Freedom's Forge: How American Business Produced Victory in World War II, Arthur Herman.

Random House, 2012

Over the past 15 years, Arthur Herman has become one of America’s more interesting historians. His books include a history of the British Navy, a revisionist defence of the red-baiting Senator Joe McCarthy, and, most recently, an account of the parallel lives of Mahatma Gandhi and Winston Churchill. His books are large in scope, well told, and quite different from each other in theme and time period.

In Freedom’s Forge, Herman turns his attention to World War II and to the manufacturers whose diligence and ingenuity ensured that Allied forces had the supplies they needed to win the war. This book is a traditional history that should appeal to readers who enjoy books about engineers who successfully solve tremendous problems.

Anyone who saw the US military in 1939 could see that America was unprepared to fight. Herman provides an illustrative example of American weakness by demonstrating what happened in 1939 when General George S. Patton took command of the Second Armored Brigade at Fort Benning. The tanks kept breaking down because of defective nuts and bolts, which the fort’s quartermaster could not supply. Patton ultimately solved the problem by buying nuts and bolts — at a nearby Sears store.

Why were America’s forces so weak? Part of the reason was that New Dealers eager to bloat the welfare state didn’t want to spend money on the military. A second part was because of investigations of defence contractors held by Senator Gerald Nye between 1934 and 1936, which convinced millions of Americans that the “munitions makers” had somehow “tricked” America into entering World War I in order to increase their profits.

Herman clearly dislikes the Nye Committee and the restrictions placed on American arms manufacturers as a result of the committee’s investigations. However, he largely ignores the committee, and never explains why its investigators were wrong. As a result, Herman’s readers won’t fully understand why the American military was so weak in 1938.

In 1917 the US Army tried to command companies to produce what it wanted, and even nationalised the railroads when the trains weren’t moving fast enough to satisfy the generals. By early 1918 it was clear that the Army and Navy were incapable of overseeing industry, and President Woodrow Wilson appointed a War Industries Board, headed by Bernard Baruch, to control production. American factories didn’t successfully convert to military production until the war was nearly over, and the “doughboys” sent to Europe largely fought with British and French equipment. In his memoirs, British prime minister Lloyd George said that it was “one of the inexplicable paradoxes of history that the greatest machine-producing nation” couldn’t supply American troops with guns or tanks.

In May 1939, President Franklin D. Roosevelt went to Bernard Baruch and asked him what he should do to make sure that American forces had the equipment needed to fight another war. “Who are the top three industrial production men in the United States right now?” the president asked Baruch.

“First, Bill Knudsen,” Baruch responded. “Second, Bill Knudsen. Third, Bill Knudsen.”

Herman shows that Baruch made the right choice. Signius Wilhelm Poul Knudsen (who later changed his name to William S.) arrived in the US in 1900 as a 20-year-old Danish machinist eager to build bicycles. The bicycle craze of the 1890s was fading, and bicycle companies were swiftly converting to building parts for the nascent motorcar industry. The company Knudsen worked for was a Ford subcontractor, and Knudsen’s talents attracted Henry Ford, who hired him to refine his assembly lines. But Knudsen and Ford quarrelled over the future of the company, and Knudsen resigned in 1921, only to be snatched by General Motors.

Employers of this era were obsessed with the ideas of efficiency experts like Frederick Winslow Taylor (whom Herman mistakenly calls “William Taylor”), who claimed that workers’ routines could be reorganised to maximise productivity. Knudsen showed that assembly lines were what needed to be changed, and that an efficient assembly line, using extremely precise machine tools, could turn factories into production powerhouses. His methods ensured that GM would pass Ford to become the world’s largest car company.

Even though Knudsen was a Republican, he accepted Roosevelt’s offer to head the National Defense Advisory Commission. “This country has been good to me and I want to pay it back”, he said, as he went to Washington in May 1940. Knudsen found that the military had very little sense of how much equipment it would need in a war.

He also had to disillusion those on the left who thought that factories should be seized, converted to military purposes, and then reconverted after the war into state-controlled enterprises.

In meeting after meeting, Knudsen made basic points: it would take at least 18 months to get production rolling, simply because the machine tools needed to run the new plants did not exist. And rather than coercion, businesses had to want to join the defence effort. That meant that they should be able to get a good return on their investments, have enough start-up funds to buy equipment and land, and be able to depreciate their investments in a reasonable amount of time. What Knudsen hoped to do was to create an opportunity for companies to convert their plants to military production, not because they were forced to, but because the conversion made good business sense.

Everything Knudsen wanted American businesses to do would eventually happen. The quasi-governmental Reconstruction Finance Corporation provided seed money, and the depreciation rules were changed so that companies could deduct the costs of wartime equipment in seven years instead of sixteen. The result was that businesses large and small began to sign up. One of the most prominent was Herman’s other protagonist, Henry J. Kaiser.

Kaiser was both an organisational genius and, like many entrepreneurs, a jerk. He delighted in overloading subordinates with far more work than normal people could handle. The assistants who were not crushed by their workload stayed with Kaiser for decades. Kaiser was also a publicity hog whose exploits were celebrated in Man From Frisco, possibly the only film ever made about a heroic defence contractor.

Kaiser accumulated scores of enemies. Herman shows how the Navy transferred one crucial contract to the US Maritime Commission just so that they would not have to deal with Kaiser. But Kaiser’s innovative construction methods ensured that his shipyards churned out nearly 3,000 Liberty ships that successfully carried tens of millions of tons of cargo across the Atlantic and Pacific. Kaiser also made sure his workers had good pay and substantial benefits; a health plan he created for his California shipyards evolved into Kaiser Permanente, America’s first health maintenance organisation.

Herman persuasively shows that defence contractors were so successful because they were decentralised. Corporations came up with innovative subcontracting schemes to share contracts that no central planner could have imagined. In fact, the one effort by the US to control production was disastrous. A decision by the Supply, Priorities, and Allocation Board to cease civilian car production as of 15 January 1942 made 400,000 autoworkers and tens of thousands of workers at auto dealerships unemployed. Many of these unemployed workers fled for good defence jobs in California, and Detroit had chronic labour shortages for the rest of the war. Washington learned from its mistakes; while there was some rationing, there were no further restrictions on what manufacturers could produce. Even at the apex of the war in 1943 and 1944, only about a third of America’s industrial production was used for the military. The rest went for civilian consumer goods.

American manufacturers may struggle today. But in Freedom’s Forge, Arthur Herman shows how the ingenuity of American entrepreneurs ensured that US troops had the supplies they needed to win World War II.