The Autumn of 1942 marked the peak of Axis expansion. In the South Pacific the Japanese had occupied much of New Guinea and were threatening Australia. In the North they had taken several islands in the Aleutians in a thrust toward the North American continent. In Africa the Germans had slashed into Egypt and were stalled at El Alamein. In russia the success of the great eastward rive of the Nazis hinged on the outcome of the siege of Stalingrad to which the Germans committed 22 divisions in September. In Europe Allied air warfare had not yet seriously inconvenienced the Axis in its exploitation of the resources of the continent. Yet the nadir of Allied fortunes had been reached. On all fronts the United Nations were able in the latter half of 1942 to check the Axis spread and to make a start on the long road to victory. In August the Marines landed in Guadalcanal in a desperate gamble and successfully resisted Japanese efforts to drive them from the island. In October, after reenforcing and reequipping their forces, the British at El Alamein initiated an offensive that was to drive the Germans from Egypt and westward to tunisia. Early in November American forces landed in Northwest Africa in an action coordinated with the British offensive from the east, the two moves being designed to pinch the Nazis between the British and American armies. In November the Russians put in motion a vast encircling movement to relieve Stalingrad and to crush the Nazis in the East. It was not until May 1943 that attacks could be mounted to drive the Japanese from American islands in the North Pacific and by that time island-hopping tactics were under way in the South Pacific.
Full Tide of War
By the time these military operations were in motion the wartime structure of the American Government had taken form. The problems of administration that were to arise after the fall of 1942 were of a different order than those which had been involved in establishing and staffing the wartime agencies. New problems arose in the coordination of the going mechanisms of government and a few major rearrangements of organization had to be made to deal with new issues. But in the main after the fall of 1942 the problem of administration became one of management of the machinery which had been established. Most of the critical problems that emerged flowed from
the economic and political effects of the burdens placed on the American economy by the preparations for the military campaigns under way and for those scheduled for the future. During 1942 our production of military and war-related goos for ourselves and our allies rose sharply toward the peak which was reached in 1943. As military operations got under way and as the initiation of other actions approached the demands for war matériel became more imperious. The demand for goods for war use, the needs of a prosperous civilian population, and the reduction in the production of many types of articles for civilian use brought greater and greater pressure upon price levels. The expansion of production was taking up the slack in the economy and scarcities of materials became serious while a prospective shortage of manpower loomed. The civilian population began to feel the pinch of war and the problem of supplying the home front became more difficult.
All of these things had their repercussions in the organization and administration of the Government on the home front. The pressure on prices and wages required the establishment of mechanisms to gear together the agencies of the GOvernment with powers useful in stabilizing the economy. Early in October 1942, the Office of Economic Stabilization was established with authority to take the leadership in directing the activities of Government agencies with powers to affect stabilization. The intensification of the competition for the output of the American productive system required improved mechanisms and procedures to allocate the supply of goods to different uses. New and better procedures were developed by the War Production Board for these purposes. A crisis in petroleum brought a reorganization of the governmental agencies concerned with petroleum and its products. Toward the end of 1942 the increasing demands on American agriculture brought a reorganization of the agencies of Government concerned with food production and distribution. The declining quantities of goods available for civilian use required the institution of broader rationing programs. In September 1942, it was decided to ration gasoline on a Nation-wide basis. In the spring of 1943, shoes, meats, and processed foods were rationed.
An important change took place in the American economy between the spring of 1942 and the fall of that year. This change was gradual, but nonetheless dramatic. It consisted of the disappearance of slackness in most elements of our productive system and the development of a tight economy in which war production demands apparently exceeded the Nation's capacity. the most urgent production programs of the military, naval, and air forces, and those of the shipping and lend-lease agencies were in violent collision. The required increases in total production, or in individual types of production, could not be achieved through the comparatively simple solutions used in the prior winter and spring.
Regulating the Flow of Materials
In the fall of 1942 and winter of 1942-43, four solutions were advocated for dealing with this new and extremely difficult problem of expanding war production in a tight economy. The first proposal, but forward even before the summer, and readvanced from time to time later, whenever difficulties developed, was the elimination of civilian responsibility for managing the economy and the transfer of that power to the military.
The second type of reaction was the desperate effort to get quick action in solving any immediate problem by giving the responsibility in a limited field to one man along with a broad grant of powers to that he might act with vigor and dispatch. The best illustration of this answer to the problem of war production in a tight economy was the creation of the Office of Rubber Director, although other "czars" were set up, and still others suggested from time to time.
The third method was the development under WPB of comprehensive
integrated controls requiring also the reduction of programs to feasible limits, their timing on the basis of needs, and the elimination or postponement of unbalanced programs.
The fourth method was the development under the War Production Board of the direct and indirect management of production, especially through the control of scheduling.
It is the purpose of this chapter to review these four methods of approach and to show how each one of these solutions played its part in the development of the final pattern of American war production, a system of controls which on the total record achieved extraordinary success.
As chapter 5 explains, the idea of military control of the economy in time of war was firmly held and vigorously advocated by officials of the War and Navy Departments and the military chiefs at various times from 1939 on. During the summer and fall of 1942 scores, if not hundreds, or production lines were closed down for brief periods when the flow of materials ceased, and the conflict of high military priorities threatened to strangle the entire war production program, military and civilian. These temporary crises called for strenuous new demands from some quarters for military control of the economy. Proposed plans brought WPB under the joint Chiefs of Staff, or replaced Mr. Nelson by a military officer or at least by a man with less susceptibility to foreign demands and civilian requirements whose primary concern would be for the military program.
Proposals for Military Control
Through all this discussion the issues were perfectly plain, though they were frequently overlooked even by those who were most deeply involved. The choice was between flexible civilian supervision over military production and procurement or military domination over the supply of materials, materiél, essential civilian goods, and manpower. THough there were times when it looked as if the only way out of the controversy lay in giving the military final control over the total economy, the President and the Congress, supported by the Truman Committee, were never persuaded to make the change.
While the military forces were not accorded final control over the economy, extensive war production powers were given to the military establishments from time to time. While these are described elsewhere in this study, it is appropriate to note certain of these powers here.
It as noted in chapter 5 that the War Production Board delegated the entire procurement function to the military services, the Maritime Commission, and other purchasing agencies. Extensive delegation of the right to issue priorities was a necessary consequence. Military and naval personnel reporting to high Army and Navy officers or
to the Army-Navy Munitions Board were brought directly into the WPB offices all through the organization where they might not only observe but also influence, if not control, WPB activities and decisions. And finally, military personnel were given central advisory posts on the War Production Board itself, on the extremely important Production Executive Committee which became the major power in WPB after February 1943, and on the Requirements Committee, as well as on the Divisional requirements committees. Military personnel served also on the Area Production Urgency committees and in other field office posts. In this way the military agencies were not only represented at every point within the civilian agency designed to control the economy, but were in a position to delay or recommend action, both on top policy decisions and in the smallest details, if the action proposed did not suit their views or desires.
Whenever a particular drive for military demands of the economy failed as the result of Presidential decision, or because of specific action by the Chairman of the War Production Board in asserting his powers, the military leaders took another approach to secure the same result; they never abandoned the sincere conviction that they could run things better and more expeditiously than could the civilians. This approach was involved, for example, in the transition from the Production Requirements Plan to the Controlled materials Plan, as is explained below. Similarly, when the WPB, after a bitter struggle in which the President made the decision, reestablished its right to control production schedules, the military promptly reestablished, if it did not actually extend, its influence through the Production Executive Committee and the staff which surrounded the Executive Vice Chairman.
The second answer, in a tight economy, to confusion and delay in war production was the setting up of men with conspicuous authority and specific limited duties. These men came to be known as the "czars." The best illustrations are the Rubber Director, the Petroleum Administrator, the SOlid fuels Administrator, and the War Food Administrator. At various times czars were suggested also for lumber, steel, aluminum, civilian supplies, and electric power.
War Production Czars
In every case the history was the same: A serious shortage with its attendant confusion would develop; the columnists and the public generally became alarmed; officials with conflicting authorities or ideas each proposed his own solution, or failed to present immediately a clear simple plan of action; Congress often commenced to investigate; and sooner or later someone would come forward with a dramatic
plan for solving the particular issue by giving one man all the power necessary to do the job. The author of this plan ignored the existing organization of production and the chaos that dictatorial powers in one field could cause in the whole war economy. Corrective reasoning was generally supplied by the Director of the Bureau of the Budget, by the Chairman of the War Production Board, or by the Price Administrator, who represented the agencies most concerned by these moves.
This development of czars is well illustrated in the following accounts of the origin and experience of the Rubber and Petroleum Administrations. The somewhat similar story of the development of the War Food Administration is presented in the next chapter.
OilOf the three commodities, rubber, food, and oil, oil was the most critical. We had lost our supplies in the Far East; the Germans had the rich Russian fields; and submarines were sinking our tankers in sight of the Atlantic shores. Our own and Allied demands for oil had domestic repercussions which led to mobilization of government and industry to grapple with petroleum problems, first of transportation, and then of production and distribution.
The pressure for a wartime "oil czar" stems from developments of the spring of 1941. At that time, the most pressing domestic petroleum problem was to bring adequate amounts to oil to the Atlantic coast area. Nearly all such supplies had been brought in by tankers
Chart 33. Price and Production of Crude Petroleum.
Chart 34. Sales of Fuel Oil to the Military Services.
operating, principally, from Gulf coast ports. A supply crisis was created by allocation early in May of 50 of these vessels to carry oil from Gulf and Caribbean ports to northern ports where the cargo was transferred to ships under a foreign flag for trans-Atlantic shipment, chiefly to Great Britain. The deficit in transportation facilities could be met by expansion of rail movements, by construction of additional tankers, and by extension of pipe lines, but all these solutions required time and there was immediate need to make more efficient use of existing facilities both to meet current requirements and to build up reserves for the winter ahead. Other problems which demanded attention included efficient development of petroleum reserves, optimum balance in refinery operations, and elimination of cross hauling of petroleum and its products.
Something obviously had to be done. The chief difficulty was that a good many Federal agencies had coordinate interests in oil and its distribution. Furthermore, coordination could not offer a decisive solution. The Department of the Interior had jurisdiction over production of oil on public lands and Indian Reservations, forecast consumer demand for oil, and engaged in research. The Navy Department administered naval petroleum reserves and was one of the principal consumers of petroleum. The Maritime Commission had charge of tanker transportation and the ICC had jurisdiction over rail and inland barge-line oil movements. In addition, the War Department, OPM (which had set up an industry committee for oil), the Office of Price Administration and Civilian Supply, Lend-Lease, and other defense organizations had an interest in petroleum.
On May 28, 1941, a day after he had declared the existence of an unlimited national emergency, the President sent a letter to the Secretary of the Interior naming him Petroleum Coordinator for National Defense,1 with wide advisory powers but with little operational control. It was obvious that the President recognized both the need for coordination and the threat to the established forms of organization.
This choice was influenced by the Department's long standing interest in oil, its available staff, its contacts with the industry, and the President's confidence in Mr. Ickes. The Coordinator was charged with two types of functions: He was to assemble data about needs for petroleum and about factors and actions affecting its supply. He was also to consult with, and recommend to Federal agencies, State governments, and the industry, action needed to maintain adequate supplies. The President requested some 20 Federal agencies concerned with petroleum to give the Coordinator antecedent advice of proposed actions which might affect oil supplies and to notify him of meetings dealing with its problems so that he might make recommendations. The letter did not transfer powers to the Coordinator from other agencies already dealing with phases of the petroleum problem. It simply set up an organization in which available information about petroleum could be brought together and through which proposed actions for dealing with oil problems would be cleared. Thus, assignment of authority over the defense production program continued to be distributed on functional lines, but an advisory organization with an interest in the total petroleum problem was set up to make recommendations to operating agencies which were dealing only with parts of that problem. If, for example, the Coordinator thought that unnecessary drilling of wells was consuming steel that could be used better for pipe lines, he could recommend that OPM issue orders to prohibit such drilling, but he could not command.
In organizing his office, the Petroleum Coordinator drew on staff of the Interior Department, and also on the oil industry, from which he selected his Deputy Coordinator and other officers, and constituted a national Petroleum Industry Council and District Advisory Committees. Under terms of an agreement with the Department of Justice, which was responsible for enforcement of the antitrust laws, he made extensive use of these groups in planning and executing programs. In the months before our declarations of war, OPC made Nation-wide surveys of capacities for production, transportation, refining, distribution, and equipment and supply requirements of the oil industry. It prepared and executed plans for expansion of high-octane gasoline production facilities and for supplying petroleum to Great Britain and
the Soviet Union. For OPM, OPC acted as an industry branch, advising, recommending, and passing on priority applications, preference ratings, and limitation and curtailment orders. American entrance into the war aggravated these and other problems with which OPC was grappling and made their solution more difficult.
Public annoyance with inconveniences and conflicting statements about supplies of gasoline and fuel oil, the petroleum industry's dissatisfaction with actions of Government agencies--particularly with OPA's price policies, and the Petroleum Coordinator's desire for greater authority for discharging his responsibilities led to attempts to strengthen the powers of the Office of Petroleum Coordinator. In Congress, an unenacted bill would have vested in a National Petroleum Administrator "all functions of the War Production Board and its Chairman, of the price Administrator, and of the Office of Defense Transportation, relating to the production, transportation, distribution, sale, or price of petroleum." In the Executive Branch, the Petroleum Coordinator spearheaded the drive for greater OPC authority. As early as September 1941, the President had rejected his request to delegate to the Coordinator power to determine priorities and allocation of supplies for crude petroleum and natural gas. In 1942, however, the Petroleum Coordinator succeeded partially in his renewed efforts to increase his authority.
As an organization to collect information and to make recommendations, OPC experienced difficulties in its relations with a number of other agencies. OPC, which had tackled oil transport problems several months before the creation of ODT, was inclined to feel
Chart 35. Civilian Use of Petroleum Products.
that tank cars could be treated largely apart from other transportation facilities, a view with which ODT, which had over-all jurisdiction was not inclined to agree. There was friction between OPC and the Board of Economic Warfare over matters such as supplies for oil producers in foreign countries. In WPB, which continued the OPM practice of using OPC for processing priority applications and recommending limitation and conservation orders, there was general agreement on high priorities for materials needed for high-octane gasoline plants to supply the needs of our huge plane-production program; but there were differences over other issues, particularly the construction of pipe lines, steel for which competed with material for bombs, tanks, ships, and other military requirements. OPC relations with OPA were strained by continuing differences of the urgency, extent,
Chart 36. Production of Motor Fuel.
and methods of oil rationing about which the agencies issued conflicting press releases. OPC also felt that OPA was too slow in approving price increases to offset higher costs of transportation (resulting from shifts in movement of petroleum from water to land) and less profitable refinery yields. These interagency frictions, especially those over prices, came to the attention of the President who asked the Petroleum Coordinator if there were any way all the handling of oil could be put in one place. In reply, the Coordinator wrote, on August 19, 1942, that, although a great deal had been accomplished under his existing powers, it was necessary to centralize authority over oil more clearly and positively. To accomplish this purpose he submitted a draft of an Executive order to create a Petroleum Administration for War.
The President referred this draft to the Bureau of the Budget which undertook to reconcile the views of the agencies affected, a process that required the 4 months between August and December 1942, when an Executive order, considerably less sweeping than the original proposal, was issued. Since these negotiations involved one of the major threats to the established pattern for war production, it will be useful to use them as an example and to review them in some detail to bring out the character of the controversy over functional and commodity organization. Two related issues may be distinguished: location of the petroleum agency, and the scope of its authority.
The Coordinator had proposed to place the new Petroleum Administration in the Executive Office of the President rather than in the Department of the Interior, though, like OPC, it could have been given independent status with direct access to the Secretary and freedom from internal departmental routines. The Bureau of the Budget thought it would be a fiction to locate the new Petroleum Administrator in the Executive Office and preferred an autonomous agency within the Department of the interior. A third solution, advocated by the War and Navy Departments, OPA, and WPB (whose chairman's earlier attempts to get it adopted had failed) was to put the oil agency in WPB, on terms similar to those applying to the recently established Office of Rubber Director, so that its activities might be related better to actions affecting the rest of American industry. The Petroleum Coordinator, who had turned down an invitation to become a member of the War Production Board, was reported to have conceded the logic of such an argument but to have objected to incorporation of his agency into WPB as long as its then chairman, with whom he did not get along well, remained in office. Another obstacle to the transfer of the oil organization to WPB was confusion in the Board resulting from an internal reorganization in the fall of
1942. In the end, the Petroleum Administration was set up technically outside the Executive Office, the Interior Department, and WPB; and its head was authorized to report directly to the President.
More significant than location, however, were the powers of the Petroleum Administration. The Coordinator had written to the president that his draft order did not expand existing OPC authority substantially except over prices other than those to consumers, and in the exercise of priority powers within the oil industry. Possibly because language in the proposed order was not sufficiently clear, possibly because they were excessively suspicious of potential encroachments on their own jurisdictions, other agencies affected professed to read much greater power into the draft order than did the Petroleum Coordinator. The latter expressed willingness to modify the document, which underwent extensive revision before it was issued. The basic issue, as noted already, was the principle to be followed in organization for war production. The Coordinator advocated that authority to take action, as distinguished for making recommendations, to a substantial extent should be vested in the petroleum agency. Other agencies, with economy-wide responsibilities, objected strongly to diffusion of authority over production, transportation, price stabilization, foreign traded, and other functions which cut across all industries and commodities. The Bureau of the Budget sided with these agencies on the grounds, summarized in a memorandum to the President, that the functional principle had been followed in organization since the start of mobilization; that it would be utterly confusing to try to employ simultaneously both functional and commodity or industry organizations; and that drastic change of the basic pattern in the midst of war would create confusion and result in stoppages that the country could ill afford. The difficulties inherent in the organization suggested by the Petroleum Coordinator can be brought out best by a review of his original far-reaching proposals, the reactions of other agencies that were affected, and the much more moderate provisions of the Executive order finally issued on December 2, 1942.2 More than a dozen agencies had a substantial interest in the powers of the proposed petroleum agency, but the broad issues of "commodity" versus "functional" organization will be posed clearly enough by consideration of provisions applicable to only five of them.
Transportation.--The order submitted by the Coordinator would have authorized the Petroleum Administrator to issue and enforce specific directives to the oil industry on the transportation of petroleum. The War Shipping Administration and the Office of Defense
Transportation would have determined the number of tankers, barges, tank cars, and tank trucks available to transport petroleum, but the Petroleum Administrator, in collaboration with these agencies and the War and Navy Departments, would have allocated these facilities among the various services and among units of the petroleum industry. He would have been empowered to direct the construction and operation of petroleum pipelines. Also, he would have advised the War Production Board Chairman what materials were needed for transportation of petroleum.
Detailed control of specific operations such as that proposed by the Coordinator ran counter to the prevailing conception of war production organization, under which supply agencies merely set goals for total movements, and very likely would have interfered with attempts to achieve a balanced and over-all plan for the flow of traffic.
The War Shipping Administration, which had been dealing directly with the Army, Navy, and lend-lease in allocating tankers, objected to establishment of a second agency to allocate shipping, and declared its intention to continue to be guided by OPDC recommendations in making allocations to units of the oil industry. Under the order issued by the President, the Petroleum Administrator was merely to consult WSA about tanker assignments and to recommend allocations of available assets.
The Director of the Office of Defense Transportation found it "difficult . . . to see how an important part of transportation can be wisely separated from the total transportation without adding to duplication and conflict and without impairing the effectiveness of public control." His objections were met substantially in the order finally issued. Transportation was excluded specifically from definition of the* oil industry over which the Petroleum Administrator was given certain powers. ODT was to continue to make recommendations to WPB for materials needed for transportation not only of oil but also of other products. Instead of allocating barges, tank cars, and tank trucks among units of the* oil industry, the Administrator was simply to designate the quantity and kinds of petroleum to be shipped and received by those in the industry and to certify these designations to the Office of Defense Transportation for provision of necessary transportation. The Petroleum Administrator's authority over pipe lines, also, was limited: he was to review plans for their construction, approve those he thought necessary, and recommend material requirements to the War Production Board; and he was to direct their physical operation to the extent of prescribing the petroleum to be transported, and the direction of flow, through such pipe lines. These powers were subject to ODT's existing authority
to provide additional transportation facilities and equipment to coordinate and direct domestic traffic movements.
Economic Warfare.--The Coordinator proposed to give the Petroleum Administrator authority to determine, in collaboration with the State Department, Lend-Lease Administration, and the Board of Economic Warfare, the amounts of oil required by foreign nations. The Executive Director of BEW criticized this provision, among others, on the ground that "any economic warfare program depends largely for its success upon the authority to coordinate and direct the movement of all gods in international commerce." Control of the flow of oil was a vital weapon whose use had to be coordinated with that of others in the economic arsenal. Collaboration between BEW and OPC already was provided to some extent through OPC's membership in BEW's Foreign Petroleum Policy Committee.
In the end, the Petroleum Administrator was empowered merely to collaborate with agencies authorized to determine plans and policies for foreign petroleum activities; and his orders to the domestic industry with respect to their foreign acitivites were to conform to such plans and policies. The Administrator, however, was to be the channel of communication on foreign petroleum between Federal agencies and the oil industry.
Price Control.--The oil industry's dissatisfaction with prices allowed by the Office of Price Administration for petroleum products was one of the principal motives behind the proposal to set up an "oil czar," from whom the industry expected more sympathetic treatment. To this end, the Coordinator's draft order would have transferred from the Price Administrator to the Petroleum Administrator the former's powers over petroleum prices under the Emergency Price Control Act of 1942. The sole qualification was the Price Administrator's approval of prices to ultimate consumers, in reviewing which he was to consider only their effect on general price levels. If the Petroleum Administrator, whose principal responsibility was to provide adequate supplies of oil, had been given this power, it was not unlikely that he would have given more consideration than had OPA to use of prices to facilitate operations of the oil industry and less attention to the general problem of stabilization and prevention of inflation. The Price Administrator pointed out that the power of approval left to him would be "wholly ineffectual" because prices to ultimate consumers are determined largely by prices at earlier levels, over which he would have no control and because it would be difficult or impossible to demonstrate concretely a threat to the general price level.
In the final order, the Price Administrator's authority was preserved and the Petroleum Administrator was limited largely to advisory
functions. The latter was to compile data about petroleum prices, to consult with the former, and to recommend revisions of petroleum prices to him. The Price Administrator, in turn was to advise with the Petroleum Administrator before establishing or changing oil price schedules.
Rationing.--The Coordinator's draft order would have required the Petroleum Administrator's approval of oil rationing orders before they were issued. Thus, one agency would have been authorized to approve the methods of another agency with general responsibility for administering the rationing program. the Price Administrator pointed out that "detailed policy formulation cannot be successfully separated from the actual administration and operation of programs . . . Apart from then evil of divided responsibility, the additional time consumed in clearance is not unimportant." As the Executive order was issued by the President, it provided simply that the Petroleum Administrator should be advised of all proposals for civilian rationing and that he should consult with rationing authorities in their development.
Priorities and allocations.--The proposed Executive order would have vested in the Petroleum Administrator substantial powers which were being exercised by the War Production Board Chairman. The Petroleum Administrator would have obtained determinations of military oil requirements from the War and Navy Departments, and, in collaboration with others, would have determined the amounts needed by foreign countries and for essential industrial and civilian uses. He would have advised the WPB Chairman about material necessary to meet these requirements; and he would have issued directives to distribute materials allotted to the industry by the WPB Chairman. He would have had general authority to issue and enforce specific directives to the oil industry on practically all phases of its operations.
The WPB Chairman opposed the draft order strongly on the ground that it would interfere with his exercise of priority and allocation powers. He suggested that, instead of strengthening OPC as a separate agency, it would be "more efficient and rational" to transfer it to WPB. This shift was not made, but the President decided that WPB should retain full control over materials and priorities.
Under terms of the Executive order finally issued and agreed to by the WPB Chairman,3 the Petroleum Administrator had the following authority and functions: (1) He was to obtain estimates of oil requirements, compile and analyze them, and submit them to WPB with recommendations for allocations. After the WPB Requirements
Committee determined oil allocation to the several claimant agencies, the Petroleum Administration for War was to act as a War Production Board operating division in implementing them. When rationing was adopted to maintain adequate supplies of petroleum the Petroleum Administrator was to determine, after advising with WPB, the areas and times of rationing and the amounts of oil to be available for it. (2) The Petroleum Administrator was to prepare and recommend estimates of material needed by the industry to make available petroleum to meet the oil allocations he recommended; and he was to control distribution within the industry of the material made available to it. ()3) Finally, the Administrator was given authority generally to issue to the industry, and to enforce, directives and orders dealing with production, refining, treating, storage, shipment, receipt, and distribution of petroleum and its products.
The effects of this grant of authority which was to be exercised subject ot policies and directives of the WPB Chairman, were less far-reaching than they appeared. To a very substantial extent, WPB had recognized OPC as an industry division and had followed its recommendations with respect to the oil industry's material needs and the allocation of petroleum. Formal recognition of PAW as an operating division of WPB, by giving the Petroleum Administrator authority to issue directives to the industry, however, did relieve the Board of certain time-consuming functions.
The Executive order on petroleum issued in December 1942 watered down the draft submitted by the Petroleum Coordinator in August by limiting the PAW's functions largely to advice and recommendations. It safeguarded the powers of other agencies further by reciting their authorities, which the order was not to be interpreted as limiting. The attempt to create an oil "czar," then, had only a very moderate success. Those, like the oil industry, who favored the Petroleum Coordinator's original draft failed in the attempt to exempt petroleum from the authority exercised over all commodities by agencies set up to deal with production, prices, and other "functions" that cut across all industries and commodities. THus, the basic functional pattern of organization for war production was retained despite the position of PAW outside of WPB4--though the issue was soon to be fought again in connection with coal. Ickes became, in fact, a liaison agent between the oil industry and the WPB.
RubberLike oil, rubber was a commodity for which there were universal demands, many of which could not be filled; but while in petroleum and solid fuels the principal bottlenecks were transportation and labor, in rubber the most critical factor was the raw material. Over ninety percent of our crude rubber imports were cut off when the Japanese attacked Pearl Harbor, and prospects of substitute supplies from South America were uncertain. Facilities to process crap rubber were limited and reclaimed rubber could not be used in all cases as a substitute for crude rubber. The country was "basically dependent upon synthetic rubber," as the following data make amply clear:5 On July 1, 1942, there were on hand 578,000 long tons of crude rubber, with imports of 53,000 tons more expected by January 1, 1944, making a total supply of 631,000 tons. Without allowance for passenger automobile tires, military and other essential demands between July 1942 and January 1944, amounted to 842,000 tons. THus, the deficit to be met by synthetic rubber was 211,000 tons. little of this could be produced during 1942. Under programs already scheduled, however, it was estimated that during 1943 manufacture would amount to about 400,000 tons of buns-S, 30,000 tons of neoprene, 62,000 tons of butyl, and 24,000 tons of thiokol--enough synthetic rubber to offset likely deficits in crude rubber during the critical year 1943. Only neoprene and buns-S were suitable for combat and heavy-duty tires. The schedules for these synthetics would provide a safety margin of 100,000 tons; but, if they lagged as much as 4 months, there would not be enough to meet the requirements of mechanized warfare and the need to keep civilian America on wheels. Concern with the problem found expression both in Congressional and in Executive action.
Late in July 1942 Congress passed S. 2600, a bill to create a new, independent rubber supply agency headed by a director appointed by the President with Senatorial approval. The agency was to provide a supply of rubber, which, added to other sources, would be adequate to meet military and (apparently, all) civilian needs. It was also to provide an adequate supply of alcohol produced from agricultural products. The agency would have been empowered to provide the plants and materials needed for making synthetic rubber; and materials which its director certified he needed would have ha priority over all other deliveries. In vetoing this measure on August 6, 1942, the President set out forcefully to case against diffusion of the priorities and allocations powers which, by delegation, he had
concentrated in the War Production Board "in order to carry on a unified, integrated, and efficient program of war production." He pointed out that plants already were being constructed by the RFC's Rubber Reserve Company and the Defense Plant Corporation under a WPB program to establish capacity to manufacture 800,000 tons of synthetic rubber annually. The President took note of charges that "the manufacture of synthetic rubber from grain has been hamstrung by selfish business interests" and of "many conflicting statements of facts concerning all the elements of the rubber situation." He informed Congress that he had appointed a committee, consisting of Bernard M. Baruch, James B. Conant, and Karl T. Compton, to investigate the whole problem and to make recommendations to him.
In its report to the President on September 10, 1942,6 the Rubber Survey COmmittee reviewed estimates of requirements and supplies, recommended measures for conservation and production of rubber, and proposed administrative reorganization. To conserve the available
Chart 37. New Supplies of Rubber.
supply of rubber, the Committee outlined a rationing program that included gasoline rationing as "the only way of saving rubber." To increase supplies, the Committee recommended that the existing synthetic program should be "bulled through" and that an additional margin of safety should be provided by increasing the program from 800,000 to 1,100,000 tons annual capacity. To insure that the program would be carried through effectively, the Committee advocated an immediate administrative reorganization.
The Committee cited the following examples of poor administration under the existing set-up: Conflict between the Rubber Reserve Company and the Office of Petroleum Coordinator had delayed the bringing in of new facilities for production of butadiene, a component of buns-S. Under an agreement with four large rubber companies, only Ribber Reserve could give out information about synthetic rubber processes to others; but the WPB Rubber Branch had to work 6 weeks to get such data released. In spite of Soviet offers to make it available, information about long-used Russian methods for making synthetic rubber had not been obtained. None of the agencies carrying out the $600,000,000 rubber program had set up a clearly recognized group of experts to make technical decisions in the highly complicated program.
To overcome difficulties such as these, the Committee recommended "complete reorganization and consolidation of the governmental agencies concerned with the rubber program." It was critical of WPB's handling of the rubber problems and, at first, was inclined to propose an independent Rubber Administrator who would report to the President through the Chairman of WPB. After discussion with members of the Bureau of the Budget, however, who pointed out the objections to transferring priority and other powers from the central production agency to one concerned with only a single commodity, the Committee decided to recommend that the Rubber Director should be located within the general framework of WPB and that the Board's Chairman should delegate to him complete authority over manufacture of rubber. These and related recommendations were incorporated in orders issued subsequently by the President and the WPB Chairman.
Executive Order No. 9246, drafted in the Bureau of the Budget and signed by the President on September 17, 1942,7 contained the following provisions: The Chairman of WPB was directed to assume full responsibility for, and control over, all phases of the Nation's rubber program. Within WPB and under its Chairman, there was to be a Rubber DIrector to administer the program. The Director was authorized to direct other Government agencies, including RFC, OPC, BEW, ODT, OPA, and Agriculture, to execute aspects of the
rubber program and these agencies were instructed to give full compliance to his directives. Plant construction was to be supervised by the Rubber Reserve Company. OPC was to do developmental research on butadiene from oil and to supervise operation of butadiene plants. The Price Administrator's powers under the Emergency Price Control Act of 1942, however, were not limited by the Executive order.
On September 15, WPB Chairman Nelson appointed William M. Jeffers, President of the Union Pacific Railroad, to be Rubber Administrator in complete charge of the entire program. Five days later, he delegated to the Rubber Director all the powers conferred on him by Executive Order No. 9246. He abolished the Office of Coordinator for Rubber and the Rubber and Rubber Products Branch in WPB, whose functions, personnel, and records were inherited by the Rubber Director. Later, the rubber functions of the Division of Civilian Supply were transferred to the Office of Rubber Director, which continued to operate until September 1944, when it was replaced by a Rubber Bureau under the WPB Operations Vice Chairman.8
The Rubber Office had been created within WPB, so the functional pattern of the war production organization had been preserved. Structural symmetry, however, did not insure harmony among various parts of the Government's machinery for industrial mobilization. On the contrary, the Director's aggressiveness in "bulling through" the Baruch Committee program brought him into collision with administrators who had responsibility for other phases of the war program and also with members of Congress. Two general problems were involved. First, it was necessary to relate the Office of Rubber Director to the rest of the WPB organization. Second, the program for construction of rubber plants had to be integrated with other programs, such as those for aircraft and escort vessels, which competed for materials and components required for such plants.
Since the Rubber Director was part of the WPB organization, it is not surprising that, in some ways, fuller authority was delegated to him that was vested in the oil and coal"czars" who were outside the Board. In effect, the definition of the Director's authority amounted to slicing rubber out of the general structure of the WPB.9 Though the surgery was less extreme that the Rubber Director sought, from time to time, the position of the Rubber Director's office (ORD) was more favorable than that of WPB industry branches for other
commodities.10 (1) Requirements: ORD was designated as the claimant agency before the WPB Requirements Committee for critical materials and facilities needed for construction and alteration of rubber plants and for raw materials needed in rubber manufacture. Construction requirements were to be presented through the Facilities Bureau, while those for maintenance and operation were to go through regular channels, though the Rubber Director had wanted to bypass them. (2) Allotments and allocations: (a) The Rubber Director was authorized to allot rubber among claimant agencies and for civilian requirements, with the advice of a Rubber Requirements Committee consisting of the principal using agencies and ORD's Domestic Requirements Section. Allotments were to be submitted to the WPB Requirements Committee for determination of their consistency with over-all production programs approved by the Board. After determining allotments, the Rubber Director was authorized to make specific allocations of rubber to manufacturers and for civilian requirements. For this purpose, for issuance of limitation orders, and for control of rubber stock piles, the WPB Chairman delegated priorities powers to him. (b) The Rubber Director's request for authority to allot critical materials for construction, maintenance, and operation of specific rubber plants was not approved by the WPB Chairman, who later specified that the Rubber Director's authority did not extend to distribution of materials other than rubber or its products even when they were for use in rubber production. This reservation meant that the power to allocate the critical component parts required by competing war production programs would remain concentrated within WPB.
Final Status of CzarsThe rise of commodity czars resulted from a very real need of industry for liaison agents with production agencies. At first the czars threatened the existence of a functional stabilization, but in the end they strengthened it. Jeffers' insistence on securing components for his rubber factories emphasized the need for a unified control over all processes of production, rather than control through allocation of materials. Similarly, Secretary Ickes' demands for complete control over petroleum and its pricing and allocation ended by giving him extensive control over petroleum and its production
and distribution, but within the existing framework of production. The WPB controlled materials, and the OPA, prices.
The adjudication of these attempts to establish one-man controls over commodities also illustrates the difficulty in trying to find a definite pattern in the flexible system of our wartime administration. Both Ickes and Jeffers became liaison agents between an industry and the Government, but one reported directly to the President; the other remained subordinate to WPB--the decision reached showed the care with which the President tried to fit th case to the man, to the industry, and the real need.
Thus, in the long run, in spite of the publicity given to the czars, very few were set up, and these few were extensively tied into the general structure of the over-all war production controls. In World War II, there were in the United States no such centers of single commodity authority as were represented by the independent food and fuel administrations of the prior war.
The third answer to the difficulties of production in a tight economy was the effort to develop new integrated controls for the whole war production program. This effort involved new methods of comprehensive programming, cutting programs back to feasible totals, balancing production within these totals, allocating materials on a time schedule, month by month, and quarter by quarter, and clearing production bottlenecks with new scheduling and directive powers.
Comprehensive and Integrated Controls
The steps by which this third method of approach was finally carried through, and the organizational changes which it required in the structure of the WPB, are described in the following pages of this chapter.
The Time ElementWhen the stringency of the economy compelled a decrease in production plans, program planners had to introduce the element of time into their calculations. A stated production requirement might stand still. If the total requirement had to be reduced, however, closer attention had to be given to maintaining a balance within each program and between the various programs. While this was highly desirable from the first, it was imperative as soon as the time element was introduced, so that at given target dates for major military actions there might be available a balanced complement of troops, transports, escort,s landing ships, mechanized equipment, air protection, guns, ammunition, gasoline, quartermaster and medical supplies, and a certain flow of services, munitions, and supplies for the operation from that point on. All of this called for "synchronizing the flow
of material with the time element of the program"--to take a phrase from Donald Nelson. It was the time element which thus made it necessary to interrelate the programs.
Though this synchronization was generally recorded in terms of materials, the top decisions were actually made in airplanes, tanks, ships, high-octane gas, pipe lines, and other end products where were to be finished by a given date.
Program Cut-BacksA major first step in getting war production on a maximum basis, strangely enough, was the reduction of the grand totals sought in a given period. These reductions in major production programs carried the expressive title of "cut-backs."
Our economy is apparently much like the camel and ceases to keep going when the load is increased by "the last straw." The problems arise with the high-pressure demands by individual procurement officers, each of whom "must" get his tanks, or rifles, or shoes, or landing barges, or packing boxes, or beef, by a given date in the near future, and who is convinced that no other demand is half so pressing as his. This is followed by the placing of contracts wherever a producer can be found. The producer then starts to hire workmen, get more machinery to increase his output, and to place orders for steel, wool, lumber, ball bearings, leather, oil, valves, and everything else. As these orders accumulate, they exceed the possible capacity of the suppliers of raw materials, and these start to expand, hiring more men and ordering more machinery. The machine-tool manufacturers and the mines in turn are in the same fix; they cannot fill their orders without expanding. And so it goes, everybody getting in the way of everybody else, until, instead of increased production, there is the threat of industrial self-strangulation in the effort to do more than is possible. In the end, nobody can operate efficiently because everybody is out of something--coal, or steel, or manpower, or machinery, or cotton, or paint, or soda, or any one of the other thousand things which must be available at the right time, the right place, and in the right quantity to keep the wheels turning and the goods flowing.
Some statistics will show that we were heading into just such a situation during the early years of the war. When WPB added up the production programs of the various services in January 1942, incomplete as were these programs, it found they came to about $60 billion for the year 1942, over against a theoretical feasibility estimate of about $40 billion. While American labor and industry fooled the experts and actually produced 10 percent more than the theoretical maximum, that was still far short of the $60 billion sought by the
Chart 38. Production of Selected Basic Commodities.
services in their scramble for equipment. Similarly, the figure for 1943 was even worse, being some $45 billion out of estimated balance. Such discrepancies were not mere "straws"; they were sure to break the camel's back.11
No amount of juggling things around or establishing controls could meet this situation. There is no way of adjusting a load which is simply too heavy to carry. So the answer was cut-backs, without which all the rest of the program of control and Government guidance was futile. The story of the Army supply program which covers well over half of the total war production for 1942 is revealing. On February 1, 1942, it was set at $62 billion for the year 1942. This was cut on April 6 to $45 billion, and on May 29 to $38 billion. On September 1, however, the program was pushed up to $40 billion, only to be cut back to $31 billion on November 12, approximately the actual production achieved for the year.12
Similarly, the aircraft program went through many permutations, measured both in numbers and in weight, as the new models became heavier and faster. On numbers alone, from January 31, 1942, to July 12, 1945, there were 16 "schedules," numbered from 8-I to W-15, four of which had both "initial" and "ultimate" objectives. Production for 1942 was scheduled all the way from 69 thousand planes to 47 thousand planes in four programs; 1943 saw 10 different schedules running from 88 thousand planes up to 109 thousand, and then back again to 86 thousand. The merchant marine program, however, went through the year 1942 at about 8 million tons, substantially as originally planned, though at one stage it was temporarily lifted to 9 million tons.
These and other program reductions, though made by the services under WPB pressure, were not accepted without a most vigorous struggle, a struggle fought in terms of steel, copper, aluminum, tin, and other strategic materials.
Review of ProgramsNext in importance to "cut-backs" was the systematic review of programs by the impartial staffs of the WPB to see if the claimants really needed as much as they asked, and as fast as they asked it. This critical review of material demands, not only brought about important reductions in inflated demands, but also revealed the all-too-human propensity of energetic supply officers, determined not to fail in their assignments, to overlook completely the needs of other services and other needs of the total economy. At the very beginning there were failures to plan for enough, but from February
1942 on, the errors were all the other way, the tendency to overorder, to overcompute in translating from tanks to tons of steel, for example, to overestimate the needs for spares and the use of ammunition, except for the foreign orders, and above all, to set completion dates ahead of real needs based on other complementary parts of the total program was almost universal. Many supply officers were caught trying to complete in 1942 end products which would have been stored for 2 years before they were scheduled for shipment, while the steel, textiles, and valves going into them were holding up articles which turned out to be critically needed in 1943 for the African landings. In certain shipyards, steel was found which could not be put in place for 18 months, at the very time that escort vessels for combating the submarines were in immediate demand. Many contracts for components also were permitted to run after the major end product had been superseded.
It was not unexpected to find that few, if any, supply officers knew about, thought about, or cared about any other part of the program than their own. But it was surprising to discover haw passionate, tricky, and ill-balanced men can become because of short-sighted overloyalty to their own programs. Most of the anguish of war-torn Washington arose not from the inherent difficulties of organizing for war, but from the frictions engendered by energetic men who sought the success of their own programs, had no time or inclination to think about the total effort or its many interrelated parts, and had no ability to discriminate between the exasperating obstacles of inertia and the essential barriers of coordination. IN such situations, the impartial review of programs and schedules by men concerned only with the total success of the whole war production program proved not only essential, but actually more often than not, helpful for the individual programs thus brought into better balance within themselves.
Program BalanceThe effort to introduce balance into the conflicting production programs thus became a major necessity in the fall of 1942. While various glaring inconsistencies had been pointed out before by the WPB Planning Committee and others, the first full-scale attack on the problem came through the reports of the BUreau of Statistics at the meetings of the War Production Board on August 18, September 22, and November 2,4 1942. At the last meeting, Stacy May, Chief of the Statistics Bureau, not only exposed the wide gap between first-of-month schedules and actual deliveries under the unbalanced and unrealistic programming, but demonstrated that the situation was getting steadily worse, and pinned the blame directly on the procurement
officers of the Army, Navy, and Air Forces, In the meantime, at the Board meeting of October 6, Robert Nathan presented the feasibility report of the Planning Committee, showing that the sum total of unbalanced programs, which stood at $115 billion for 1943, was beyond the realm of possibility.
The following further conclusions from this report of the Planning Committee deserve repetition:
The analysis reveals imbalance in the sense that production is well above schedules for some easy items; and significantly below for the harder items with which the easy items are to be combined to yield a usable end-product. The is an inevitable consequence of a huge program flooding the channels of production without a careful, unified control . . .
While the pressing problem for the immediate future is to correct this imbalance by curbing the items that are ahead of schedules and concentrating effort on the items that are behind, we must not overlook the fundamental basic source of the trouble. There can be no efficient production control without production schedules; there can be no meaningful production schedule without a set of well-formulated and properly screened and tested objectives, spelled out over time and in respect of the relative importance of the various categories and end products; and there can be no such set of objectives unless there is a competent body, taking responsibility for formulating them in broad terms, and seeing to it that the spelling out in detail does not contravene the fundamental considerations that determined the program in its broad outlines . . .
What we urgently need is an authoritative body that would represent fully and competently the strategic, economic, and political (in the sense of broadly social) factors that must jointly determine a well-formulated production program . . .
While high goals were recognized as an incentive for all-out production, WPB took the position that impossible goals had become dangerous because they (1) throw production out of balance, (2) justify excess production capacity, (3) result in failure to meet targets for other and often more important parts of the program, (4) produce inflexibility, (5) increase difficulty of effectively controlling flow and distribution, and (6) prevent coordination of production program with those of other nations.13
While various general,s admirals, and under secretaries rose at subsequent meetings of the Board to defend their own programs and to demand the elimination of various civilian products, they did go back to their offices and begin to introduce some balance and some recognition of feasible time limits into their own production programs, and the Chairman of WPB, with the backing of the President, asked the joint Chiefs of Staff to revise their total program. Mr. Nelson also concluded that WPB would have to take over and exercise a greater degree of control over the balancing and timing of programs one against the other.
This balancing, and the elimination of production bottlenecks arising from lack of balance and timing were sought through two important innovations, the introduction of the Controlled Materials Plan under Mr. Ferdinand Eberstadt, and the introduction of controlled scheduling under Mr. Charles Wilson, both of whom were appointed Vice Chairmen of WPB during the third week in September, 1942.
The appointment of Mr. Eberstadt and Mr. Wilson, with the duties assigned them, constituted a major reorganization of WPB, a reorganization which called for from Mr. Bernard Baruch in a telegram of October 1 to the President these glowing words:
Reorganization of WPB
I feel that the WPB is not at last reorganized on the proper lines and headed in the right direction, and that in the next 60 days we will see the commencement of a large increase in production in every line that we wanted. I feel much encouraged on the production outlook.
The new organization was, however, not put into administrative orders immediately because of the difficulty of drawing a sharp dividing line between the functions assigned to the vice chairman in charge of program and the flow of materials, Mr. Eberstadt; and the vice chairman in charge of production and scheduling, Mr. Wilson.
November 11 Reorganization OrderMr. Eberstadt proceeded immediately to standardize, clarify, and integrate the industry and material divisions and the programming activities, put under his direction. This was accomplished in part through the issuance on November 11, 1942, of a WPB administrative order drawn by Mr. Eberstadt with the staff aid of Maj. Gen. C.F. Robinson from the Army Service Forces Control Division, the WPB Office of Organization Planning and representatives of the Bureau of the Budget.14
There were several important elements in this new organizational set-up. First of all programming and operations, which had existed independently and on the same plane of authority under the prior organization, were now brought together under a single authority, that of the program vice chairman. This meant that Mr. Eberstadt would sit as the presiding officer of the Requirements Committee, listen to the claims advanced by the Army, the Navy, the Air Forces, the Maritime Commission, the Lend-lease Administration, and the Office of Civilian Supply, consult with his own program experts, make a tentative decision, clear it with Mr. Nelson if sufficiently important,
and then issue orders to the materials divisions and to the industry divisions, all of which were under his immediate direction, to operate the industrial economy accordingly. Making the decision and carrying it out were tied up in the same bundle, under one man.
The second important step in the new organization was the establishment of the sovereignty of the materials and industrial divisions. This was done through five administrative devices. First, the titles were changed from "branch" to "division," an important step upward in the semantics of Washington bureaucracy; second, each division was given primary responsibility for maximizing the production in its area, and for handling virtually all relations of the industry as such with WPB; third, the division directed the flow of allocated materials in its area, making specific allotments under the broad determinations of the Requirements Committee and the program chairman, except as these were covered by the claimant agencies; fourth, if the WPB maintained order-board or scheduling control over the products of any industry, the management of these were assigned to the appropriate producing division; and finally, the division was made the point of focus for reconciling competing demands, and for this purpose had its own subrequirements committee, patterned after the parent committee of claimants and was responsible for working out the total program of requirements, production, allocation, and distribution. The major divisions were also equipped with their own lawyers, labor advisors, civilian requirements experts, and statisticians, all of whom were assigned by the staff bureaus and offices under which they served.
The third important step in strengthening the operating divisions was the curtailment of the defined responsibilities of the special program units, such as those dealing with scrap and salvage, simplification and substitution, redistribution and inventories, stockpiling and shipping, resources protection, facilities and construction, concentration of industry and civilian supply. These units were bluntly told that they were from that time on "staff divisions," and that it was their function to:
- Advise the vice chairman, the director general for operations, and their immediate subordinates.
- Formulate policies, programs, plans, and procedures.
- Advise and service the industry divisions and the regional offices.
- Follow up the execution of functions in the industry divisions and the regional offices.
- Perform those phases of the functions where centralization of performance in unavoidable.
Furthermore, it was specifically stated that "all performance phases of the functions assigned to the vice chairman are carried out by the
industry divisions and the regional offices, with minor unavoidable exceptions."
The fourth important step in building up the status of the operating divisions, and perhaps the most important, was, however, Mr. Eberstadt's methods of management. He meant what he said in the new organizational order, and in his daily operations leaned heavily on the materials and industrial divisional chiefs and their divisional requirements committees to carry on the major operating functions of WPB in Washington. Thus, under the November 11, plan, each industry division became a small WPB in its own area, with its own small requirements committee representing the chief claimants and endeavoring to work out a balanced program within the overriding decisions of the top requirements committee.
The Controlled Materials PlanWhen Mr. Eberstadt originally took hold, the WPB system of control over the flow of materials was undergoing transition from the priorities system to the production requirements plan, described in chapter 5. The essential element of PRP, as is shown below, was the monthly allotment to each plant by WPB of the amounts of materials required to meet its approved production schedules in view of its past experience and its inventories. Beautiful as was this plan on paper, it was under vigorous attack as administratively unworkable by some large industrialists and by the chief claimants, particularly the Army Service Forces. The PRP reports did disclose, however, large excess inventories and had a beneficial effect on production in many quarters.
Nonetheless, the new vice chairman went immediately to work to develop and enforce a new system of material control. In this he had aid from several sources. The WPB Steel Committee returned from England and reported on September 22, urging, among other things, the adoption of the British system of steel allocations. At the same time, a group of automotive engineers worked out and presented a "warrant plan" under which each prime contractor would be given warrants for the critical materials and components called for under his war contracts. The services, in contrast, thought that the only solution was to be found in giving each major claimant a fixed percentage allocation of each critical material, and then leaving it to that claimant to flow "his" material to the contractors working for him.
Mr. Eberstadt brought these various groups together behind locked doors, including some British advisors who were flown over for the purpose, and came out with a compromise and composite system which was approved by Mr. Nelson and presented as the Controlled Materials Plan on November 2, 1942, to become partially effective
April 1, 1943, and fully effective July 1, 1943. Extensive CMP schools were immediately organized both in Washington and in the field to train WPB, Army and Navy representatives, and businessmen in their new duties and the procedures under the Controlled Materials Plan.
Fundamental Principles of Production ControlIn order to appreciate fully the significance of Mr. Eberstadt's epochal reforms, it is necessary to view this last change against the prior history of war-production controls, even at the risk of repeating what has been chronicled earlier. Two elements are involved: first, the strategy of control; i.e., where do you take hold of the economy? And, second, the tactics of operation; i.e., how shall you mange your controls?
The Strategy of Control.--The WPB program of November 1942, like its predecessors, was based almost exclusively upon materials. The new plan for managing the industrial economy, designed to get out the maximum war production, was entitled the "Controlled Materials Plan," the clearest possible recognition of its central purpose.15
There are many other possible points of control in an economy, such as contracts, appropriations, financing, production schedules and utilization of power, transportation, plant and manpower. Of all these, Mr. Eberstadt seized but one: materials and components, and these he dominated by completely controlling steel, aluminum, and copper, with other commodities added later. Under the CMP, the whole industrial economy of America was steered by taking control of these few key materials as a rudder. Virtually everything else was expected to fall in place naturally and inevitably.
The tactics of operation.--There was an equally clear philosophy back of the new technique of production control. This can best be seen by examining the changing principles underlying American production controls from 1940 to the Controlled Materials Plan of November 1942.
In spite of the tremendous complexity of the American economy and the involved nature of the war production controls which gradually
came into being, the essential of the four kinds of control which were established through the OPM and WPB are not difficult to understand when stated in their simplest terms.
These four systems were:
- Control by Priorities.
- Control by Unrelated Allocation of short items by independent materials and commodity divisions of WPB.
- Control by Integrated Allocation under PRP by the Requirements Committee and the WPB materials and commodity divisions.
- Control by Integrated Allocation under CMP by the Requirements Committee, working primarily through the Procurement Agencies, namely, the Army, Navy, Air Forces, Maritime Commission, etc.
The accompanying diagrams (charts 39 and 40) bring out the points of contrast between the two latter systems. In both diagrams the WPB organization is shown in skeletal form on the left. The key function of the Requirements Committee is illustrated with the responsibility for "cutting the material pie" among the various claimants, and as the advisor of the program vice chairman and the Chairman of WPB who had the final say.
The twelve "claimants," each with their own war or essential civilian production programs, are represented by the four boxes to the right.
The circles which fill the bottom of the diagram represent in very simplified form the tens of thousands of independent contractors, large and small, who go to make up the American economy, most of whom in one way or another did some direct or indirect war work.
The dotted black lines form the claimants to the circles, and between the circles represent the prime contracts and their subcontracts for war production.
Chart 39 shows the skeleton of the first effort that was made to eliminate the confusion and inefficiency of unrelated priorities and allocations by substituting a comprehensive and integrated system of allocation. The system was known as the Production Requirements Plan, because under it each producer was required to make a single comprehensive statement to WPB of all his requirements on a monthly and quarterly basis, as is explained in chapter 5. This flow of incoming information on requirements is shown by the alternate dash lines. After the total requirements as shown by these PRP statements had been added up, the material pie was cut, and apportioned, plant by plant, in the light of the total war production program, by the Requirements Committee and the program vice chairman. Authorizations to
Chart 39. General Scheme of Production Control Under Production Priorities Plan.
buy and use critical materials were thus granted to every producer direct from WPB.
These allocations, which went out chiefly through the WPB industry divisions, were designed to take the place ultimately of both the specific allocations and the flood of priorities.
This system was tried experimentally beginning in December 1941 and was made mandatory for some 10,000 larger war contractors beginning with October 1942.
Chart 40 present graphically the CMP system which Mr. Eberstadt installed, and which became effective in place of the PRP with the first quarter of 1943, and was continued for 10 quarter years to the end of the war.
Under this last development, requirements were gathered and stated by the "claimants," the material pie was cut by the Requirements Committee and the program vice chairman, and the stream of allocations flowed down to the 12 major claimants as lump-sum allotments under each of the controlled materials. Each claimant then made a suballocation to this prime contractor; each prime contractor made a further allocation to his subcontractors; and each subcontractor allotted to his sub-contractor, to the final link of the chain. Thus, the allocations followed the same lines as the contracts, and were managed, within the broad totals set by the WPB, by each of the major procurement agencies, the Army, the Navy, and Air Resources Control Office, the Maritime Commission, and the Foreign Economic Administration, etc.
There were, however, certain types of production which could not well be handled through this distribution of allocations--the chain was too long. Therefore, requirements for maintenance, repairs, and operations of industries, including the mines and mills, and for the civilian economy generally, were computed chiefly by the operations vice chairman, and the allocations were enforced through this office and through other divisions of WPB. In chart 40, the flow of incoming information on requirements is shown in alternate dash lines, reaching the Requirements Committee chiefly from the claimants; i.e., the procurement services. The allocations are shown in lines marked "A," though only one set has been filled in to avoid pictorial confusion.
Perhaps these diagrams will aid in making clearer the underlying significance of the final evolution of the WPB material control techniques.
In passing from priorities to allocation, we passed from a queue system, with the military program entitled to go to the head of the line, to a rationing system, under which selected commodities were separately rationed. In passing from these multiple allocations to
Chart 40. General Scheme of Production Control Under Controlled Materials Plan.
PRP, we passed from the unrelated rationing systems to a comprehensive and integrated rationing system, under which allocations of one commodity were related to allocations of another commodity, plant by plant and program by program, under the complete administration of the WPB itself. The final change was to shift the detailed administration of allocations from the WPB to the claimant agencies, chiefly the Army, Navy, Air Forces, and Maritime Commission, and to delegate the secondary power of allocation to the prime contractors, who passed the allocations on down through the industrial system.
The power which this transferred to the military services and to the prime contractors, was, however, not quite as sweeping as these diagrams indicate, because two other types of control not shown on these charts were developing just as the final shift was being made in the controlled-materials system. These two new areas of control were scheduling and manpower allocation. The nature of these controls is described below and in chapter 14.
Under the Controlled Materials Plan as thus worked out, the WPB announced that it would "bring about the adjustment of production programs to conform to materials supply" and that "each manufacturer receiving an authorized order or authorized delivery schedule for his product will receive an allotment of the materials which he and his subcontractors must buy in order to fill the order."
Scheduling production.--The fourth answer for the problem of maximum war production in a tight economy was the direct control by WPB of the main military production programs. Direct control involved three important activities: (1) sitting down with the military chiefs, reviewing their programs, contracts, and production schedules, and requiring them to make adjustments designed to get a better over-all result; (2) sitting down with the managers of plants which were producing the important military products, and authorizing or directing them to take the necessary action in their own plants to get out maximum production regardless of contracts, or the demands of individual procurement officers and their expediters; and (3) taking more or less complete control of the production schedules and deliveries of the manufacturers of intermediate products like valves, ball bearings, motors, crankshafts, and steel and aluminum alloys and shapes; i.e., components.
The man selected by the President and Mr. Nelson to develop and manage these production controls was Charles W. Wilson, president of the General Electric Co.
Jurisdictional controversy.--When Mr. Wilson went ot work toward the end of September 1942 on this important and difficult assignment, he found it extremely difficult to get under way. The whole Washington situation and the complicated division of work between the
WPB and the services, and within WPB, were not only baffling, but exasperating to a man fresh from the outside. The basic reason for delay was, however, the loss by WPB of its powers over production both through inaction and by the delegation of the contracting power to the procurement services early in 1942. Thus, Mr. Wilson as production vice chairman had to reassert and recapture the primary authority of WPB over all production, a move the military authorities resisted openly as well as covertly. Thus, while Mr. Eberstadt was moving ahead rapidly with the backing of the Army, Mr. Wilson was fighting a jurisdictional conflict over the basic powers of the WPB. The ensuing interagency struggle between "coordinators" and "operators" was labeled widely as another show-down fight between the civilians and the military. The controversy ended in a compromise under terms of which the WPB production vice chairman, Mr. Wilson, was to be--
responsible for and . . . direct the scheduling of the various production programs of the Army, Navy, Maritime Commission, and other agencies participating in the national war production program, in order to ensure that program schedules do not conflict, are in balance, are consistent with the maximum productive possibilities of the national economy, and are in accord with the strategic requirements of the Chiefs of Staff.
In discharging these functions with respect to end products and their components, he was to have the advice and assistance of a Production Executive Committee consisting of himself, as chairman, the WPB program vice chairman (in charge of materials), the vice chairman of the Maritime Commission, and two representatives each of the War and Navy departments. His directives were to be issued through the military supply services. In addition to these duties of general supervision, the production vice chairman was charged with central supervision and direction of the production programs for aircraft, escort vessels, and radio and detection equipment. In dealing with aircraft, he was to be advised and assisted by a board comprising himself, as chairman, two representatives of the War Department, and on eof the Navy Department. Again, he was to issue directives through the supply branches of the Armed Forces.16
With the Production Executive Committee, Mr. Wilson had an organization through which he could coordinate all production. But the most immediate problem facing him involved only one small but extremely important part of production, that of component parts, such as valves or motors. For many vital programs, components were relatively more scarce than materials. Thus, for example, there might be ample supplies of steel for all the ships to be built for a particular quarter, but insufficient valves or motors. Forgings, boilers,
gages, heat exchangers, turbines, blowers, pumps, and bearings were equally necessary for ships and the manufacture of airplanes, for rubber factories, and the production of farm machinery. Unless the production of components was carefully scheduled, and unless the components themselves were distributed against immediate need, proper allocation of raw materials did not prevent bottlenecks in production.
How difficult it was to schedule the production and delivery of critical common components will be suggested by recalling the range of these "middlemen of manufacture."
The components going into the finished products necessary for modern war range all the way from minute jewel bearings for delicate instruments to huge steel castings and forgings, from tiny fractional horsepower electric motors to mammoth marine turbines, and many of these components, such as engines and pumps, winches, motor controls, and axles, have subcomponents of their own, each of which must be produced and delivered in proper quantity and on schedule or some vital end product will be delayed.17
For this purpose, neither the Production Requirements Plan nor the Controlled Materials Plan was adequate. These systems had been installed to distribute materials among competing end-product programs. They were not designed to assure the best detailed use of components which continued to flow under the priority contracts. Thus the new systems could not insure that orders for parts would be filled in accordance with the relative urgency of various end-product programs. A manufacturer with AA-1 ratings for more components than he could supply at once was compelled to fill orders according to the date he received them. As a result, the Navy, for example, might get electrical equipment for ships which would not be launched for another year while the Army waited its turn to have an order for an urgent program filled. These problems were aggravated by the armed services' underestimation of their requirements for components, so that production was not increased soon enough to meet needs. in addition, there was a tendency among claimant agencies to inflate the amounts, and to advance the dates for delivery, of their end-product and component needs, partly as a means to stimulate production. In other cases, claimants and contractors failed to place orders early enough to permit their production to be increased sufficiently and their distribution to be scheduled properly.
To meet these difficulties, the War Production Board undertook to obtain more timely determination of requirements and to scale them down to actual needs to secure prompter placement of orders, to increase capacity to produce components, and to effect better distribution of available components. Even before the winter of 1942-43,
the Board had been obliged to schedule production and distribution of certain components in short supply, such as machine tools, compressors, turbo-blowers, and jewel bearings. now it proceeded to "codify" the process and to extend its coverage. This was done under WPB General Scheduling order M-293 of February 26, 1943,18 and the Component Scheduling Plan of June 1, 1943, both of which later underwent considerable revision, though their basic features remained. Under these arrangements, WPB sought to determine more precisely the actual requirements of claimants for components and to establish and freeze firmly schedules for their production and delivery.
General Scheduling Order M-293 listed the critical components to which delays in fulfilling end-product programs approved by WPB had been attributed. On the basis of scarcity and need, these components were grouped into three categories: undesignated, "X" and "Y." Manufacturers of the first, and least critical, group were to make regular operation reports to WPB, showing productive capacity, and orders filled, received, shipped, canceled, and scheduled for the specific period designated. Manufacturers of "X" items were required to submit not only these operational reports but also delivery schedules, and they were allowed to deliver components only under schedules approved by WPB. Most items in the "Y" group, which was the most critical, already were under WPB scheduling orders. Anyone who wanted to place an order for one of these components first had to obtain approval of WPB, which might specify the plant in which it was to be placed. Orders so authorized had to be accepted by the manufacturer if regular price and terms were met. Schedules approved by the Board under Order M-293 could be "frozen"--I.e., protected from interference by rerating and expediting--through they were subject to change by further WPB directives.
On the basis of information submitted on forms required for operation of its Order M-293, WPB, through its industry divisions and Production Scheduling Division, was able to determine expected production and requested deliveries over a future period for a group of manufacturers. It could transfer orders among plants making a component if some were overloaded and others were operating below full capacity. When total supply was not enough to meet total demand, the Board tried to increase manufacture by eliminating labor and material bottlenecks; and it undertook to correlate production and distribution of components more closely with actual relative urgencies of need.
To effect such correlation, it was necessary to determine the particular end products into which the components were going and the "lead time" required for each component of the products. For this
purpose, the WPB industry divisions brought in representatives of claimant agencies to go over the orders of component manufacturers and to justify their orders on the basis of concrete end-product programs and realistic time schedules. Results of this procedure, however, were not enough ot meet the problem. The information needed for adjusting schedules was not always available; and there was no formal procedure to facilitate interchange of vital data about components among contractors, claimant agencies, and WPB. To deal with some of these deficiencies, the Board, on June 1, 1943, put into effect its Component Scheduling Plan.
The Component Scheduling Plan (CSP) was a voluntary cooperative scheme focused on critical components and subcomponents for a limited number of military programs including ships, tanks, and rubber plants. It introduced "vertical," as distinguished from the prevailing "horizontal" or interplant, scheduling, a shift in some ways analogous to that from PRP to COMP for control of materials. The purposes of CSP were to develop realistic unit requirements for each product and to identify the programmed items or projects for which components on order were intended. Information on requirements, contract numbers, and end products was transmitted by the prime contractor to his subcontractors, by them to their subcontractors, and so on.19 Each manufacturer in the contracting chain thus was given the relation in time and quantity between the components he was to supply and the end products into which they would go. These arrangements facilitated verification of requirements and adjustment of delivery schedules by WPB. Orders approved by the Board under the CSP procedure could be frozen into schedules established under WPB Order M-293.
General Scheduling Order M-293 was revised on September 17, 1943. To the three categories of components mentioned already, there was added a "Z" classification consisting of items which had been handled under the Component Scheduling Plan. The CSP procedure was made mandatory by requiring contractors and subcontractors to fill out CSP forms on instructions from claimant agencies. in addition, certain "X" and "Y" components were moved into the undesignated category in order to simplify reporting by manufacturers. Detailed data were required only from producers in greatest difficulty and on types and sizes of components which were most critical. In February 1944, the "Z" classification was dropped and the vertical scheduling procedure for special programs was simplified because the paper burden and time involved were found to make this system unworkable. At the same time, procedures for reporting requirements for "X" components
were simplified further. Those for "Y" items continued as they were, but the number of components affected declined.20
Collision Between Production and Materials ControlsThese developments in the scheduling of production and delivery of components required adjustments in organization of the War Production Board. The basic problem was to relate effectively the controls exercised over manufacture of end products through distribution of component parts with controls employed to allocate materials for these products since, in many cases, both these elements of production were critically short. It was desirable, for example, that production schedules obtained by WPB should be in a form that would serve both systems of control. It was important, also, that critical materials and components both should be directed to the specific manufacturing plants which would use them most promptly and effectively. Within WPB, however, the two types of control were in separate hands. The program vice chairman, Mr. Eberstadt, exercised authority over allocation of materials, while the production vice chairman, Mr. Wilson, had responsibility for production of end products and components.21 The WPB Chairman recognized that these responsibilities were "closely interwoven" and that "each official must consult the other in many cases."22 He sought, therefore, to define relations between them so that allotment of materials and scheduling of production would be integrated properly; but circumstances were such that this effort was not successful. WPB Chairman Nelson had declared that the relation between the program and production vice chairmen "has not and does not promote conflict."23 Neither such reassuring statements nor his instructions for consultation and cooperation between the two officials, however, were enough to insure the coordination that was needed in the war production program. Apart from difficulties inherent in division of authority and provisions for its coordination,24 there were other factors which interfered with
integration of the two systems required for control of production of end products. Among them were the presence in WPB of two "strong men" in coordinate positions with closely related functions, the playing of "palace politics" in the organization, and repercussions of controversies between WPB and the military procurement agencies.
The potential frictions inherent in this situation came to a head in a struggle for jurisdiction over WPB industry divisions. These units were used for scheduling production as well as for allocating materials (especially for CMP "B" products, which were common to many end products)l Difficulties were almost inevitable in attempts by the divisions to serve satisfactorily two masters who did not see eye to eye: The program vice chairman, Mr. Eberstadt, had jurisdiction over most of the divisions and was responsible for allocating resources to end product programs. The production vice chairman, Mr. Wilson, had responsibilities for production of these end products and their components. The WPB Aircraft and Radio Industry Divisions and the Office of Progress Reports had been placed under his direction when WPB extended its control over production of these military products early in December 1942.25 Not long after, Mr. Wilson sought to have other WPB divisions put under his jurisdiction in order to assist him more effectively in meeting his general responsibilities for the war production program. He was reported to have complained, for example, that the sizes and shapes of the raw aluminum supplied under Mr. Eberstadt's direction were such that they could not be turned in to the extrusions needed for production of airplanes under his supervision.26 On February 4, 1943, WPB Chairman Nelson transferred to the production vice chairman the Shipbuilding, General Industrial equipment, Tools, Automotive, Safety, and Technical Supplies, Aluminum and Magnesium, and Facilities Divisions and the Facilities Bureau, all of which previously had been under the program vice chairman.27 These shifts were a result of Mr. Wilson's insistence and a recognition of the increasing importance of production scheduling and the declining relative urgency of materials control in the war supply program. The process was completed less than 2 weeks later when the WPB Chairman asked the program vice chairman for his resignation and designated Mr. Wilson Executive Vice Chairman in charge of functions formerly performed by himself over production and by Mr. Eberstadt over materials.28 Chairman Nelson justified the reorganization with the argument that--
Chart 41. United States Munitions Production.
Because our entire effort must now center about the production lines, and because this involves the closest control over scheduling, it is essential that two things be true--first, that a production man be in full charge; second, that all related problems be within the jurisdiction of that production man.
. . . The man in charge of production cannot discharge his duties adequately unless he also controls the flow of materials into production channels.
In other words, materials control and production control today are all one integrated job. They cannot be considered separately. They must be directed as one job, not two.29
Another element in the reorganization, however, was the relationship between the WPB and the military. The latter were reported to be seeking Mr. Nelson's ouster from the WPB chairmanship, and Mr. Eberstadt, a former official of the Army and Navy Munitions Board, was believed to be in sympathy with them.
With this final evolution, the WPB reached its ultimate wartime
development and proceeded with new vigor and unity of direction to drive production upward from month to month, until direct military production reached toward the close of the year an annual rate of over $62 billion, a figure previously considered impossible by many experts and higher than the combined efforts of the other Allies.
Table of Contents ** Previous Chapter (9) * Next Chapter (11)
1. 6 Federal Register 2760. On Apr. 18, 1942, the President changed Mr. Ickes' oil title to Petroleum Coordinator for War.
2. Executive Order No. 9276, Dec. 2, 1942, 7 Federal Register 10091.
3. WPB Directive No. 30, Aug. 18, 1943.
4. The Rubber Director reported directly to the PB Chairman even after the latter appointed an Executive Vice Chairman. WPB General Administrative Order No. 2-80, Feb. 26, 1943. The Senate Special Committee Investigating the National Defense Program declared that, as a result of the Petroleum Administrator's direct responsibility to the President and of his complicated relations with the WPB Chairman, "The lines of authority are confusing even on paper. As a practical matter they breed disputes . . ." Senate Report No. 10, 78th Cong., 1st sess., pt. 9, pp. 4-5.
5. House Document No. 836 77th Cong., 2d sess., Sept. 10, 1942, The Rubber Situation, containing the Report of the Rubber Survey Committee.
7. 7 Federal Register 7379.
8. The production of synthetic rubber amount to 8,383 long tons in 1941, 22,434 in 1942, 231,722 tons in 1943, and 753,111 in 1944. War Production in 1944, Report of the Chairman of the WPB, June, 1945, p. 138.
9. General Administrative Orders Nos. 2-62, Oct. 20, 1942, and 2-70, Dec. 8, 1942.
10. The Senate Special Committee Investigating the National Defense Program remarked that "a rubber czar was set up, within the War Production Board, to be sure, but still more or less autonomous" since, in spite of his responsibility to the WPB Chairman, he "was given power himself to issue directives to the various agencies. The Chairman of the War Production Board was requested by the Commander in Chief to divest himself of concern with the rubber program. Therefore, practically speaking, the Chairman of the War Production Board has had only tenuous authority over the Rubber Director although technically he is the boss." Senate Report No. 10, 78th Cong., 1st sess., pt. 9, pp. 2-4.
11. War Production Board. Wartime Production Achievements, and the Reconversion Outlook. Report of the Chairman of WPB, Oct. 9, 1945, p. 11.
12. War Production Board, Minutes, Dec. 1, 1942.
13. War Production Board, Minutes, Oct. 6, 1942.
14. General Administrative Order 2-65.
15. The concentration of WPB controls in one area, namely materials, was accentuated by two other decisions of Mr. Nelson during the latter part of 1942. These were the decisions: (a) to transfer out of WPB such power as it might theoretically have exercised over the allocation of manpower, and (b) to relinquish as far as possible power over food and agriculture. Closely as these problems were related to war production, it was apparently Mr. Nelson's feeling that WPB should be kept as simple as possible, that it was already "too big," and that his interests could be adequately protected by continuing to control materials and by being represented on the advisory boards which dealt with manpower and with food and agriculture. The transfer of these functions was effectuated in the fall and winter of 1942-43; Manpower by Executive Order No. 9247., Sept. 17, 1942, 7 Federal Register 7379, and Executive Order No. 9279, Dec. 5, 1942, 7 Federal Register 10177; Food and Agriculture by Executive Order No. 9280, Dec. 5, 1942, 7 Federal Register 10179.
16. OWI-WD-ND-WPB Press Release WPB-2207, Dec. 4, 1942; WPB General Administrative Orders Nos. 2-71, 2-72, 2-73, Dec. 9, 1942.
17. War Production Board. War Production in 1944, June 1945, p. 53.
18. OWI-WPB Press Release WPB-2690, Feb. 27, 1943.
19. WPB Operating Procedures 71-11, June 1, 1943; OWI-WPB Press Release 3568, May 17, 1943.
20. WPB Press Release WPB-4952, Feb. 10, 1944 (OWI).
21. Duties of the program vice chairman are stated in WPB General Administrative Order No. 265, Nov. 11, 1942. those of the production vice chairman are include in WPB General Administrative Orders Nos. 2-71, 2-72, 2-73, and 2-74, Dec. 9, 1942.
22. OWI-WPB Press Release WPB-2065, Oct. 26, 1942.
24. The production vice chairman was to obtain the advice of the program vice chairman with respect to (1) points at which proposed war production plans, programs, and schedules seemed likely to exceed production possibilities because of material shortages, and 92) readjustments that might meet material limitations effectively. He was to arrange with Army, Navy, and Maritime Commission that their schedules and claims for materials should be in harmony with production plans, programs, and schedules he had approved or released. Allotment requests submitted by these claimant agencies were to be reviewed by the WPB Requirements Committee, Program Bureau, and Controlled Materials Division to determine their consistency with production schedules approved by the production vice chairman and their relation to total supplies of materials. When the program vice chairman made determinations for distrubtion of materials that required reduction in approved production schedules, the production vice chairman was to ensure that such schedules were adjusted appropriately. (WPB General Administrative Order No. 2-73, Dec. 9. 1942.)
25. WPB General Administrative Orders Nos. 2-71, 2-72, 2-73, 2-74, Dec. 9, 1942.
26. New York Times, February 17, 1943, p. 11, column 4.
27. WPB General Administrative Orders Nos. 2-76, 2-77.
28. WPB General Administrative Orders Nos. 2-71, 2-72, 2-73, and OPVC Administrative Order No. 2. But see also Nelson, Donald M., Arsenal of Democracy, N.Y. 1946, p. 388 ff.
29. OWI-WPB Press Release WPB-2568, Feb. 16, 1943.