• September 2, 2011

The miracle of US munitions production in WWII was not capacity but the proper channeling of capacity as guided by the economic concept of feasibility. According to Jim Lacey, author of Keep From All Thoughtful Men: How U.S. Economists Won World War II, economists Robert R. Nathan, Simon Kuznets, and Stacy May battled to prevent goals for production planning from being too meager and too ambitious,extremes that could derail strategy, erode morale, and prolong war. Their work, Lacey claims, “did more to determine military strategy and the timing of the great Allied offensives than all of the Allied national leaders and military commanders combined.”

Fact versus Myth

In demonstrating the influence of economists on war production and military strategy, Lacey dismantles four propositions of most historical interpretation.

1. General Wedermeyer’s “Victory Program Report” had little impact on strategy or production. Instead, the “real victory program” consisted of Plan Dog, by Admiral Harold Stark, and the Anglo-American Consolidated Balance Sheet, by Stacy May, an economist on the Supply Priorities and Allocations Board. Stark described how to win the war; May estimated the material means for winning. Nathan and Kuznets would estimate when the means could be available.

2. General Marshall was thwarted in his desire to establish a second front in 1943 not by the British but by the economists, argument that targets for munitions production targets could not be met until mid-1944.

3. President Roosevelt,s wildly ambitious production goals did not inspire awesome feats of production but instead had to be corrected by the principle of feasibility lest production goals as well as military operations fail.

4. Limits on consumer-oriented production did not drive munitions production,GDP growth did. More profound, the economic basis of war was no longer cash but capacity,more precisely, the relationship between industrial feasibility and optimal goals,something that at first only Robert Nathan and Simon Kuznets seemed to understand.

Thoughtful Men, in the Nick of Time

Soon after Pearl Harbor, Roosevelt formed the civilian War Production Board, headed by Donald Nelson, who then hired Robert Nathan and Simon Kuznets. The two economists had worked together creating what Lacey calls the “statistical revolution” of national income accounting and GNP, and Nathan had been a student of Kuznets at the University of Pennsylvania. (Kuznets won the Nobel Prize in 1971.) Their military counterpart-and opponent-in 1942 was Lt. General Somervell, head of the supply chain of command and very loyal to General Marshall.

Nathan led the Planning Committee, which was charged with analyzing production and estimating the impact of the victory program on the economy. Nathan, however, believed it more important to see if the munitions production programs for 1942 and 1943 could stay on schedule without sapping the economy or confounding military objectives for a two-front war. It was agreed that Kuznets would conduct a feasibility study of an “all out effort.”

The study concluded that military goals were not realistic and that entry into war against Germany should be delayed. It also called for a civilian-only committee empowered to formulate, screen, and test objectives,in effect coordinating military strategy and production in order to set feasible production goals.

Lacey points out the “naivete” of calling for a civilian committee, something which could only inflame military strategists, particularly Somervell. In fact, in his review of the study, Somervell disputed any need to revise the Victory Program, pugnaciously concluding “I am not impressed with either the character or the judgments expressed in the reports and recommend that they be carefully hidden from the eyes of all thoughtful men.” Writing on behalf of and in defense of his mentor, Nathan responded:

I am obliged to be frank with you in expressing my disappointment in your reply. The problems discussed are important and their intelligent consideration is urgent. The author-is one of our ablest and soundest authorities on our national economy and upon its ability to produce for peace or war. I think it would be most unwise to bar these problems,from people who have responsibility for the success of the war effort and the welfare of this country.

Subsequent meetings between the Board and the Joint Chiefs of Staff were vituperative, then grudgingly conciliatory as the facts sank in and the JCS agreed to cut $12 billion from their 1943 program. Six months into their crusade, the economists had won. D-Day was rescheduled to June of 1944. Kuznets returned to the National Bureau of Economic Research and Nathan enlisted, after the war founding Robert R. Nathan Associates, now Nathan Associates Inc.

Thoughtful Men…In Search of

Jim Lacey delivers a compelling story in ten briskly paced and well supported chapters. Primary sources in the book include Kuznets, feasibility study, Nathan’s October 6, 1942, memo to the WPB, minutes of the WPB meeting of October 6, Somervell’s comments on WPB proposals, and Nathan’s reply to Somervell.

Some might claim that Lacey exaggerates in saying the economists “won” WWII war, but he shows that the discipline the economists imposed on planning and production made the war winnable at the least cost to the American economy.

Where, one must ask, is that discipline now?

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