Sunday, May 20, 2012

Civilian Leadership in World War II ... Could We Use More of the Same Today?

The economic performance of the American private sector has been the success story of the world for many years.

But what lessons does it offer in other areas, including fighting wars?

The Civilians' Finest Hour is a review of  the book "Freedom's Forge" by Arthur Herman. The book looks like a great read, and its review describes FDR's selecting civilians from the private sector to  lead the World War II manufacturing effort:

"Not long after the Japanese attack on the American fleet at Pearl Harbor, President Roosevelt ordered the shutting down of nonessential civilian manufacturing. Within days, the car and truck industry had ground to a halt, and thousands of auto workers and dealers were out of work. Eleanor
Roosevelt was so enraged that she cornered the auto industrialist William Knudsen, the man she thought was responsible. "I wonder if you know what hunger is," she said, bristling with brahmin indignation. "Has any member of your family ever gone hungry?"

Knudsen, charmingly, did not rise to the challenge. He could have told the first lady that he had worked from age 6, pulling carts for a glazier in his native Denmark. Or that he had arrived in the United States as a 20-year-old with just $30 in his pocket and had worked one of the roughest jobs in the Bronx shipyards, holding pieces of steel while they were riveted into place. Or that by dint of his own hard work and ingenuity he had risen to the very top of the U.S. car industry in the 1930s before being asked by President Roosevelt, as Europe was engulfed in war in 1940, to take a leave of absence from General Motors to help ramp up military production. Knudsen did not even tell Mrs. Roosevelt not to worry, since with America going to war after Pearl Harbor soon there would be more work in Detroit and elsewhere than any of the unemployed could handle. Instead, as the first lady later wrote, Knudsen gave her a look "like a great big benevolent bear . . . as if to say, 'Now, Mrs. Roosevelt, don't let's get too excited.' "

Historians always give the headlines to politicians and generals in times of war. But as Arthur Herman makes clear in "Freedom's Forge"—a rambunctious book that is itself alive with the animal spirits of the marketplace—no successful war effort would go anywhere without heroic figures in the civilian world, capable of making ships, tanks, weapons and ammunition more quickly, to higher standards and in greater quantities, than the enemy can.

In William Knudsen and the shipbuilder Henry Kaiser, Mr. Herman has two wonderful subjects, and he makes the most of them. Knudsen, a manufacturing genius who designed plants and production lines for both Henry Ford and for Alfred Sloan at General Motors, was taciturn and conservative and liked to go home after work to play the piano. Kaiser was more the swashbuckling entrepreneur, a colorful risk-taker capable of going days without sleep as he threw himself into enormous projects—before taking on the job of building ships and ports for the Navy in wartime, he had been one of the main contractors for construction of the Hoover Dam.

In 1941, when Roosevelt announced plans to build 50,000 planes a year, Hitler scoffed, saying: "What is America, but beauty queens, millionaires, stupid records, and Hollywood?" His spies had clearly failed to tell him of America's genius for manufacturing. By war's end, Mr. Herman notes, "American businessmen, engineers, production managers, and workers both male and female" had turned out two-thirds of all the military equipment used by the Allies in World War II, including 286,000 warplanes, 86,000 tanks, 8,800 naval vessels, 2.6 million machine guns "and 41 billion rounds of ammunition."

The drama in "Freedom's Forge" comes from watching Knudsen, Kaiser and the teams they assembled meet the overwhelming challenge of gearing America up for war while also trying to manage their complex relationships with government. This story, as Mr. Herman tells it, is worth a thousand economics textbooks. On one side are the businessmen, can-do, profit-motivated but also fiercely patriotic; on the other, the elected and unelected officials, suspicious of any nongovernment types and eager to centralize anything they can. Flitting amid them is the Mephistophelean figure of FDR, playing the two sides against each other, waiting until the last possible moment before making decisions, and then going out and making speeches promising many more guns, tanks and ships than he had agreed to in private.

Mr. Herman leaves us in no doubt of his own sympathies. He quotes Alfred Sloan's assertion that "decentralization [is] analogous to free enterprise, centralization to regimentation." "Freedom's Forge" is a story of the triumph of hard-headed American business and industry not only over the Axis powers but also over their lily-livered critics. Knudsen, Kaiser and their like weren't just instrumental in the Allied victory, argues Mr. Herman, they also created the conditions for the postwar economic boom and America's transformation into a superpower. These conditions depended on business being given enough freedom to do its best and government helping without meddling.

Knudsen, Mr. Herman writes, "had sensed from the beginning that Washington didn't have to command or ride herd over the American economy to achieve new heights of production even after a decade of depression. All you had to do was put in the orders, finance the plant expansion, then stand back and let things happen. And they did, in prodigious amounts."

Mr. Herman tastefully refrains from making the comparison that must clang in every reader's head regarding the relationship between the business and political worlds today. But it is impossible to read his book and not think that, in times of economic hardship, heroic entrepreneurship, sometimes harnessed to government, will trump Washington's bloodless fiscal tinkering any day. It has been done before and can surely be done again."

Summing Up

Yes, the story of the U.S. manufacturing effort in World War II is indeed worth "a thousand economics textbooks." So meaningful, so simple and so true.

In one sense, it's a story about how much can be accomplished when qualified and motivated people are given an assignment and then left alone to improvise, innovate, compete and take the necessary steps necessary to realize the basic objective.

In another, it shows the wisdom of following a decentralized methodology led by businessmen instead of subjecting them needlessly to the inevitable meddling of centralizing government knows best bureaucrats.

Congratulations to FDR for knowing which horse was the best to ride in World War II.

Now it's time to pick which horse to ride on the global economic battlefield.

Let's hope we pick the right one again.

Thanks. Bob.