Part Four
Postlude to War

The preceding pages have surveyed, in necessarily broad terms, the reorganization of the Nation's economy and government for the tasks imposed by war. The major changes necessary in government and in the economy to effectuate this purpose had largely been made by the end of 1943 or early in 1944. From the point of view of the prosecution of the war, the period from the spring of 1944 until the end of German and Japanese resistance was largely one of successful operation of the machinery previously erected for the task.

Were we to adopt a narrow definition of our subject matter this volume might end here. But the task of winning the war was not limited to a mobilization adequate to the military defeat of our enemies nor is the significance of the war experience to be summed up in the word "victory."

Our policies on postwar international relationships, our peace terms to our enemies and our plans for assuring the perpetuation of peace were developing significantly long before VE- and VJ-days. Almost at the same time that our production of munitions was reaching its peak late in 1943, and as victory seemed near, administrative preparations had to be undertaken to deal with such domestic matters as the settlement of war contract claims, the reconversion of industry, the reemployment of demobilized military personnel and war-industry workers, and the disposition of surplus war property. The nature of these problems, the goals to be achieved, and the methods by which they might be best attained were the subjects of that same process of free and thorough discussion by which the problems of defense and war had been thrashed out. From such public examination of problems and alternative courses of action came that reconciliation of divergent points of view which permitted the establishment of policies and administrative machinery which were to guide the Nation through the difficult days of postwar readjustment. The following chapter treats of these developments.

The events described in the first fifteen chapters of this volume culminated in victory and therein had their justification. A principal objective of this analysis, however, has been to ascertain what might be learned about our system of government from the process by which we went about securing victory. A volume such as this should properly


end with a careful and considered appraisal of the significance of the events discussed.

The war years represent too profound an experience in the history of American democracy to permit an evaluation by any single group of observers which will supply an adequate appreciation of its full meaning. Some appraisal of our war experience is possible, however, if we seek perspective by contrasting our methods with those of our major enemies, Germany and Japan. Such comparison, undertaken briefly in chapter 16, reveals a vigor in American democracy which its citizens, who participate in its day-to-day operations, may not always appreciate and which neither the Germans nor the Japanese understood. War is a cruel test of the soundness of a nation's political and economic structure. our political system, while retaining the important elements of individual freedom, succeeded in applying the Nation's resources to a national task in a manner which by comparison with that of Japan and Germany was highly efficient.


Chapter XV
Preparing for Peace

Victory over Germany came in May 1945 and was received with quiet elation. The death of Franklin Delano Roosevelt a few weeks earlier, and the realization of the magnitude of the task that lay ahead dampened public jubilation. But the opportunity for vociferous celebration was not to be long delayed. Less than 4 months after the remnants of the Nazi armies had signed terms of unconditional surrender, the Emperor of Japan requested an armistice. The formal surrender on September 1 on the battleship Missouri in Tokyo harbor was almost an anticlimax.

The task of organizing the Nation's energies and resources so as to focus upon the enemy all possible pressure had not been completed. Victory had been earned at an incalculable cost. Two hundred and ninety-six thousand American lives had been lost; many of the 680,000 wounded suffered permanent physical handicaps. The Nation had supplied its armies and those of her Allies with vast amounts of supplies and equipment; its natural resources had been heavily drawn upon in their production. The Nation would not soon be able to forget the national debt of $278 billion accumulated during these years.

The United States now turned from the bloody and destructive business of war to the task of rebuilding the lives of peoples and nations. The scars of war were deep and many unhealed wounds remained, not only in the bombed cities and villages of Europe and Asia and in the wrecked lives of those who had lived in them, but also in the economic, the political, and the social fabric of this unbombed Nation. For the United States had not been able to avoid some curtailment of cherished rights and privileges in the task of proving itself truly the arsenal of democracy. Victory held for us the hope


that it might be possible to return to the peacetime ways of life with the added knowledge gained during the war. Such desirable objectives were not to be taken for granted. The obstacles were many, bearing such names as demobilization, reconversion, decontrol, rehabilitation, inflation, surpluses, and shortages. There were few who looked upon the period in which such problems had to be solved as an easy one.

The measure of the task might be read in the magnitude of the mobilization which had been accomplished. At its peak, the armed forces totaled 12.3 million men and women who had been taken from their normal occupations and trained to military duties. From the beginning of Selective Service to VJ-day, more than 15,000,000 individuals had experienced military service. Industry and agriculture had applied themselves to satisfying an insatiable demand by turning out an unparalleled volume of products. The quarterly rate of the Nation's output of goods and services had risen from $34 billion in the last quarter of 1941 to a peak of $52 billion (current prices) in the second quarter of 1945. The annual output rose from $96 billion in 1939 to in excess of $197 billion in 1944 and 1945. The total for the war period approximated $687 billion, of which $273 billion was devoted to war purposes.

To achieve this tremendous expansion of production, not only was the use of available productive resources greatly intensified, but the supply of labor and of facilities was also greatly augmented. To replace the men drawn into the armed forces and to meet the labor needs of the war program, women had left their homes and youths their schools to enter industry. As a result, the total labor force was expanded from 54.5 million in 1940 to 64.6 million in 1945. Employment in the munitions industries had expanded 240 percent since 1939, and the manufacturing industries in 1945 accounted for 24 percent of all nonagricultural employment as compared with 12 percent in 1939. This augmented labor force helped to main $16 billion in new facilities built by the Government. Marked changes had occurred in the character of productive activities. Industries which had been insignificant parts of the economy in the days of peace became giant employers. The aircraft, shipbuilding, and ammunition industries occupied 5.6 million workers at their peak; only 0.7 million in 1939.

The Nation's production record was not accomplished without sweeping changes in its economic structure. Over the war period, governmental regulations and restrictions invaded one area of economic life after another and with constantly increasing stringency. Freedom to operate manufacturing facilities and to use raw materials and fabricated items was severely restricted under the orders


of the War Production Board; freedom to buy was sharply curtailed under the priority regulations of the War Production Board, the ration restrictions of the Office of Price Administration, and the set-aside orders of the War Food Administration. Much of the seller's freedom to ask and the buyer's freedom to offer a price vanished under the sweeping price ceilings and regulations issued by OPA. The freedom to trade with foreign countries was hemmed in by regulations on all sides. Civilian use of the transportation system was subject to the priority of military travel and transport needs. Choice of occupation and the right to change jobs suffered curtailment by action of the Selective Service System and the War Manpower Commission. The National War Labor Board intervened in the free bargaining between employers and employees whenever disputes arose or wage increases were a part of the bargain.

With the coming of peace, the Nation turned to the task of dismantling the war-born governmental and economic structure. Members of the armed forces were to be discharged and absorbed into he civilian labor force, employment of all in peacetime pursuits must be provided, the distorted industrial structure had to be converted to producing the needs of a peacetime population, and many other problems raised by the transition to peace had to be solved. The nature of the problems involved and the means of their solution had long been the subject of study both within and outside the government. The success of the reconversion period in attaining a healthy economy lay in large part in the nature of the preparations that had been made.

Early Planning

Concern over the effect of the war upon the United States began with the outbreak of hostilities on the European continent. Even before Pearl Harbor, Federal agencies were studying the effects upon the Nation of its defense activities and endeavoring to determine its probable role in international affairs once peace had been regained. After Pearl Harbor, it was clear that the character and the magnitude of mobilization would determine the nature of postwar problems and planning necessarily waited upon the full development of governmental policy, the attainment of its objectives, and the course of the war. Moreover, there were those who feared that attention to postwar problems was interfering with the complete devotion of the Nation's energies to the prosecution of the war. Among such opponents of planning were high Government officials, particularly in the military services. [Hence the adage, "War is too important to be left to the generals!" -- HyperWar]

Despite such difficulties and opposition, analysis of the impact of war began early and was carried on without interruption by a number


of agencies. Among the most aggressive of Federal agencies in this field was the National Resources Planning Board. The work of this organization came to an end when the agency was terminated by Congress in August 1943. Nevertheless, postwar problems received much attention from the Nation's legislators. Before the end of 1942, the Congress on the President's recommendation had taken action to ease the adjustments of agriculture in the postwar period by authorizing the Commodity Credit Corporation to make loans at 90 percent of parity on the basic crops for two full years after the formal termination of hostilities.1 While the measure was designed to induce maximum agricultural production for war needs, it was also the earliest significant action dealing with reconversion taken by the Government. Congress continued in the months that followed to give attention to the problems of peace. Indeed, there were few organizations, Government or private, which did not find it possible and desirable to assign small staff to work unobtrusively on such problems.2

The invasion of Italy in the fall of 1943, the satisfactory progress of the war in Russia, and indications of the mounting volume of the preparations for invasion of Northwestern Europe aroused increasing expression of the public interest in the problems of reconversion. Official governmental recognition was also forthcoming. The President had already in July requested of Congress demobilization legislation which would define the Federal Government's responsibilities in the task of readjustment to civil life of the members of the armed forces. In November, the Senate established a Special Committee on Post-War Economic Policy and Planning, under the chairmanship of Senator Walter F. George,3 which began hearings on war contract cancellations, disposition of surplus property, and industrial demobilization and reconversion. The Chairman of the War Production Board, Mr. Nelson, testified before on eof these hearings that WPB had begun planning for reconversion.4 The Truman Committee likewise undertook investigations in these fields.5 With the announcement by Justice Byrnes of the appointment of Bernard Baruch to study the problems of reconversion as head of a unit in his Office of War Mobilization, that office assumed leadership among Government agencies in planning for the transition period. All of these actions


reflected a feeling of a need for haste in preparing a reconversion program. The announcement in December 1943, of the first but-back of materials in the war program--the closing down of four aluminum pot lines--suggested that these moves were not premature.

By this time also, public thinking had reached one firm determination on postwar reconstruction. Reconversion of the Nation to a peacetime basis could not mean a return to the economic conditions of 1935-39. Rather, the postwar economy, toward which reconversion policy would be guided, would be one which would reflect as closely as possible the wartime intensity of resource utilization. How this was to be accomplished and what it meant were matters not easily definable in generally accepted terms. High level production, full employment, gross national product of 160 to 180 billion dollars, "close to 60 million jobs," were some of the forms in which these desires were given expression.

The President, in his annual budget message in January 1944, approached the problems of reconversion in some detail, indicating that the period of offensive war--the fourth and final stage of the war--was beginning. Pointing out that "demobilization begins long before hostilities end," the President outlined the objective to be reached in the postwar period as a "permanently high level of income and a correspondingly high standard of living." To achieve this end, the President said that "there must be concerted efforts by industry, labor, and Government and a well-planned demobilization program. As more and more materials are released from war service and production, such resources must be channeled to civilian production, consumption, and employment. The soldier, the worker, the businessman, and the farmer, must have assurance against economic chaos."6 He proposed as a major aim of reconversion policy the stimulation of private investment and employment. In this message the President discussed "certain aspects" of the reconversion program under four principal headings:

  1. Contract termination, disposal of surplus property, and industrial reconversion.--The President suggested that the policies followed would be of major significance in determining the speed and effectiveness of reconversion and, that a unified program was needed. He further stated that recommendations were in preparation by Mr. Baruch and the Joint Contract Termination Board in the Office of War Mobilization.

  2. Manpower demobilization and reemployment.--The President urged that care be taken to prevent the weakening of existing job


    placement machinery and that a unified national employment and counselling organization supplemented by adequate job retraining, education, and rehabilitation services was essential.

  1. Public works planning.--The President gave his opinion that public works might be needed but that planning for such works should be closely coordinated and adapted to the broad economic situation.The Bureau of the Budget was assigned the task of coordinating various phases of a shelf of emergency public works and improvement programs. (The President, a few days later sent to the Congress a recommendation for a Federal highway program involving the postwar reconstruction, in cooperation with the States, of some 35,000 miles of needed highways.)

  2. Veterans legislation and social security.--The President called attention to his recommendations of the preceding July for a military personnel demobilization program including mustering-out pay and educational benefits. he also recommended extension of social security coverage and an expansion and liberalization of unemployment compensation.

The President's statement was followed within a few weeks by a report of Messrs. Baruch and Hancock on reconversion.7 Reconversion had now become a problem of official concern. the fact that the Baruch reports was quickly followed by three Executive orders providing for the execution of many of its recommendations gave it the weight of official policy. The report was frequently used in the months ahead as justification for taking action on postwar problems. Although concerned largely with the financial aspects of industrial reconversion, with only relatively brief references to the human side of demobilization and the relaxation of Government controls, the report formed the core about which detailed policy development and administrative planning were to develop.

In establishing the Baruch unit to study reconversion, the Office of War Mobilization had taken leadership in the Government's planning and preparation for reconversion. This function, it and its successor agency continued throughout the war and in the reconversion period. The President, acting on the Baruch recommendations, assigned to OWM the policy-making responsibilities in the fields of surplus property disposal, contract termination, and reemployment. The administrative structure, including the constituent agencies which thus developed, were transferred by Executive order into the legislative organization established by Congress with the passage of the War Mobilization Act of 1944 in October of that year.8 The Office of War Mobilization and Reconversion therein


provided for was given specific responsibilities for most phases of reconversion. Its jurisdiction was much broader than that of the Office of War Mobilization set up by the President's Executive order. Among other functions with which it was charged by Congress was "to promote and assist in the development of demobilization and reconversion plans by Executive agencies . . . and settling controversies between Executive agencies in the development and administration of such."

From this point on, preparation for peace was largely initiated and guided by the new agency. Its requests to the interested Government organizations involved for statements of their plans for reconversion stimulated such preparations; its actions in resolving stalemates between agencies were important steps in furthering action on matters relating to the coming era of peace. In its formal quarterly reports to Congress and in the frequent statements by its Director before congressional committees, are described the preparations made for the period of transition between victory over Germany and final victory over Japan as well as for the larger task of postwar reconstruction. These things the Office accomplished in a variety of ways. It established a Reconversion Planning Committee representing 28 agencies for the purposes of interchange and coordination of plans. A Deputy Director for Production was appointed to expedite plant reconversion and to review cutbacks to assure termination of unnecessary work. OWMR, also established a Construction Coordinator who, working with WPB, OPA, and the National Housing Agency, sought to facilitate postwar construction programs. In addition, the OWMR developed staff which worked closely with the War Production Board, the Office of Price Administration, and other agencies in the development of reconversion planning within the sphere of responsibility of these agencies.

Planning World Peace

While this volume is largely concerned with the impact of the war upon the Nation's domestic organization and activities, the extremely important developments during the war period looking towards the Nation's participation in world affairs when peace came demand brief attention.

The effect upon public opinion of the international events of the war period is graphically shown in chart 56. Indications of the direction in which public leadership was moving came in September 1943 when the Mackinac conference of Republican Governors and Congressmen adopted a declaration favoring United States participation in international efforts to preserve the peace. Within a month both the House of Representatives and the Senate had endorsed American


participation in international cooperation and organization to maintain the peace.9

Chart 56. Public Opinion on Membership in World Peace Organization.

Meanwhile the Executive branch of the Government was taking action expressive of the public's attitude. Progress on the crucial task of assuring peace in the postwar era began when the four major powers at the Moscow Conference of Foreign Ministers in 1943 pledged themselves to unity and cooperation in keeping the peace and in seeking peaceful means for settlement of international problems. These four powers met again at Dumbarton Oaks in Washington, and in October 1944, announced proposals for a United Nations Security Organization. At the Yalta Conference between Britain, Russia, and the United States, agreement was reached for a conference to draft a charter for a world security organization. Fifty nations participate dat the San Francisco Conference in the early summer of 1945 and formulated the United Nations Charter. The charter was ratified by the Unite States Senate in july 1945, and the United Nations Organization began functioning late that year.

Among other international problems, those relating to food and to


international financial matters were of particular importance. The United Nations Relief and Rehabilitation Conference met in 1943 to lay plans for the relief of war devastated countries. UNRRA was established as a result and participation by the United States was approved by Congress in November 1943. Some 7 months later, a United Nations Conference on Food and Agriculture was held which resulted in recommendations that a permanent international commission on basic food supplies be established to assure more reasonable and adequate controls. Congress accepted the recommendations in the summer of 1945.

The need for developing adequate machinery to provide financial credits for postwar reconstruction and resource development led to discussions between Great Britain and the United States on the problem of exchange stabilization and international investment. These problems were the subject of the Monetary and Financial Conference at Bretton Woods in the summer of 1944. Agreement was there reached upon plans for the establishment of an International Bank for reconstruction and also upon an International Monetary Fund. Both received the approval of Congress in 1945, which also extended for 3 years the Reciprocal Trade Agreements Act.

In these actions and others, the Nation had by VJ-day laid the ground-work toward American participation in world affairs and the maintenance of world peace.

Demobilization--the Human Side

At the peak of our war effort, some 45 percent of the Nation's labor force was enrolled in the military services or engaged in war production.10 Mobilization had vastly disrupted the peacetime distribution of occupations and greatly expanded the number of individuals gainfully employed. The coming of peace would mean for many millions of people the cessation of their wartime employment and the need to find new sources of livelihood. The speed of industrial reconversion would determine in large part the degree to which war mobilization would result in unemployment, but even with high levels of economic activity the readjustment of these millions of persons to peacetime pursuits was a task of great magnitude.

The Federal government already possessed the basic administrative machinery to carry out its responsibilities in facilitating demobilization. Demobilized soldiers and sailors would turn to the Veterans' Administration; unemployed civilians would seek help from the Unemployment Compensation System of the Social Security Board; both would expect guidance from the Employment Service in securing new


employment. In addition, the veteran could turn to his local Selective Service Board for assistance in securing reemployment in his old job, a task with which Congress had charged it.11

To handle the task of planning human demobilization and reemployment and to coordinate the various agencies involved in such a program, the President adopted the suggestion of Baruch and Hancock and established an Administrator of Reemployment and Retraining in the Office of War Mobilization. The Director of this organization was charged with the responsibility of developing programs for the absorption into the peacetime economy of persons discharged or released from the armed forces and from war work, and for the adequate care of disabled members of the armed forces.

The first action of General Hines, the Director, was to establish in each State a Veterans' Service Committee, composed of representatives of the Selective Service System, War Manpower Commission, and the Veterans' Administration to secure the establishment of veterans' information service centers.12 The State and local communities were eager to cooperate in the establishment of coordinated and integrated activities in behalf of veterans. Ultimately more than 2,700 veterans' information service centers were established.

Aside from this activity, the Office accomplished little. The planning function delegated to the Administration was of such far-reaching character, as General Hines recognized,13 as to be carried on largely elsewhere within OWM and other agencies better equipped for the task.

Meanwhile, the Administration had moved to strengthen both of the agencies which would play key roles in demobilization--the Veterans' Administration and the United States Employment Service. General Omar Bradley was named Veterans' Administrator on August 15, 1945, and inaugurated both a sweeping reorganization as well as an expansion of the agency's program and staff.

The USES was well equipped as a result of its wartime experience to handle the share of the task of peacetime adjustments which would fall to it. The chief danger to its effective operations was seen in the probable disappearance of its integrated and coordinated activities with the return of the services to State control. While the Congress refused to acquiesce in the President's request for the retention of the employment offices under Federal control during the reconversion period, his pocket veto of the First Supplemental Surplus Appropriation Recision Act 1946, continued Federal direction for an indefinite


time. In addition to such actions by the Executive branch, it was necessary that Congress determine the policies to be followed. In particular, it was essential that Congress determine the provisions it wished to make in assistance of the veterans of World War II, and that it review the adequacy of the unemployment compensation programs established in peacetime for the far heavier, war-created burdens that might be thrown upon it.

The President in october 1943, had urged upon Congress the need for legislation to facilitate the return of veterans to civilian life and the Congress responded to the suggestion with alacrity. In November, it passed legislation providing mustering-out pay for the Armed Service, and the following June it provided in the G.I. Bill of Rights14 support for veterans in every phase of readjustment to civilian life.

The President also urged upon the Congress on a number of occasions the necessity for reviewing the adequacy of the existing unemployment compensation system to meet the problems of reconversion unemployment. A number of large groups who might be expected to suffer from reconversion unemployment, particularly maritime workers and Government employees, were not covered by existing legislation. Moreover, although the State unemployment compensation reserves had accumulated large resources during the war, there was grave danger that a substantial portion of these funds would be unavailable to meet reconversion needs because of limitations in State laws. Such laws restricted both maximum weekly unemployment compensation payments as well as the maximum number of weeks for which such payments could be made. These provisions had been subject to much criticism as inadequate to the needs of the unemployed and well below the capacity of the State funds to pay.

The battle in Congress on the reconversion bills in which these recommendations were incorporated was fought out in terms of the ability of the States to measure the needs of their unemployed and to administer their own programs. In the end, all legislative proposals were defeated and no changes designed to broaden aid to the unemployed were made.

With the approach of victory in Europe, the armed forces announced their plans for demobilization on the basis of individual point scores computed on service experience.15 After VJ-day, demobilization proceeded with phenomenal speed (chart 57), although never fast enough to satisfy the public. With the war over, the essentially nonprofessional character of the nation's armed forces once again


Chart 57. Mobilization and Demobilization of the Armed Forces.

became apparent. The men in the services wanted discharge without regard to the possible continuing needs of the Nation for military strength. Such wishes found strong support from their families at home. As a consequence of these demands, expressed in the press and through the Congress, demobilization proceeded at a pace far above that anticipated by military leaders and, in fact, limited only by the capacity of available transportation. Although the method remained that of the point system, with critical scores progressively liberalized,16 the plans of the military to maintain a substantial prepared military force with newly trained draftees available in adequate numbers proved in fact unfeasible.

The demobilization of the war industries was likewise rapid. Over 2.5 million workers were released from war jobs in the month following the Japanese surrender. Employment in the aircraft, ammunition, and shipbuilding industries in August 1945, had fallen almost 50 percent below the May level, 1.2 million individuals losing their jobs


in these industries. Employment in industries which could quickly reconvert to civilian production declined little, on the other hand.

Demobilization--the Financial Responsibility of Government

In the process of harnessing the nation's productive capacity to the requirements of war, the Government had become the purchaser of almost half of the products of industry; the owner of an unparalleled quantity of fabricated goods and raw materials, and an important group of manufacturing facilities. The attainment of victory would wipe out all but a minute fraction of the demands of government for industry's products and would make much of the Government's accumulated inventories unnecessary for war purposes. The policies which the Government might follow in settling its terminated contracts with industry would go far in determining industry's ability to turn speedily to producing for the civilian market. There was no more certain way of assuring abundant employment opportunities than to make possible a prompt conversion of industry to the production of the goods so much in demand on the civilian markets. On the other hand, the character of that market in many areas would be strongly influenced by the Government's policy in disposing of its surpluses.

In carrying out the war program, the Government procurement agencies dealt with the Nation's business firms on a contractual basis. Over the war period, more than 350,000 contracts were made between the Government and some 40,000 prime contractors. In addition, many times that number of contracts were made between these prime contractors and their suppliers or subcontractors.

A substantial part of the liquid capital as well as of the credit of the nation's industrial firms was tied up by war contracts in purchases of raw materials and components and in fabricated parts.17 Payments for delivered goods were made expeditiously but when contracts were canceled, payments waited upon the determination of the exact amount of the Government's obligations. Moreover, even if a firm possessed adequate liquid assets, it would in many cases find its plants clogged with Government-owned machinery, semifabricated equipment, and material. Until these were either purchased by the operator of the plant, or removed by the Government, resumption of the plant's normal production would be difficult and in many cases impossible.


Machinery was therefore necessary which would expeditiously and with uniform fairness settle terminated contracts so that funds would be quickly available for normal operations.

The experience in the International Harvester cut-back made in April 1943 greatly stimulated public interest in the problem.18 Congress conducted several investigations and numerous bills were proposed.19 The War Department had already developed detailed regulations which covered the subject, which were used by all its various branches.20 The Navy was similarly developing its own policies, as were the other agencies.

Business interests, however, had in numerous ways expressed concern over the diversity of practices and policies that existed or were coming into being. The War Production Board's Procurement Policy Board had for some time been attempting to develop coordinated policies acceptable to all the procurement agencies. In spite of this effort, the War Department proposed in October 1943, the establishment of a contract termination board composed of representatives from the principal procurement agencies which had the function of determining policies of general applicability. Such a board, with broad representation of Government agencies, was established in November 1943, by the Director of War Mobilization under the title of the Joint Contract Termination Board.

The preliminary conclusions of this Board's deliberations were largely incorporated in specific and detailed fashion in the Baruch-Hancock report. Among its recommendations was the settlement of terminated contracts by the contracting agencies through direct negotiations by trained termination settlement teams. These should operate on the principles of speed, finality, and protection of the Government. Policies should be developed by the Joint Contract Termination Board so that auditing would not "cripple the Nation into a panic." The Comptroller General's function should be limited to a simple mathematical check with the right to reopen settlement for fraud reserved.

These recommendations gave assurance to industry that much of its working capital would be quickly freed for reconversion. Working capital supplies were supplemented by interim financing arrangements provided for by private banks and the Reconstruction Finance Corporation. The report further recommended that the Government


remove its property from private plants within 60 days after the receipt of the contractor's inventory.

A number of the Baruch-Hancock recommendations had been placed into effect some days before the appearance of the report when OWM approved a uniform termination article for fixed supply contracts.21 Legislative action was needed to meet other important problems encountered by the Joint Contract Termination Board. This was supplied by the passage in July of the Contract Settlement Act of 1944, which established an Office of Contract Settlement as a part of OWMR. Broad principles were laid down in the statute under which its director and his advisory board were to operate. These were by and large similar to the policies which had already been developed by the Joint Contract Termination Board. The act, however, settled the controversy over the functions of the Comptroller General by limiting his function to a post audit review for fraud. The act also authorized provision of interim financing by the procurement agencies, either by advance payments on the claim filed by the contractor, or through direct or guaranteed loans. Also of significance were the provisions for permissive company-wide settlement and for settlements with subcontractors. The act established an appeal board to which a contractor might take complaints after having exhausted the appeals machinery provided by the procurement agencies. To meet the impact of an increasing volume of contract cancellations, the Office of Contract Settlement undertook extensive training programs both of governmental as well as industrial personnel.

The test of these preparations came with VJ-day. The flow of contract cancellations began some days before the Japanese surrender. During August, the War Department canceled 70,848 contracts. By the end of 1945, of the wartime total of 303,000 canceled contracts, all but 52,000 had been settled, although the number remaining included a large proportion of the more difficult cases (chart 58). These contracts represented claims of $64 billion. Almost half of that sum had been settled. While the face value of the claims remaining to be settled was very large, available evidence suggests that the machinery to finance a contractor in the period between the filing of his claim and its final settlement operated smoothly in reconversion. Partial payments on filed claims and guaranteed termination loans (T-loans) proved more than adequate to meet business needs. The advances made, including partial payments, termination loans, Government guaranteed production loans, and others, at the end of 1945 totaled $2.5 billion. In view of the magnitude of the Government's contractual obligations, this was a small sum.


Chart 58. War Contract Terminations and Settlements.

Also of great importance to business was the work of the Office of Contract Settlement in supervising plant clearance of Government equipment. Congress had concurred with Messrs. Baruch and Hancock in recognizing the need to clear plants quickly of GOvernment-owned equipment and material by requiring the removal of such property within 60 days after the operator filed an inventory. Administration of this policy required cooperation with RFC for storage space with the Surplus Property Board in acceptance of surplus property, as well as with the procurement agencies who were owners of the property. This coordination was accomplished by an inter-agency committee. Although the volume of plant clearance rose very sharply after VJ-day, the work was, in fact, expedited and less


than 6 percent of industry requests required more than 60 days to complete. The difficulties which had been anticipated in securing adequate storage space did not materialize.

The success achieved in the handling of terminated contracts was not duplicated, up to the end of 1945, in the handling of surplus goods. The problems faced were, of course, far more difficult; there was not the same clear-cut objective which commanded universal agreement; conflicting interests were more numerous and powerful. Moreover, the problem of the proper organization and administrative machinery for surplus disposal was not fully solved, but continually plagued the Government.

The task of disposing of surplus property was extraordinarily difficult. Ascertainment of what there was to be sold, involving detailed inventories by the owning agencies, was in itself a gigantic task with hundreds of thousand of different types of goods scattered virtually all over the globe to be located and described, their condition determined, and their marketability decided. The establishment fo sale policies in the face of the pressures and conflicting interests was also a task of great difficulty. Prices to be asked for the property and the timing of the sales were particularly vexatious problems.

As in the case of the administration of contract termination problems, the initial Government action was based on the recommendations of the Baruch-Hancock report. In accordance with that report, the President established by Executive order22 a Surplus War Property Administration within the OWM which vested in an Administrator, assisted by a Policy Board, the general supervision and direction of the disposal of surplus property. The order further followed the Baruch-Hancock recommendation closely by assigning the disposal of surplus goods among four agencies according to the type of commodity involved. Mr. Will Clayton was appointed Administrator.

The President acted in the face of the fact that Congress had had surplus property legislation under consideration for more than a year. Surplus property disposal was becoming an acute problem and performance of the duties delegated to the SWPA was urgently needed. Moreover, it was indicated in the Executive order that not substitute for legislation was intended, but that congressional action was essential., Such legislation was not forthcoming for another 7 months.

The first problem demanding action by SWPA was that of expediting sales of contract termination inventories delayed largely because of the absence of authority or policy on which to act. A policy statement by SWPA served to clear the road23 Thereafter, SWPA


proceeded to establish its basic surplus disposal system, reviewing with the affected agencies the method of reporting surpluses and disposals, the control of inventories, the selection of trade channels and price policies.24 Consumer goods were sold to the channels of trade normal for the item involved "in lot sizes which have been established for small business by trade custom."25 Prices at which goods were actually sold were to be established through sealed bids, negotiations, and rarely through auctions. Resale by the private purchaser of such goods was under OPA regulation.26

In May, SWPA had been requested to prepare for the consideration of Congress necessary legislation on surplus property. An interagency committee was formed which prepared a draft bill, although Mr. Clayton took the position that immediate legislative action was not necessary and that it was desirable to gather experience before Congress should act.27

Acting on the Surplus War Property Administration proposal and its own intensive investigation, Congress in November passed the Surplus Property Act. The act earmarked the proceeds for the retirement of the national debt, and while it generally affirmed the policies laid down by the SWPA, made significant administrative and policy changes.

A three-man Surplus Property Board was established replacing the single Administrator designated in the Executive order, the arrangement being a compromise between the Senate's desire for a five- or eight-man board and that of the House for a single administrator. The Surplus Property Administrator, Mr. Will Clayton, protested that the arrangement would be unworkable and announced his resignation effective whenever the new Board has been appointed.28

The act laid down a number of policies different from those developed by SWPA. In general, these were designed to recognize the claims of various groups to preferential treatment and to assure that surpluses be dispersed in accordance with the established antimonopoly policy. In establishing these criteria, Congress greatly accentuated the difficulties in disposing of surplus property.

The act established a mandatory system of priority rights to purchase of surplus property by (1) Federal agencies, (2) State governments and their subdivisions, tax supported and nonprofit


institutions, and (3) veterans, farmers, and small business, in that order. In the case of the 5,000,000 acres of surplus lands, it was required that priority to purchase be given in order to: (a) Federal agencies, (b) State governments and their subdivisions, (c) original owner, wife, or heirs, (d) original tenant, and (e) veterans. Congress sought to guard against monopolistic practices in the sale of surplus war plants by requiring the Attorney Generals' approval of the sale of plants valued at over $10,000,000. It furthermore required a detailed report to Congress on the contemplated sale of plants costing $5,000,000 or more. Leases of plants costing $5,000,000 or more were limited to 5 years, a short time in view of the frequently high reconversion cost.

The Board acted first to reorganize its disposal machinery. The Treasury's function in handling the disposal of consumers' goods was transferred to the Department of Commerce. Disposition of property in foreign countries except for ships and aircraft was left to the Army and Navy, the owning agencies. The designated disposal agencies were then:

Several important changes were made in the organization of surplus disposal before the end of the year. The three-man board provided by the Surplus Property Act proved administratively unsatisfactory. Disagreements obstructed and delayed necessary action on policies to guide the disposal agencies, a fact which Mr. Clayton had predicted in his testimony protesting such action by Congress. Its chairman, Senator Guy M. Gillette, upon his resignation after a 6-month period, recommended a single administrator. In July 1945, President Truman requested Congress to substitute a single administrator for the three-man Board. Congress acquiesced and passed the necessary legislation on July 17, 1945.

A second important change in disposal organization was made when,


in November 1945, the disposal of consumer goods was transferred from the Department of Commerce to the Reconstruction Finance Corporation.29 The RFC then consolidated all of its disposal activities into one organization, the War Assets Corporation. Some 90 percent of all surplus disposal was thus brought within the jurisdiction of one agency.

Chart 59. The Surplus Property Problem.

The surplus goods held abroad, a large part of the total, presented special problems. Most of these were owned by the Army and Navy, a small portion by FEA. The War and Navy Departments under the authorization of the Surplus War Property Board early in 1945 set up an Army Navy Liquidation Commissioner to which was delegated the responsibility of disposal of overseas surpluses.

There were numerous problems peculiar to overseas sales which involved not only the Nation's interests in securing the highest possible net return but also its foreign policy. In meeting these problems, it was determined that sales were to be for American dollars and that care was to be taken not to sell in quantities beyond rehabilitation needs in order to protect future foreign export markets. Surplus property was also to be used to settle claims of foreign governments


and nationals against the United States. To sell at all in a foreign country, it was necessary that agreements be reached with the foreign government. For these reasons, it was necessary for the Army Navy Liquidation Commission to work closely with the Treasury and State Departments. Because the task was so intricately interwoven with the Nation's relations with foreign countries, this organization was abolished in late 1945 and the function transferred to an Office of Foreign Liquidation Commissioner, which was made a part of the State Department.30

The task of fitting the purchase priority scale established by the act into the sales machinery was a difficult one. To overcome the delays that might arise from the requirements of offering goods to a number of groups in sequence, the Board established a procedure which placed upon the interested Government agencies the necessity for taking initiative in expressing interests in merchandise and giving them limited periods within which to act. The Board sought to expedite sales to private priority groups by setting aside merchandise in what is believed to be adequate quantities.

At the end of 1945, some $12.9 billion of property had been acquired as surplus for disposal, of which $2.9 billion had been sold (chart 59). It was estimated that na additional quantity of goods valued at $33 billion would be declared surplus in 1946 with a substantially smaller quantity in 1947. Of the $10 billion surplus inventory at the end of 1945, about a third represented unsalable aircraft whereas only 10 percent of the surplus expected in 1946 was anticipated to be in that category. Quite clearly only a very small part of the surplus disposal job had been completed.

The experiences of 1945 brought about marked changes in organization. Responsibility for actual sale in the domestic market was highly centralized in the War Assets Corporation. With both food and housing in short supply as the year ended, the tasks of the National Housing Agency and the Department of Agriculture presented no serious difficulties. The disposal of ships by the Maritime Commission awaited the development of a national maritime policy. The disposal of property located on foreign soil was guided very largely by the political considerations which were the province of the State Department. Except for the latter, the problems associated with surplus property disposal were almost entirely in the ands of the War Assets Corporation. Now that there was no longer a reason for the separation of the policy-making function in the hands of the Surplus Property Administration from the selling function of the War Assets Corporation, further consolidation was in prospect.


Planning the reconversion of Industry

As has been described in chapter 10, the War Production Board had developed over the war period an interlocking system of controls over the use of materials and the disposition of finished products which effectively channeled manufacturing activity into those uses which were determined as most necessary to victory. At the same time, these regulations operated to prevent manufacturers from producing for the civilian market. Wholesale removal or amendment of controls was necessary whenever any significant expansion in the supply of civilian products was to be permitted.

The Chairman of the War Production Board, Donald M. Nelson, early in 1943 had expressed his concern over the solution to these problems and the need for preparing to meet them.31 In April of that year, Ernest Kanzler prepared of the WPB an intensive study of the reconversion problem. From that time on, the problem was under almost constant discussion and analysis within the agency and policies slowly came to be formulated. Originally the WPB's interest covered all matters relating to the termination of the wartime organization of industry, including contract termination and surplus property. As these and similar problems were assigned elsewhere, the WPB interest became increasingly focused on the utilization for the civilian economy of freed facilities and materials.

As with other aspects of reconversion, the Baruch-Hancock report called the problems to the public's attention, formed a foundation for much of the work that was to be done, and supplied essential support in the controversies that were to come.32

The basic point made by messrs. Baruch and Hancock was that war contracts should be canceled as quickly as needs permitted, and that such cancellations should be coordinated with the planned expansion of civilian production. They recommended that the War Production Board was the appropriate agency to control the resumption of civilian production, since the unwinding of the economy could best be carried out by the same agencies which had mobilized the nation's resources. In the performance of this task, the report suggested that the War Production Board, as well as the armed services, prepare "X-day" plans which would show what production would be canceled and what plants released at the end of the European war.


They further recommended that retooling of plants for civilian production be permitted before war production was terminated.

The Baruch-Hancock recommendations reflected the view of most qualified civilian observers. There was at no time any significant controversy over the degree of decontrol of production once both Japan and Germany had been defeated. It would be sweeping in character. The problems in decontrol lay in the degree and character of the resumption of civilian production while the war still continued. it was argued that a decline in industrial activity would probably appear even before the victory had been achieved on either front. The pipe lines would be filled, inventories built up, facilities completed, and production of certain matériel reduced. Such slack presented both opportunity and need for resuming civilian production. An even greater opportunity for an orderly, partial transition of industrial activity from war to peace would arise with victory on one of the fronts. If this first victory should come in Europe, as was generally assumed, military requirements for continuance of the war in Asia could be met with a substantially reduced volume of war production, a reduction variously estimated at the time at from 10 to 40 or 50 percent, with 35 percent the most generally used figure. This period between victories was viewed in many quarters as a challenge to the government so to plan its controls as to assure a shift from the high levels of war production to comparably high levels of peacetime economic activity as quickly as possible and with a minimum of unemployment and lost production. The decline in economic activity which would follow from military cut-backs would be cushioned for a time by the continuance of large Federal expenditures. If civilian good began to flow in volume from released industrial facilities with sufficient speed, it was believed possible to avoid the first serious threat to postwar economic prosperity--a sharp decline in economic activity during the prolonged reconversion period. Such action was deemed essential if there was to be reasonable assurance that the goal of high level production which the Nation had set itself was to be attained. Without challenging the merits of these arguments, there was nevertheless strong opposition, particularly from the military procurement agencies, to any action on them. In fact, the military services consistently expressed disapproval of public discussion of reconversion planning33 and while not objecting to reconversion preparations by


Government agencies, vigorously opposed until after VE-Day all plans to take action on such programs.

Such opposition was founded on the ground that until victory was certain, no use of industrial facilities should be permitted which would interfere with their quick return to war production or which would in any way interfere with the attainment of scheduled war production. The fact that monthly munitions production until March 145, never met scheduled production, provided the military with a very strong argument against reconversion. When driven from that position by the evidence that supplies were never inadequate,34 they could argue that the existence of critical programs which lagged behind schedules were evidence enough against any action on reconversion and that attainment of such scheduled production would be even more difficult if manpower should be attracted to reconverting plants.

There was also the question of the administrative feasibility of attaining a degree of industrial reconversion before final victory had been secured. The task of translating the recommendations of the Baruch-Hancock Report and the views of the staff of WPB, the Military Services, industry, and the Congress into administratively feasible plans for reconversion was one of great difficulty. Essential to the problem was precise information on the magnitude of the continuing needs of military supplies. To control and guide cutbacks, the chief procurement agencies, at the request of OWM, had appointed in 1943 committees to review the procurement programs. A short time later, the Joint Chiefs of Staff established a Joint Production Survey Committee to review the actions of the procurement agencies in the curtailment of the procurement program. From this committee estimates were available as to the volume of military procurement. The availability of such data was, however, merely the first step in the process.

THe key to the resumption of civilian production simultaneously with a continued program of war production lay in the specific incidence of the cutbacks to be made. Thus, even large cutbacks might have no effect on the opportunity to produce civilian goods if they were concentrated in Government owned and operated plants. On the other hand, in the spring of 1944 relatively small cutbacks in the


war programs, were it possible to locate them properly, could have released all consumer durable goods industries from war contracts.35

There was inherent in much of the thinking about reconversion, as in the Baruch-Hancock report, the idea that contract cancellation could easily be carried out so as to release facilities important to civilian production, retaining in war production those that were of less immediate significance. At the same time, however, conflicting concepts as to the policies to be followed in contract cancellation found considerable support. there were suggestions that preferential treatment in the resumption of civilian production be given to pre-war companies over firms established during the war, to small business,36 to specific industries, to certain geographical areas.37 Among these proposals, only that of giving small business some advantage in reconversion was adopted as official policy, although for a time some preference was given to prewar companies over new firms.

The actual task of canceling contracts was in the hands of the procurement agencies who were strongly inclined when faced with diminished needs for specific items to follow basic financial considerations and to cancel first the contracts of the higher cost or least satisfactory producers. Any other cancellation policy would necessarily have to be imposed upon the procurement agencies by higher authority.

The establishment of a pattern of contract cancellation for the interim period based on the desirability of securing production of civilian goods rather than on a strict financial basis was fraught with difficulties. Policy decisions were required relative to--

  1. Establishment of a system of priorities for civilian products.

  2. Assurance that contract cancellations would single out appropriate facilities, retaining in war production plants less adaptable to civilian production.

  3. Assurance to the civilian industries of adequate supplies of raw materials and component parts. This involved the release from war production of adequate capacity to produce the supplies of components and parts needed for the civilian product.

  4. Establishment of a policy on the treatment of competitive firms within the same industry if all could not be released from war production simultaneously and/or if materials were inadequate for capacity operation by the entire industry.


  1. Assurance that manpower would be available without interfering with war production.

During the summer of 1944, public optimism over an early end of the war in Europe was very great, an attitude supported by the quick success of the landings on the continent and the capture of Paris. The feeling was general that the war-planning job had been completed before D-day; the number of resignations at the War Production Board of men returning to their private occupations was very large. Demands that reconversion planning be hastened came from all elements; industrialists, labor leaders, members of Congress, and high Government officials. Congress was besieged for legislation covering surplus property, contract termination, and human demobilization; OPA for a price policy covering civilian products; and most particularly, WPB for detailed X-day planning. In May, the demands upon WPB were given emphasis by the Baruch and Hancock criticism of delays and by the Brewster cutback incident.38 Caught between these demands on the one hand, and the firm opposition of the military on the other, the position of the War Production Board's Chairman was an unhappy one, accentuated by continued disputes between factions of his own staff.

Nevertheless, while warning that the first task of war production continued to be a mililtary one, Mr. Nelson moved steadily toward establishment of a policy. Thus, in March he revealed, in reply to questions from Senator Maloney, the following WPB plans:

  1. While the services have in the past consulted with WPB on cutbacks to only a limited extent, from now on the military services, when they have determined that a cutback is necessary, will collaborate with the War Production Board in determining where the cutback is made.

  2. Manpower is the most critical determining factor in war production today. So far as possible, we attempt to guide the cutbacks in the critical labor areas, in order to ease the manpower situation in these areas.

  3. The availability of manpower, materials, and component parts determines the extent to which civilian production has been cut back. The military services also are concerned over possible adverse effects of an expansion of civilian production at this time on morale both at home and among the fighting men abroad. With these factors in mind, our policy is to expand civilian production as it become possible to do so without interference with the over-all war program, and particularly in concerns whose war orders have been cut back. The Office of Civilian Requirements has prepared a number of programs for expanded production of civilian items and has listed their relative order of importance to the economy. It is our purpose to put these programs into effect whatever the military outlook, and the situation with respect to manpower, materials, and parts indicates the advisability of such action.


  1. While the idea of withholding conversion of a plant until an entire industry can be reconverted is fair and convenient, it is a physical impossibility. The entrance of new firms into na old industry cannot be restrained since it "has been my objective from the very start to confine detailed economic planning to wartime production of military and civilian essentials," and "it is all-important to maintain a competitive economy."39

The policies so stated formed the basis upon which the War Production Board program was to be developed. The details were worked out but slowly, shifting with the changes in the military situation and the consequent changes in estimated future requirements. Their implementation likewise expanded and contracted with the rate of military progress, beset with criticism as to timing from the military agencies.

Machinery to assure the attainment of the first point was created in June by the establishment of the Production Executive Committee Staff under Wilson, including on its membership the procurement agencies and the War Manpower Commission as well as WPB. This group had the function of inquiring into any feature of production, including scheduling, and to clear all cutbacks and terminations proposed by the procurement agencies. Its unanimous recommendations regarding such changes were binding on the procurement agencies; when opinion was divided, the PEC rendered the binding decision.

In June 1944 Mr. Nelson announced his reconversion program, which embodied the following provisions:

  1. Restrictive orders covering aluminum and magnesium were to be removed to permit the use of these metals in fabricating essential products when manpower was available.

  2. Manufacturers were to be authorized to acquire materials and components to build one working model of any product planned for postwar production.

  3. Manufacturers were to be allowed to purchase machine tools and dies for civilian production, out of surplus stocks, or, if necessary, through orders validated by the War Production Board for manufacture when war demands permitted.

  4. Production of civilian items from available materials was to be permitted on the basis of individual authorizations made by the regional offices of the War Production Board in consultation with local representatives of the War Manpower Commission. This was the "Spot Authorization Plan."

In timing this announcement, Mr. Nelson recognized the demands of the public and of Congress for such action, and had the support of an analysis by his staff which indicated that the Army's supply situation


was satisfactory. The announcement, however, brought the conflict between Nelson and the Armed Services to the surface. Appealing to higher authority, the Army took its objections to the Director of War Mobilization, who ordered the effective date postponed pending his review. Justice Byrnes approved Nelson's proposal except that the effective date of the spot authorization was moved ahead to August 15 and that applications were made subject to the review of the local Production Urgency Committee who would give manpower problems strong consideration. The WMC became the key agency in industrial reconversion since its certificate that labor was available was required before the PUC's would approve a spot authorization application.

Although Mr. Nelson's action received wide public support, including that of Senator James M. Mead, chairman of the Senate War investigating Committee, it was opposed by WPB Vice Chairman Wilson and the military. The latter carried their objections to the President with a demand for Nelson's removal. Meanwhile, Mr. Nelson had agreed to the President's request that he undertake a special mission to China. Shortly thereafter, Vice Chairman Wilson's resignation was also accepted and Julius A. Krug became Acting Chairman of the WPB.

The change in leadership resulted in no change in WPB's announced reconversion program. Indeed, for a short time, reconversion planning and discussion moved at an accelerated pace. Mr. Krug told a Senate Committee that he was "in complete accord with" Mr. Nelson's plans for a gradual reconversion, and a few weeks later laid before that Committee detailed and integrated plans for industrial reconversion, for application after the fall of Germany and after the defeat of Japan. Early in September the War Production Board announced the first instances of resumed civilian production under the Spot Authorization Plan. Meanwhile, a committee to review the demobilization of controls was established in September. The following month it made a detailed report on the WPB controls which should be dropped and those which should be retained or modified for a one-front war.

The slowing of the war in Europe with the approach of the winter of 1944-45, the German counterattack and the resulting Battle of the Bulge set back the military schedule and forced an upward revision of military requirements. Discussion of reconversion disappeared amidst general recognition that the anxiety of the previous summer had been premature. Meanwhile, the war in the Pacific was moving rapidly, well ahead of schedule, with a consequent intensification of demands of equipment. The result was that while the munitions program had declined month by month during the first three quarters


of 1944, it rose significantly in November over October and again in December. Faced with these rising schedules and an increasing number of critical programs, the Chairman of the War Production Board announced that from now on "we are assuming that the war will go on indefinitely." The War Production Board, War Manpower Commission, War and Navy Departments issued a joint statement reemphasizing the precedence to be given to the war program.40

Reconversion progress under the spot authorization plan meanwhile had been very slow. Although Krug had in November rejected a demand from the Services that the spot authorization program be suspended for 3 months, the program was virtually inoperative in the following month in all labor markets. Reconversion planning in the War Production Board, as elsewhere, was driven underground by these events, but continued to be the subject of careful and detailed examination. Such planning was necessarily a continuing operation because of the shifting nature of the demands of the military upon the economy and the changing significance of military operations to the time period for which planning was being carried out.

The rapid improvement of the military situation in Europe in the early spring of 1945 brought renewed public interest in reconversion and expression of anxiety over the plans made to meet declining war production. To these queries, Mr. Krug could reply that WPB had been working on, if not talking about, reconversion. In fact, a Committee on the Demobilization of Controls after VE-day had dealt with that problem during the winter. As a result of a request from OWMR Director Byrnes, asking WPB to formulate plans, the problem received intensified attention from a newly established Committee on Period One (the interval between VE- and VJ-days). Preliminary data on the requirements of the Services for the one-front war were made available in March, and thereafter a succession of plans was prepared, based on the action that would be possible under various assumptions. By the middle of April, WPB had reviewed virtually all procurement cut-back proposals effective before the termination of the war against Germany.

IN April, the European war was near its climax. Reconversion discussion was openly sanctioned by WPB without protest from the military and the Spot Authorization Plan was revitalized at approximately the same time that the first major cut-back--in aircraft--was announced, foreshadowing victory over Germany. WPB had prepared some months earlier for the increased load by establishing a Production Readjustment Committee to give its full attention to guiding the impact of cut-backs with the work of actually cutting


and guiding the facilities into new uses in the hands of the Field Termination Committees.

VE-day--May 6--brought no sudden change in industrial controls. Reconversion had, in fact, begun weeks earlier in the revitalization of restrictive orders. A few days after VE-day, producers of civilian goods were given permission to place orders for steel, copper, and aluminum for delivery after July 1, and rating floors were removed to permit placing unrated orders if they did not interfere with war needs. limitation orders on some 73 types of products were removed, and restrictions of this nature continued to be lifted almost daily during the interim period. Such actions were in the nature of granting hunting licenses for raw materials and meant civilian products only if the decline in the war program permitted.

WPB's inclinations toward a hurried removal of controls, a policy which had been formulated int he fall of 1943 by Chairman Nelson and Vice Chairman Batcheller, was opposed by other war agencies; by OPA and WMC who felt that production controls were necessary to the success of their operations; and by the military who sought maximum protection for their continuing production requirements. Of great importance was the fact that WPB was faced also with demands from civilian businesses for priorities for civilian production since materials continued in extremely tight supply. While the War Production Board recognized that the retention of certain controls, particularly on construction, were desirable, Mr. Krug's position was that WPB's jurisdiction was limited ot war production and that such controls should be exercised by some other agency. The Mead committee expressed itself in agreement with Mr. Krug's observation that a little competition was a good thing. Thus, the agency continued to move in the direction of an early complete disappearance of WPB and its controls over production.

Less than 4 months separated victory over Germany from the defeat of Japan. Scheduled production which controlled material availability for August, was, in May, planned for at a rate only 15 percent below that in May.41 While certain materials became fairly abundant, other remained tight, and important commonly used components remained difficult to secure.

The results of liberalized materials control between the abandonment of spot authorization and the end of the war are not susceptible


to statistical measurement. In general, the result of the interim reconversion plans of WPB in terms of increased flow of finished products to consumers was very small. It is nevertheless true that the steps taken were of undoubted assistance in expediting the reconversion of industry when the end of the war came.

Lifting Controls

The central issue in the preparations made for peace was the disposition of the numerous controls that over the war period had been extended to virtually all phases of economic life. The public had accepted such restrictions as one of the prices to be paid for victory but, at the same time, from the time of their imposition and consistently thereafter, had demanded assurances that they would be eliminated at the earliest possible time. The Nation's wartime production achievement had apparently served to strengthen the public's faith in the values of freedom of economic action. It was recognized that some controls could not be removed as quickly as others. Military demobilization necessitated an adequate supply of transportation facilities. Assurances were needed that the armies of occupation receive adequate supplies. But for the rest, the weight of opinion was heavily against the continuation of controls that had not existed in peacetime.

On the other hand, those who were most directly concerned with the many problems that would have to be solved in the immediate postwar period were concerned over the premature dropping of controls, and in some cases advocated the retention of a substantial number of such administrative devices. Their point of view was that an orderly transition to a peacetime economy at the highest possible level of activity and with the greatest possible speed was attainable only by continued controls over allocation of materials, rationing of certain products, and continued control over prices. To permit unfettered competition for the short supplies that would exist in many materials during the reconversion period was to jeopardize a smooth transition.

The policy of the Administration on this matter was enunciated by the President when at the end of the war he instructed the Federal agencies "to move as rapidly as possible without endangering the stability of the economy toward the removal of price, wage, production, and other controls and toward the restoration of collective bargaining and the free market."42 Many of the war agencies already had plans consistent with the President's policy and many had previously publicly announced their intentions. In fact, in most agencies, such plans had been held in readiness since the fall of 1944.


In accordance with the Administration's policy, victory over Japan was celebrated with a very substantial restoration of economic freedom. On August 16, the day following the announcement of the surrender of Japan, all controls over manpower were dropped by the War Manpower Commission, and the OPA removed ration restrictions on gasoline, fuel oil, processed foods, and heating stoves. Other ration orders were lifted during the rest of the year so that by the end of 1945 only sugar continued under rationing control.43 Several hundred items were removed from price control within the first hundred days after VJ-day. By the end of August, the War Production Board had abolished most priority controls, the Controlled Materials Plan and with it all control over metals except tin, lead, and antimony, eased industrial construction restrictions, and revoked several hundred control orders. The Office of Defense Transportation had lifted several thousand controls on commercial motor-vehicle traffic and eased the ban on conventions. Early in September, a large portion of controls over exports was lifted and coastal and intercoastal shipping was resumed.

The Fight Against Inflation

During the war, consumers' incomes had risen sharply, whereas the supply of good available for purchase had increased much less rapidly; the supply of many consumer durables either declined or ceased altogether to be available. While increased tax payments, bond purchase campaigns, and voluntary savings served to absorb a substantial portion of the expansion in consumer incomes, imbalance between purchasing power and the supply of good was sufficiently great to create dangerous inflationary possibilities.

Prior to the end of the war, there was no unanimity of agreement that such inflationary pressures would continue long beyond the attainment of victory. Some observers felt that the very sharp drop in Federal expenditures to be expected after VJ-day would result in serious deflation and that as a consequence unemployment would be the Nation's major problem. Others, recalling that during World War I price inflation had been far more severe after the end of hostilities than during the war, argued that consumers' purchasing power would for some time exceed the supply of available goods and that the danger of inflation would continue for an extended period.

The Government, in view of these two possibilities, prepared to combat both deflation and inflation. Plans for public works and the maintenance of consumer purchasing power were discussed. Chief


emphasis was placed, however, on ways and means of combating inflation. The Baruch-Hancock Report had suggested that the problem would be one of controlling prices and President Roosevelt in his Budget message in January 1945 had said:

When war production is extensively reduced some of the controls which were needed in an all-out war economy can be relaxed, although other controls must be continued to assure necessary war production and orderly reconversion. For example, we must avoid speculation in inventories such as contributed to the inflation after the last war. The fact that many businesses and individuals have ample funds for a buying spree necessitates caution in relaxing controls. The balance between incomes, savings and expenditures will still be precarious during the reconversion period. It will therefore be necessary to retain the machinery for allocation and price controls as long as certain materials and finished goods are in short supply.44

The situation ofter VJ-day was one of high wage levels though somewhat reduced from wartime peaks, combined with favorable employment conditions, continuing large Federal expenditures, vast pent-up demands for many classes of goods, and very large liquid savings in the hands of individuals as well as business corporations. In view of the long time lag before the desired goods could appear on the markets in significant volume, the danger of an upward spiral of prices was very real. The Office of Price Administration had prepared to handle these problems well before VJ-day. Price control during the reconversion period, and until the Price Control Act came before Congress for renewal, was to be within the framework of administration and policy developed during the war.

Among the demands made by business groups in 1944 and early 1945 for adequate Government preparation for reconversion, requests for enunciation of a price control policy were frequent and insistent. The task was essentially that of reviewing and making the necessary adjustments in the price ceilings of products which were on the market in 1941-42 but which were not being manufactured for some time before the end of the war. It was necessary also to determine price ceilings for new products, a more difficult task but one with which OPA had acquired considerable experience. It was essential that the pricing program be developed so that these commodities would flow into the civilian market in maximum volume as quickly as possible after the end of war production. While the administrative burden was heavy, the number of commodities involved in the reconversion pricing program was relatively small and their production was highly concentrated in a small group of large firms.

The Office of Price Administration had given some attention to the problem of reconversion pricing since the last half of 1943; intensively so in the middle of 1944 when partial reconversion seemed


probable.45 The specific policy to be followed was, however, not announced until May 1945. Under the program, prices on reconversion products were set at 1941-42 levels with adjustments for legitimate increase in costs to be made upon application. Such adjustments would cover increased costs by the use of industry-wide formulae or in the case of smaller firms, on an individual basis.45 There were, however, larger issues involving the entire framework of economic stabilization which required administrative action.

The problem of controlling prices after VJ-day differed sharply from the task in the war period. On the one hand, the decision to eliminate a maximum number of controls over production meant that price stabilization could find only limited support in that direction. On the other hand, President Truman had early indicated his agreement with the popular desire to return to free collective bargaining in labor relations at the earliest possible opportunity. If such release of controls was to mean a sharp rise in hourly wage levels, as did prove to be the case, inflationary pressures would be expanded. Such increase would be reflected in higher costs to consumers, increasing the cost of living. The task was thus one of reconciling the objective of continuing price control with the desire to eliminate or the impracticability of continuing other controls which over the war period had proven essential supports of the anti-inflationary effort.

On August 18, the President issued an Executive order "providing for assistance to expand production and continued stabilization of the national economy during the transition from war to peace, and for the orderly modification of wartime controls over prices, wages, materials, and facilities".47

By this order the whole process of decontrol--of removing wartime restrictions--became subject to the requirements of the stabilization program. The objectives of the Government were stated as the removal of price, wage, production, and other controls, and the restoration of collective bargaining and the free market. These were to be accomplished "without endangering the stability of the economy."

The Price Administrator was specifically instructed to "take all necessary steps to assure that the cost of living and the general level of prices shall not rise'. Such price increases as might be approved for designated reasons were not to cause increases at later levels of production or distribution. Wage increases might b made by industry without approval of NWLB or the Director of the Economic Stabilization if such increases were not to be used to seek an increase


in price ceilings or to increase the cost to the Government of products produced under Government contract. Wage increases to correct maladjustments and inequities might be approved by NWLB when such "interfered with the effective transition to a peacetime economy" but such increases when involving a change in a price ceiling were subject to the approval of the Director of Economic Stabilization.

This policy was clarified and strengthened October 30 by the President in an address to the Nation and with the simultaneous release of an Executive order.48 By this order, wage increases were to be approved by the Stabilization Administrator when NWLB found: (a) that total wage increases since January 1941 were not equal to the percentage increase in the cost of living from that date to September 1945; (b) where such increases were required to correct industry or area inequities; (c) and where such increases were found "necessary to insure full production in an industry, designated by the Stabilization Administrator, which is essential to reconversion and in which existing rates or salaries are inadequate to the recruitment of needed manpower."

In support of this stabilization program, certain controls over production were necessary. While an early complete disappearance of WPB's controls over industry had been anticipated, the importance to the price control program of an adequate supply of low price consumer goods forced reconsideration of the Government's postwar role in allocating scarce materials to such essential civilian items. With WPB's Chairman convinced that such a function was beyond WPB's powers, the issue was taken by the Director of OWMR to the President for settlement. In a letter to Krug, the President, while agreeing on the desirability of a quick removal of controls, urged the temporary retention of such controls as were needed to prevent or break bottlenecks in the production of low-priced goods. In consequence, when an effective date was set for the termination of the War Production Board, the creation of the Civilian Production Administration was also announced,49 that new organization to take over the administration of some 60 orders in such fields as textiles and construction.

The task of reconciling labor's demands for higher wages with the economic stabilization program presented many great difficulties. Wage stabilization was essential to the program since it was to be expected that most employers would demand increases in price ceilings adequate to cover any production costs arising from increased wages. Although the Administration at various times suggested the feasibility and desirability of raising wages out of anticipated profits, strenuous


employer resistance was met. The resultant labor-management conflicts, when expressed as work stoppages, were a stumbling block to smooth and expeditious reconversion.

The problem presented serous administrative difficulties. During the war period NWLB had administered the wage stabilization program with marked success. Its accomplishment had rested very largely upon labor's adherence to the no-strike pledge at the beginning of the war and continued for the duration. It had consequently expired on VJ-day and the Board was in no position to take on new cases after that date. Although President Roosevelt in his Budget message in January 1945,k had said, "We must also see to it that our administrative machinery for the adjustment of labor disputes is ready for the strains of the reconversion period" and urged that wartime lessons be applied in working out a long-range labor policy, nothing had been accomplished.50

President Truman made some effort to continue NWLB as an effective wage control organization. He requested labor to accept NWLB's jurisdiction and decisions and to continue the no-strike pledge until a labor-management conference could be convened to develop new machinery for maintaining industrial peace. In his Executive order of August 18, he directed that "disputes which would interrupt work contributing to the production of military supplies or interfere with effective transition to a peacetime economy are disputes which interrupt work contributing to the effective prosecution fo the war." These efforts were not rewarded with success.

Organized labor had during the war years to a substantial degree, sacrificed the peculiarly favorable opportunities to obtain large wage increases which were inherent in the tight labor market situation. The sacrifice was not an easy one to make and labor had grown restive over the war period, resentful of the wartime restraints of the no strike pledge and the little steel formula, fearful of reduced weekly earnings as a result of the loss of overtime pay. In consequence, VJ-day was followed by an upsurge of work stoppages and strikes, despite the fact that public opinion strongly disapproved of such interferences with the progress of reconversion.

The lack of preparations which might have made of NWLB an useful postwar device to meet these problems was the result of labor's desire to escape all the wartime restrictions of Government intervention in collective bargaining, a desire with which industry appeared to be in substantial sympathy and which had previously been shared by Government officials including the members of NWLB. Thus, NWLB had not concerned itself with preparing for a role in the transition


period, but solely with making plans for finishing its backlog of work and then liquidating. By the time the threat of labor stoppages to reconversion had become clear, these steps had so weakened NWLB that its members felt it necessary to advise the President that it could not function effectively to handle the crisis. Without the no-strike pledge or some similar agreement on the part of labor to abide by NWLB rulings, the Government had only the device of plant seizure under the Smith-Connally Act with which to meet work stoppages. Consequently, NWLB proceeded with its plans to liquidate, announcing in October that it intended to dissolve at the end of the year. The President, meanwhile, had requested that the Board set up a successor organization for the purpose of administering the wage stabilization program. The National Wage Stabilization Board, organized similarly to the National War Labor Board, was formed to begin operations the following year.51

Though it then had the administrative machinery to approve wage increases, the Administration was faced with the necessity of developing quickly new policy with which to meet the threat of labor strikes in cases where labor-management disagreements could not be settled by collective bargaining. Such policy and accompanying machinery was hoped for as a product of the National Labor-Management Conference which the President called early in November. No formula or agreement whereby industrial disputes might be settled within the framework of announced economic stabilization policy was forthcoming, however.

Meanwhile, as a top-gap device the President set up fact-finding boards to handle the most pressing of the industrial disputes, at the same time requesting of Congress action to bestow on such boards legislative sanction and authority. These boards had, in fact, no authority save only agreement by the two parties to accept them as arbitrators. Their awards did, however, carry the prestige of coming from a Presidential board and consequently carried with them considerable pressure for acceptance on both parties. In any case, the issue was what action OPA would take to cover the increased labor costs which might result from awards of increased wages. That agency attempted, insofar as possible, to obtain the absorption of such cost increases by the intermediary stages in the flow of products to ultimate consumers and thus prevent, or at least reduce, the impact upon the cost of living. This absorption policy met strenuous opposition on the part of the affected industries, particularly wholesale and retail merchants, and became a basic issue in the controversy over the extension of the Price Control Act.


Reconversion and Demobilization of the Executive Establishment

The needs of war required substantial expansion of many of the Government's normal functions and the addition of many activities unknown in peacetime. To carry on these operations, new agencies had been created; many old agencies had found it necessary to expand their staffs substantially and numerous shifts in functions and responsibilities among the agencies had been made.

As in the case of the other aspects of reconversion, the Government early began consideration of its demobilization problem and made preparations to reorganize the Government for the tasks of reconversion and peacetime. Continuous checking on the necessity of the operations of the Government's agencies and the need for staff were, in fact, part of the normal budgeting review operations of the Bureau of the Budget. Along with its assistance in establishing new agencies, the Bureau had from time to time throughout the war made recommendations that staff be reduced, agencies abolished, or functions transferred wherever such action was in the public interest. Thus, such agencies as the office of Civilian Defense and the President's Committee on Congested Production Areas were terminated well before the end of the war when it was apparent that there was no longer any need for their functioning.

Such activities of the Bureau received a considerable impetus when on September 18, 1944, the President wrote the Director of the Bureau of the Budget, stating:

Upon the termination of hostilities, we must proceed with equal vigor to liquidate war agencies and reconvert the Government to peace. Some steps along these lines may be taken when the fighting ends in Europe. The transition from war to peace should be carried forward rapidly, but with a minimum of disorder and disruption. Only careful planning can achieve this goal.

This is the time to do the planning, although the war--even in Europe--is not over. Most of the planning will probably have to wait for execution until the Japs have surrendered--and there is no way of telling when that will happen. But the plans should be ready.

The letter further requested that the Bureau reexamine the programs, organization, and staffs of Government agencies and prepare recommendations for "the liquidation of war agencies and the reassignment of such permanent or continuing functions as they possess; the reduction of Government personnel to a peace footing; and the simplification and adaptation of the administrative structure to peacetime requirements."

The Bureau promptly began its study, supplementing its own examination with a request to the head of each agency for a statement


on program readjustment that might be made immediately and those which could be made following VE-day.

Congress, meanwhile, had inserted in the War Mobilization Act of 1944 instruction that the Director of OWMR study and determine the need for:--

simplification, consolidation, or elimination of such executive agencies as have been established for the purpose of the war emergency, for the termination, or establishment by statute, of executive agencies which exist under Executive order only.

While this was clearly a duplication of jurisdiction, the Administration refrained from any effort to secure a change in the legislation. Instead, Mr. Byrnes in a letter of November 29 requested that the Bureau of the Budget undertake the necessary study and thus avoided any conflict of jurisdiction.

The delay in achieving victory over Germany resulted, as elsewhere, in a reduced emphasis on this phase of demobilization. The Bureau of the Budget nevertheless continued to study the problem. One of the results was the view that little change in the Federal Government was to be expected until the war had been ended on both fronts. Thus, the Director of the Bureau of the Budget wrote the Director of War Mobilization in March 1945, that:--

Generally speaking, the war organization of the Government has been stabilized for some time, and will require but little adjustment except in consequence of material change in the programs of agencies. Contraction in the size of agencies may be expected in many instances, but wholesale reshaping of the war organization is not, in my opinion, in prospect until there is a substantial shift in production from war materials to civilian goods.

Meanwhile, the Bureau intensified its studies of demobilization and prepared detailed analyses of the programs of the Federal agencies. By VJ-day, it was well prepared with recommendations. Some of the agencies had also prepared plans for their liquidation soon after the end of the war.

A few days after the Japanese surrender, President Truman appointed a committee composed of the Director of OWMR, the Director of the Bureau of the Budget, and Judge Samuel I. Rosenman to make recommendations "on the proper disposition of the various war agencies." The recommendations of this committee were followed by quick action by the President. Thus, before the end of the year, the following were among the major agencies that had been formally terminated:


Agency terminated Effective date Action
Office of Civilian Defense June 4, 1945 Executive Order No. 9562.
Central Administrative Services Aug. 25, 1944 Executive Order No. 9471.
Office of War Information Aug. 31, 1945 Executive Order No. 9608.
War Refugee Board Sept. 14, 1945 Executive Order No. 9614.
War Manpower Commission Sept. 20, 1945 Executive Order No. 9617.
Office of Economic Stabilization Sept. 20, 1945 Executive Order No. 9620.
Office of Strategic Services Oct. 1, 1945 Executive Order No. 9621.
Foreign Economic Administration Sept. 27, 1945 Executive Order No. 9630.
Office of Army-Navy Liquidation Commissioner Sept. 27, 1945 Executive Order No. 9630.
Surplus War Property Administration in Reconstruction Finance Corporation Oct. 19, 1945 Executive Order No. 9643.
Office of Censorship (Censorship Policy Board) Nov. 15, 9145 Executive Order No. 9631.
Munitions Assignment Board Nov. 8, 1945 By action of Joint Chiefs of Staff, approved by President Truman and Prime Minister Attlee.
War Production Board Nov. 3, 1945 Executive Order No. 9638.
Smaller War Plants Corporation Dec. 27, 1945 Executive Order No. 9665.
National War Labor Board Dec. 31, 1945 Executive Order No. 9672.
War Food Administration June 29, 1945 Executive Order No. 9577.
Combined Production and Resources Board Dec. 10, 1945 By agreement of President Truman with Prime Minister Attlee and Prime Minister King.
Combined Raw Materials Board Dec. 10, 1945

The functions of some agencies came to an end with their dissolution; in others, functions were transferred to other agencies with the result that a considerable consolidation of Government activities was attained. The most striking example was that in the labor field. The Department of Labor was strengthened by receiving control of the United States Employment Service, the National War Labor Board, and National Roster of Scientific and Specialized Personnel, and the Reemployment and Retraining Administration. The Government;'s activities in international affairs were again concentrated in the State Department which received jurisdiction over some of the former functions of the Office of Strategic Services, the Office of War Information, and the Foreign Economic Administration, and would logically receive also the functions of the Office of Inter-American Affairs. Commerce strengthened its position by securing the functions of the Smaller War Plants Corporation as well as some of those of the Foreign Economic Administration.

Of special importance to the reconversion period was the consolidation of reconversion activities within OWMR. With the abolition of OES, stabilization coordinating functions were transferred to OWMR. Likewise, when WPB was abolished, the continuing priorities functions were vested in CPA which was instructed to report to OWMR. The President furthermore made OWMR responsible for the furtherance of his legislative program of September 6 requesting that agency reports on the status of the various elements of the program be made to him through OWMR. Thus, the guidance of the reconversion program was more highly centralized than the war program had been at any time during the period of hostilities.


*   *   *   *   *   *   

Though the war with Japan ended far more quickly than was generally anticipated on the basis of military advice, the ease with which the Nation's economy entered the reconversion period paid tribute to 2 years of the preparations which had been made for it. World War I had served as an example of what not to do, and the Nation had profited from that experience.

The plans made were the product of no one group, but in a real sense embodied the opinions and interests of a broad cross-section of the Nation. President Roosevelt performed an invaluable service in early calling attention to the importance of the problem, and the close association of President Truman as Senator and Chairman of the Senate War investigating Committee with the problems involved meant a continuity of policy development of the utmost importance. Thereafter, initiative and over-all guidance was to a large degree supplied by OWM and its successor OWMR. Public expression of its interests were made not only through the Congress, but more directly through the industry and labor advisory committees of WPB and OPA. By and large, the preparations reflected the Nation's wishes; the difficulties that were encountered were to be ascribed more to the public's clearly expressed desire for maximum economic freedom as quickly as possible than to misjudgments or miscalculations on the part of those responsible.

Though the reconversion period would merge into the post-war era without clear-cut indications to mark the transition, it was apparent that at the end of the year the process of readjustment from war to peace was still far more complete. The effectiveness of the preparations that have been described in this chapter are thus not within the purview of this book. It was clear, however, that the Nation was enjoying high levels of prosperity, that unemployment was far less serious than had been anticipated, that inflation was as much a threat as it had been at any time during the war period. The dangers of economic ills, of deflation and depression and heavy unemployment had been pushed well into the future. The degree to which that was true spelled the success of wartime planning for peace. The economic problems that lay in the future were to be met by actions which were not a part of the preparations for the conversion to peace, but a part of the larger postwar era ahead.


Table of Contents ** Previous Chapter (14) * Next Chapter (16)


1. 56 Stat. 765.

2. Galloway, George B., Post-War Planning in the United States. New York: Twentieth Century Fund, 1942; also Senate Document No. 106, 78th Cong., 1st sess., Post-War Economic Policy and Planning; and Lorwin, L.L., Post-War Plans of the United Nations. New York: Twentieth Century Fund 1943, pp. 43-72.

3. The House established a similar committee in the spring of 1944 under the chairmanship of Congressman William F. Colmer.

4. U.S. Congress. Senate. Committee on Post-War Economic Policy and Planning. Hearings. 78th Cong., 1st sess., p. 410.

5. U.S> Congress. Senate. Special Committee Investigating the National Defense Program. Hearings. 78th Cong., pursuant to S. Res. 6, p. 8613 et seq.

6. The Budget of the U.S. Government for the fixed year ending June 30, 1945, Presidential Message Transmitting the Budget, p. x.

7. Senate Document No. 154, 78th Cong., 2d sess.; Baruch, Bernard M., and Hancock, John M., Report on War and Post-War Adjustment Policy.

8. 58 Stat. 785.

9. Fulbright Resolution (H. Con. Res. 25, 78th Cong., 1st sess., agreed to Sept. 21, 1943); and Connally Resolution (S. Res. 192, 78th Congress, 1st sess., agreed to Nov. 5, 1943.)

10. Survey of Current Business, August 1944, p. 6.

11. 54 Stat. 890. The responsibilities of Selective Service System under the act are interpreted in Selective Service, vol. 4, No. 4, Apr. 1945.

12. 9 Federal Register 5391.

13. U.S. Congress. House. Special Committee on Post-War Economic Policy and Planning. Hearings on H. Res. 408, 78th Cong., 2d Sess. Exhibit No. 9, General Hines' Testimony, pp. 467-473.

14. 58 Stat. 284. This was followed within a few days by the Veterans Preference Act of 1944 (58 Stat. 387) giving veterans preferred status in employment in the Federal Civil Service. Liberalization of some of the provisions of the Servicemen's Readjustment Act were provided by Congress in December 1945.

15. Statement of Maj. Gen. Walter F. Tompkins, May 10, 1945. The Army had announced an earlier discharge plan on Sept. 6, 1944. The Navy announced its plan July 20, 1945.

16. By the Army Sept. 3 and 20, 1944, and Nov. 16 1945; by the Navy Sept. 10, 1945, Oct. 24, Nov. 21, and Dec. 4, 1945.

17. Assistant Secretary of the Navy James V. Forrestal pointed out in 1943 that "American industry cannot stand a prolonged delay in settling its war contracts. Five automobile companies, which in 1939 had $4.40 of current assets for every dollar of current liabilities, had by the end of 1942 only $1.96 of current assets for every dollar of current liabilities. The manufacturing companies in the electrical, steel, rubber, and other industries, with $4.26 of current assets for every dollar of current liabilities in 1939, now have only $1.86. Industry has insufficient fat on which to live during a prolonged thawing out of frozen war contracts." Navy Department Press Release, Nov. 23, 1943, of Mr. Forrestal's address at the Wharton School of Finance and Commerce.

18. This cancellation of a $217 million contract involving 11 plants of the company, 438 principal subcontractors, and perhaps a thousand other subcontractors and suppliers required 16 months to settle.

19. Senate Report No. 537, pt. 1, 78th Cong., 1st sess.; House Report No. 809, 78th Cong., 1st sess.; House Report No. 1268, 78th Cong., 1st sess. U.S. Congress. Senate. Committee on Military Affairs. Preliminary Report on Contract Termination (of the War Contract Subcommittee), 78th Cong., 1st sess., Subcommittee Print No. 1, Dec. 23, 1943.

20. U.S. Army Services Forces. Procurement Regulations, No. 15, Aug. 14, 1943, War Department Basic Policy Statement.

21. 9 Federal Register 478-80.

22. Executive Order No. 9425, Feb. 19, 1944, 9 Federal Register 2071.

23. Surplus War Property Administration Statement of Policies to be Followed by Government Agencies in the Sale of Contract Termination Inventories, Apr. 21, 1944, 9 Federal Register 4559.

24. Surplus War Property Administration. Report to the Director of War Mobilization as to Activities under Executive Order No. 9425, Oct. 31, 1944.

25. SWPA Regulation No. 1, 9 Federal Register 5096, 9182, 12069.

26. U.S. Office of Price Administration. 11th Quarterly Report, pp. 7-8; 14th Quarterly Report, pp. 4-6.

27. U.S. Congress. Senate. Committee on Military Affairs. Summary of Recommendations Submitted on Surplus Property Legislation. Report . . . pursuant to S. Res. 198, 78th Cong., 2d sess., Subcommittee Print No. 5, June 5, 1944, pp. 146-48.

28. U.S. Congress. House. Committee on Expenditures in the Executive Departments. Surplus Property Act of 1944. Hearings . . . on H.R. 5125, Aug. 8, 1944. The Director of OWMR, Mr. Byrnes, also expressed opposition to a board.

29. Executive Order No. 9643, Oct. 19, 1945, 10 Federal Register 13039.

30. Executive Order No. 9689, Jan. 31, 1946, 11 federal Register 1265-7.

31. U.S. Congress. House. Committee on Appropriations, National War Agencies Appropriation Bill for 1944. Hearings . . . 78th Cong., 1st sess., May 27, 1943, p. 1083.

32. It should be noted that Messrs. Baruch and Hancock drew heavily upon WPB thought in the preparation of their report. Mr. Nelson in response to a request from Mr. Baruch submitted to him some 47 WPB studies within the field, including a study of basic importance by its Planning Division. U.S. War Production Board, Policy Analysis and Records Branch, Report No. 15, Development of the Reconversion Policies of the War Production Board, p. 27.

33. For example, in a public address in April 1944, Under Secretary of War Robert H. Patterson stated that "there has been far too large a crop of postwar planning; far too much thought given to proposals for making money after the war . . ." In October, the War and Navy Departments sent a telegram to the General Electric Co., protesting its plan to hold a meeting with business executives to discuss postwar planning. The telegram stated:

"The General Electric Co. has a splendid record for war production on an all-out basis. We know that you intend to keep the needs of the armed forces first and foremost as long as those needs continue. We are receiving urgent appeals for war supplies on an increased scale from the commanders of the fighting forces overseas. These demands made it plain that production of war materials must be increased rather than reduced. In view of these facts, it seems to us that any meeting of your executives at this time to consider postwar planning might be misunderstood and taken to mean that the needs of production are declining." Report No. 15, pp. 43-48, 92-102. Also U.S. Congress. Senate. Special Committee to Investigate the National Defense, Third Annual Report. See statement of Maj. Gen. Lucius D. Clay, ibid., p. 209-10.

34. General Somervell testified in December 1944 that at no time had our Armed Forces suffered from a lack of supplies. U.S. Congress. Senate. Special Committee Investigating the National Defense Program, Hearings . . . pt. 26, p. 11990, December 4, 1944.

35. Survey of Current Business, June 1945, pp. 10-16.

36. A view championed by the chairman of the Smaller War Plants Corporation, Mr. Maury Maverick, as well as by the Senate Small Business Committee.

37. The Special Committee to Investigate the Centralization of Heavy Industry in the United States, of which Senator McCarran was Chairman, suggested freezing of new war plants and facilities in the 11 eastern states. (U.S. Cong. Senate. Special Committee to Investigate the Centralization of Heavy Industry in the United States, Hearings . . . pursuant to S. Res. 190, 78th Cong., 2d sess.)

38. U.S. Congress. House. Committee on Naval Affairs. Investigation of the War Effort. Report of subcommittee appointed to investigate the causes of failure of production of Brewster Aeronautical Corp. under its contracts with the Navy. Hearings . . . 78th Cong., 1st sess., pursuant to H. Res. 30. Also, U.S. Congress. Senate. Committee on Military Affairs. Mobilization and Demobilization Problems. Hearings . . . 78th Cong., 2d sess., p. 519 et seq.

39. Congressional Record, Vol. 90, pt. 2, pp. 2402-04. Mr Nelson restated his view that the War Production Board's scheduling of production was restricted to war and that such action during reconversion would be of "great violence to our system of free enterprise."

40. War Production Board Press Release WPB-6922, December 1, 1944.

41. Munitions production scheduled as of May 1, 1945, and that actually achieved was (in millions of dollars):

  Scheduled Actual
May $4,616 $4,542
June 4,373 4,153
July 4,086 3,661
August 3,924 2,448

42. Executive Order No. 9599, Aug. 18, 1945, 10 Federal Register 10155-58.

43. Not all of these orders were actually operative. They included: men's rubber boots and rubber work shoes, Sept. 5; new adult bicycles, Sept. 23; coffee, Sept. 21; passenger automobiles, Oct. 29; firewood (Pacific Northwest only), Aug. 21; shoes, Oct. 30; meats, fats, canned fish, and cheese, Nov. 23; Tires, Dec. 26, 1945.

44. The Budget of the U.S. Government, Fiscal Year ending June 30, 1948, p. xxiii.

45. Office of Price Administration. 11th Quarterly Report, pp. 5-7.

46. Office of Price Administration. 14th Quarterly Report, pp. 2-4; 15th Quarterly Report, p. 5.

47. Executive Order No. 9599, Aug. 18, 1945, 10 Federal Register 10155.

48. Executive Order No. 9651, Oct. 30, 1945, 10 Federal Register 13487.

49. Executive Order No. 9638, Oct. 4, 1945, 10 Federal Register 12591.

50. The Budget of the U.S. Government, Fiscal Year ending June 30, 1948, pp. xx-xxi.

51. Executive Order No. 9672, Dec. 31, 1945, 11 Federal Register 221-4.

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