something critically important to military as well as civilian production. The vast majority of rubber was imported from Singapore, and there was a real threat that the Japanese would invade Singapore and cut off the supply of rubber – which is exactly what happened. While this possibility was well known in advance, it was dismissed as worth worrying about, in no small part because “Roosevelt himself apparently thought that if war in the Pacific came, the Japanese could be quickly beaten, that reserve stocks of natural rubber along with scrap rubber drives could enable the country to weather any temporary disruption of imports,” so no care was given to building up the reserve stock of rubber.
The failure of this assumption to hold led to attempts to create a domestic synthetic rubber production program, paired with severe rationing of the use of rubber in the United States. Field notes that the synthetic rubber program has been hailed by some as a “miracle.” He takes a rather more dim view. He says that to “describe something as miraculous is to suggest that we witnessed an outcome that could not be or was not reasonably expected or anticipated.” But, reviewing the actual record of the synthetic rubber program, Field argues that describing the performance of the program as a “miracle” amounts to a backhanded compliment, writing “What the United States achieved can appear miraculous only if one has a poor view of U.S. war-planning, organizational, and engineering capabilities. One cannot both have a decent opinion of the latter and claim a miracle.” Ultimately, he concludes the only miracle to be found is that “given the design of the program and the delays in building the plants, it was a miracle its execution did not lead to the loss of the war.”
The litany of terrible decisions made in the synthetic rubber program are too numerous to list out here. But of particular interest is the decision about which basic pathway to use to make synthetic rubber. There were two different routes to take in the production process – one based on petroleum, and one based on alcohol derived from plants. The chemistry had long been worked out, particularly for the alcohol pathway. Field notes that while “the fifty-one government-owned plants had little initial experience with a number of the processes chosen, the chemistry allowing rubber to be created synthetically, based mostly on European research, had been understood for at least two decades.” For example, “During World War I, the Soviet Union produced synthetic rubber from plant sources (mostly potatoes and wheat) and continued to do so during World War II.” Field also notes that the Soviets offered to share their experience with the United States but the offer was ignored.
Field compares what the historical record shows on the pros and cons of the alcohol pathway and the petroleum pathway, and concludes that the alcohol pathway made far more sense. For one, “the country was sitting on an inventory of over a billion and a quarter tons of grain, accumulated as the result of agricultural price support programs in the 1930s, and indeed the surpluses were overflowing storage facilities. The grain was available, the costs of acquiring it had already been incurred…at that historical moment the costs of acquiring the feedstock should be treated as sunk, and thus its effective price was zero.” Additionally, “substantial capacity for fermenting molasses lay idle…The idle molasses-refining capacity could easily be converted to use grain as a feedstock.”
Adding to the case for alcohol, “the liquor-distilling portions of the alcohol industry…had excess capacity that could be used to produce alcohol from grains. The use of the molasses and grain spirits-distilling capacity, since it was already available, would not conflict with the other war demands for equipment or construction manpower.” Another important point was that unlike using petroleum, “making alcohol from plants was unlikely to conflict with the needs of the aviation fuel program.”
Lastly, “alcohol pathways for producing butadiene had been successfully exploited for years…whereas the petroleum-to-butadiene pathways involved challenges that were likely to delay production. In sum, the alcohol pathways were simpler and there was considerable experience with them, the raw material inputs were in abundant supply, substantial refining capacity was already available, and if additional facilities were needed, they could be built more quickly with fewer requirements for equipment or building supplies that were or were likely to be in short supply.”
You can probably guess what happened next. Planners decided to downplay the alcohol pathway and heavily emphasize the petroleum pathway (much to the delight of Standard Oil), and in the initial round of the program “only 80,000 short tons of the 550,000 short tons of butadiene needed to produce the then-targeted production of GR-S rubber was to be alcohol based (that is, relying on butadiene made from alcohol)…Moreover, none of that alcohol was to come from plants: it was all to be produced from petroleum.” Congress attempted to course-correct this with the Rubber Supply Act of 1942, which would have refocused on alcohol rather than petroleum. However, the Act was vetoed by FDR, because he saw the act as “a direct challenge to his authority, as it removed control from the executive branch agencies he had created.”
No doubt some of these decisions were the result of corruption or just sheer incompetence. But there is another factor that also explains a significant fraction of the issue, which I’ll be touching on in my next post.
READER COMMENTS
Fazal Majid
Jan 19 2024 at 5:13pm
Hmmm. Given corn ethanol’s modern role as a boondoggle for farming states, I am skeptical that Congress’ intervention was motivated by a rational assessment of the facts as opposed to pork-barrel politics.
john hare
Jan 19 2024 at 5:39pm
Even as an occasional reader of WW2 operations, I am aware of several other things not available to the front line. Reliable torpedoes, aerial refueling, heavy tanks, and a few more that could have made a difference.
Warren Platts
Jan 23 2024 at 3:58pm
The Sherman tank served well.
john hare
Jan 23 2024 at 5:31pm
The Sherman was a superior tank when introduced. It became a death trap in 44 when facing the German Panthers and Tigers. The Pershing could have been in service by D Day and available in numbers by that fall.
Warren Platts
Jan 24 2024 at 5:02am
There were a lot of moving parts when it came to the production of Sherman tanks. A big one was loading them on to ships and getting them to Europe. As for the fabulous Panther & Tiger tanks, they required about one hour of maintenance for every hour of service; Shermans were much better in that regard. So if you were a commander, what would you rather have: 3 Shermans or 1 Tiger?
john hare
Jan 24 2024 at 6:05pm
I think the question would be more, one Pershing or two Sherman’s. The German logistics were in horrible shape by the period of the war or it would have been far worse.
Richard W Fulmer
Jan 20 2024 at 11:04am
I don’t see a good fix for this kind of error. There is no market solution. What is the “market demand” for landing craft? Someone in the military had to decide what shipping was needed and allocate the limited resources accordingly. With the materials at hand, do we build an aircraft carrier or a thousand landing craft? Someone has to choose based on either experience or foresight. We had no experience with massive amphibious operations, so foresight was the only option. The assumption that ports could be secured turned out to be wrong, but was it a terrible assumption? One could make a good argument that it was reasonable for the European Theater of Operations, and unreasonable for the Pacific.
The decisions surrounding synthetic rubber production are far less forgivable. Had the government simply put out bids for synthetic rubber – regardless of the source – private companies would almost certainly have produced a higher quality product faster and cheaper than was achieved by the government-dictated “miracle.”
Kevin Corcoran
Jan 22 2024 at 12:06pm
To be clear, Field basically says the same thing. But he also notes that many accounts of WWII production talk as if it was a fantastically smooth-operating machine that was good for the economy and boosted growth and had benefits for economic productivity on top of all that. This book works to puncture the bubble driving that illusion. It may very well be the case that this kind of planning is the only option available. But just because something is the only option, doesn’t mean we should act as though it was good and done well and had long running benefits. We can – and should – be able to say that it was the only option, but it was also badly run, tremendously wasteful, and harmful to long-term economic growth.
Richard W Fulmer
Jan 24 2024 at 2:43pm
Fair enough. Allowing central planners to determine what and how much to build is inherently wasteful. Unfortunately, it is also inevitable in some areas such as military hardware. The lesson is to minimize top-down decision making, and, where not possible, to make the procurement process as competitive as possible.
steve
Jan 20 2024 at 11:31am
His version of the development of synthetic rubber is different than what chemists seem to believe. Yes, the Germans had synthetic rubber in WW1 but it was considered a bad product. Price swings in the price of natural rubber had lead to research in synthetic rubber in the 30s, with Standard Oil heavily involved in those efforts. So petroleum had long been thought the natural precursor and even after WW2 when the ruler companies could change if they wanted they stayed with it. Also, all that grain was used to feed Europe since farming was so disrupted. IIRC we went through the reserves pretty quickly and we were paying farmers extra during the war to increase production.
So, while planners had to make the decision on whether to use grain to feed people or for rubber vs using petroleum that was made based upon the input of hundreds of rubber industry workers and research academics. While you could criticize the government for not stockpiling natural rubber, assuming that was possible, it’s also notable that the big rubber companies, who also had access to information about SE Asia did not stockpile either.
The reason we were short on LSTs were at least threefold. First, they were pretty much invented for WW2. AFAICT we didnt have any in WW1. Next, they were at the top of the production priority list early in the world but were dropped to low on the list to make more ships so we could win the Battle of the Atlantic. I think most people believe this was a decent trade off. Third, it was Churchill himself who led the big push to have a big landing at Anzio. He thought Kesserling would retreat and the LSTs used to make that landing could be sent back to Normandy. He was wrong.
https://www.navytimes.com/news/your-navy/2019/06/06/the-unloved-unlovely-yet-indispensable-lst/#:~:text=The%20culprit%20was%20a%20little,nearly%20upset%20the%20entire%20operation.
Steve
Kevin Corcoran
Jan 22 2024 at 12:01pm
Field goes into pretty significant depth rebutting these sorts of claims, and the amount I can summarize in a blog comment will be severely limited. (But do give the book a read!) But among the things he points out is that when you dig into the reports, the actual input from chemists was to heavily favor the alcohol pathway, and this advice was largely ignored. To pick one high profile example, the chemist Chaim Weizmann (who would go on to become a president of Israel!) was an advisor in the process and, like his peers, heavily advocated for the alcohol pathway. In describing why the concerns of him and the other chemists was ignored, he described the “vested interest of the great firms – particularly the oil firms…I knew that large quantities of butadiene were already being made out of oil, but the trouble was, as far as I could gather, that the butadiene produced was not pure, and the purification was slow and costly, whereas the butylene produced by my process was chemically pure, and would lend itself more easily for conversion into a purer form of butadiene. But I had come too late, or at any rate, very late; the Government had already engaged the oil companies, and to initiate a process which had not the approval of the oil companies was almost too much of a task for any human being.”
Also, despite your concerns about the rubber from alcohol being poor quality, in fact, when the program went active, the portion of the program that did set about producing rubber from alcohol, despite being a much smaller fraction of the program, was quickly producing rubber at a much higher quality and quantity than the much larger fraction dedicated to petroleum. The petroleum pathway produced much less rubber, at much lower quality, and took much longer to get up and active. A year into the program, the petroleum based factories were only producing at 5% of rated capacity, and two years in they were barely producing at 40% rated capacity, while the alcohol based factories were producing at nearly 170% of their rated capacity by that same point.
You also write:
I doubt much this is a factor, because we see the same patterns of problems regarding aircraft production as was present in landing craft, and aircraft decidedly didn’t have that issue, as Field notes:
Despite all this, the production process in aircraft was just as much a tragicomedy as all the other areas. Charles Lindbergh actually tested the craft being built at one point, and in his diary he described it as “the worst piece of aviation construction I have ever seen…Rivets missing, rivets badly put in, riven holes started and forgotten, whole lines of rivets left entirely out, wrong sized rivets, lopsided rivets, badly formed skin, corner cuts improperly made, cracks already started, soft metal used where hard metal is essential, control holes left out, pilots escape hatch badly constructed.”
steve
Jan 23 2024 at 3:30pm
Will have to read it but will be a while before I get to it. What was the chemists you cite plan on how to feed Europe if we used the wheat to make rubber?
FTR, your version is not that different then the chemists I know have offered. A number of chemists were advocates of the alcohol pathway but they did offer that late and the decision had already been made since the plants needed to get built and there was already a lot fo work done by the oil people. No one had done large scale alcohol or oil as a source so they had to guess which was better and while the alcohol lobby was sure theirs was better the oil lobby thought their problems easy to overcome. As noted the rubber companies never went back to alcohol which certainly suggests that in the long run they were correct.
Steve
Richard W Fulmer
Jan 24 2024 at 2:59pm
Your counter argument is convincing. However, a possible caveat is this admission by Weizmann:
In what sense was Weizmann “too late”? If he means that his process hadn’t been either proven or publicized until after the government had contracted with the oil companies, then this is not necessarily a government failure. With a war on, the military needed to act and act quickly. Going with an imperfect process that existed instead of a perfect process that didn’t yet exist (or wasn’t yet known to exist) is hardly a mistake.
In the event, it appears from what you wrote that the government bankrolled both the petroleum-based and the alcohol-based processes. Given the time constraints, this may well have been the least bad option. Hedging one’s bets may be wise even when it is also wasteful and costly.
Pierre Lemieux
Jan 20 2024 at 3:10pm
Interesting posts. If miracles did exist and if it were possible to limit the state during wars, it should be barred from controlling prices (including, of course, not only the prices of material resources but also the wages necessary to entice young men to join the military).
Kevin Corcoran
Jan 22 2024 at 12:09pm
On the “if miracles did exist” point – rather amusingly, as he’s concluding the book he has a chapter titled “Do You Believe in Magic?” where he remarks “I’d like to believe in magic. I try not to in my academic work.” And the thrust of his book is to rebut the mindset of magical thinking that far too many people fall into when describing the economic impact of WWII.
Warren Platts
Jan 23 2024 at 4:00pm
Conscription is basically glorified slavery. Any war worth fighting is worth volunteering for..
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