The Mobilization of Man Power


By LEO M. CHERNE, Executive Secretary, The Research Institute of America, Inc.

Delivered before the National Association of Purchasing Agents, Cincinnati, Ohio, June 4, 1940

Vital Speeches of the Day, Vol. VI, pp. 680-683

WAR that now engulfs an entire continent and threatens to cast its shadow and blight to the four corners of the earth is far more than a clash of opposing armies. The relentless sweep of mechanized units speeding terror and death through the countryside, the bombs that are dropped by the wingmen of death, the booming of cannon on the Maginot Line, the mighty armadas that clash in the skies—of these are propounded the drama of war. But the ultimate determinants of victory or defeat lie far from the field of battle.

War today has become economic rather than military. This does not mean, of course, that the other horsemen of the Apocalypse—death, famine, and pestilence—will not ride again. The present conflict may yet witness a greater destruction of human life than ever recorded before. What it does mean, however, is that today wealth, production, materials and armament are the major weapons of warfare.

War has become a contest between productive capacities rather than men. The productive capacity for plane production determines in advance not only whether a critical battle will occur, but, as frequently, the ultimate victor of that as yet unfought battle.

The Assistant Secretary of War, Louis Johnson, in his recent Army Day speech, emphasized the point that is the nub of this discussion:

"The mobilization of manpower among leading nations is no longer the critical factor in warfare. It has been superseded by munitions capacity as the criterion of a nation's ability to defend itself. The long thin line—the battle line—has been supplemented by an industrial front as wide and as deep as the nation itself. We have clear evidence from Europe that war today is being won—or lost—on the economic front—in the factories and in the workshops of the nation at war."

If the economic factor in warfare is displaced, or at least equalled in importance, the military strategy, if M-Day is to mean not only the military mobilization of one out of every hundred thirty Americans, but also the impact of industrial mobilization on each of the other one hundred twenty-nine, then knowledge of what economic control would do to civilian life, property, enterprise and activity in the event of future war becomes of first importance.

Let me first underscore two facts which, are of primary interest to business: first, industrial mobilization is far from a "pipe-dream" impossible of actual application; and second, industrial mobilization is by no means a "new-fangled" idea or a "New Deal" contrivance.

Modern war presents little opportunity for parliamentary quibbling and offers small premium for either sentimental sophistry or uncoordinated individual function, enterprise and initiative. War effort must be fast, complete, unreserved, and frequently brutal—brutal in its effect on the civilian as well as on the war front.

The relentlessness of a complete war effort takes different forms in different environments. When Ethiopia was visited three years ago by a sizable group of armed Italian educators and civilizers, its government posted the inevitable mobilization order in Addis Ababa, which read as follows: "Everyone will now be mobilized and all boys old enough to carry aspear will be sent. Married men will take their wives to carry food and equipment. Men without wives will take any women without husbands. Women with small babies need not go. The blind, those who cannot walk, or who for any reason cannot carry a spear are exempt. Anyone found at home after receipt of this order will be hanged." That represented total war to a nation where even a shillelagh might have been an improvement in armament. In the United States the manpower mobilization plans call for the expansion of our present army of 230,000 regulars and an additional 235,000 in the national guard immediately ready for service to 1,000,000 within four months. How small even this number is can be appreciated from the fact that it is only slightly greater than that of Finland and about one-fourth that of Poland when war came to those two nations.

But mobilize this million-man army and the difficulty first starts. The Assistant Secretary of War says: "We know now that it would be chaotic to have a million men spring to arms overnight. As a matter of fact, they might spring, but not to arms. There are not enough guns and bullets and powder in this whole country today adequately to equip a million men. The mobilization of manpower is relatively simple. As a result of our own experience and the many historical examples, the methods are well known and the principles are established. . . . We could raise two or three million men if national defense should so require and train them in nine months, but we could not furnish the weapons and supplies in less than two years."

The necessity for industrial mobilization can be completely understood only if it is realized that the absence of a pre-formulated and digested plan during the World War came as close to causing industrial chaos and drastic military handicap as could possibly have been experienced.

Since the World War each of the major powers has attempted to devise a system under which, in the event of another war, the repetition of its industrial mistakes of 1914-1918 could be avoided, the material resources rallied to the nation's support with a minimum of delay and maximum of effectiveness, and post-war reconstruction facilitated. Under the specific authority of the National Defense Act passed in June 1920, an Industrial Mobilization Plan has been evolved for the United States.

One primary thought concerning the control of the nation's resources guides all planning for industrial mobilization. That observation is, essentially, that it is impossible to regulate or control the operations of one segment of our industrial economy without concomitant supervision of all of the other factors with which that segment is joined. Perhaps I can clarify this thought by an over-simplification.

Let us assume that in time of war the military machine demands of General Motors that it produce 200 military trucks monthly. I use the word "demands" advisedly. This quantity is well within the ability of General Motors to meet during peace-time. To assure delivery, the procuring agencies establish close observation of the activities of General Motors. In making the demand, a price is reached which, on the face, justifies the company's cooperation and assures it a reasonable profit.

But if the regulation, planning, compulsion and demands were to stop at that point, the likelihood is that the requiredproduction must sooner or later bog down. If the price of contributory materials required by General Motors were left free to the exercise of the economic laws of demand and supply in time of war—if a number of the strategic or critical raw commodities, rubber, manganese, tin, etc., which are necessary in the manufacture of those trucks, were available or not depending upon the freedom of world shipment at the time—if labor were left free to exercise the power which two new factors will have given it (the depletion of the labor market by protective mobilization and the increase of its value by the desperate need for its aid) and were permitted free exercise of that power through strike, slowdown, sit-down, or any of the other useful weapons which are in labor's arsenal, or if the components which go into the composition of the cost of living were undetermined by law, unsupervised by regulation and uncontrolled by Government—if any of these were permitted to function willy-nilly, despite the demands upon General Motors for trucks, despite the threat even of commandeering of plant and equipment, troops would walk to the encampments and battlefields, not ride.

Unless there is the completely coordinated control of all of the factors involved in industrial mobilization, the whole process of industrial mobilization must inevitably become a "muddling through."

During the World War each of these controls was utilized by the War Industries Board. The difference now is that a comprehensive plan has been mapped in advance of war to avoid chaos that existed then.

In order to assure an adequate supply of munitions and materials for the armed forces, as well as the civilian population, the Industrial Mobilization Plan contemplates the control of the following in the nation's economic system: war labor, war trade, war finance, prices, transportation, power and fuel.

Each of these will be so controlled as to contribute to adequate munitions and adequate civilian supply. Let us now analyze how they will be controlled.

Control by priorities will be the keystone of any control over industries exercised by the Government in a war period. Under war conditions the demand for certain commodities becomes imperious. They must be produced. Their producers must have power, fuel, and raw material, necessary for the production of the commodities. When produced they must be transported to use areas. Intensified production, increased demand, a depleted labor market resulting from manpower mobilization, restricted exporting by other countries, blockade and similar wartime factors may produce a shortage of power, fuel, labor transportation and raw materials. It will then become necessary to divert labor, capital and raw materials from industrial operations of a character non-essential to the purposes of the war to activities which are essential.

"Priorities" will be the most direct, powerful and therefore the most important means of directing the flow of resources into desired channels of production. It will assure equitable distribution of materials and services according to national wartime requirements. Those industries whose products are most essential in supplying the armed forces and in meeting the basic needs of the civilian population will have first call on available power, fuel, raw materials and labor. Those industries next in line on the scale of wartime necessity will then be supplied, and so on. Those industries producing luxury items and items considered non-essential will be permitted power, fuel, raw materials and capital only if, and to the extent of, any surplus left after the essential producers are taken care of. The process of priority will curtail the production of non-war industries and preserve labor,material, capital and transportation for use in war industries in those cases where there is actual shortage.

The executive responsible for purchasing must be prepared almost on M-Day itself, to face a rigorous application of this priority system. Economic mobilization presupposes that during war the value of any activity, any buying or selling, depends entirely on the closeness of its relation to ultimate victory. Thus, if the load upon transportation becomes critical, shipments non-essential to the maintenance of the war drive cannot be permitted. Similarly, new construction will be limited to those industries and activities vital to the national effort.

Military necessity will require the control of certain raw materials in order to obtain essential war production. The flow of these materials will be directed in the desired channels by the action of "priorities," by actual commandeering of stocks of the necessary materials, and by arrangements between the Government and individual industries represented by war service committees.

The fact that the United States is peculiarly favored in being the leading industrial and agricultural country in the world has led many to believe that it could be entirely self-sustained in time of war. It is self-sustaining to a degree nearly equal to the total of the six other great powers in respect to food, power, iron and steel, coal and petroleum, machines and chemicals, but in spite of this it is not totally self-sufficient for either its own industrial peace-time needs or for war-time military requirements. A list of strategic, critical and essential commodities is currently kept alive and up-to-date by the Army and Navy Munitions Board. These materials will be available to private industry entirely dependent upon the need which the Government has for the production of that industry.

It is not contemplated that the supply of power will cause any difficulty in the event of a future war. If, however, the existing supply is insufficient, or should warfare cause injury to any portion of the power supply, then the very life blood of industry, the motive force of its machines, will be doled out in proportion to the importance of the activity.

The supply of fuel to industry through the establishment of a priority system gives to Governmental control over industry a means of restricting the operation of non-essential industries and of continuing those of an essential nature.

Among the most vital supplies needed for the operation of business is capital. A war-time super-agency, the War Finance Control Commission, will prevent registration of any security with the Securities and Exchange Commission (or its successor), unless approved by the Control Commission. The sale of any security in excess of a certain amount without approval by this Commission will also be impossible. The object will be to assure that activities essential to production for the war have first call on new capital. In addition, an enormously expanded Reconstruction Finance Corporation will control dollar destiny for business throughout the duration of the war. Loans will not be available except to essential enterprises. Capital will be a vital asset, hoarded with relentless unsentimentality.

These economic factors, the production facilities, raw materials, labor, finance, power, fuel, and transportation, will on M-Day not only be factors to be controlled but also methods of control. Oil, for example, will not only be a commodity to conserve, but, by its conservation, will act as a weapon to control industry.

Thus, we have summarized the executive's major problem. Is his activity essential to the conduct of war or the maintenance of civilian life? The degree of assurance and accuracy with which that question can actually be answered will determine the degree to which the necessary supplies of business and industry will be available. The key to the availability of materials, power, fuel, labor, transportation facilities and capital lies in the necessity for the particular business activity during war. The inherent tragedy to some businesses in the Governmental determination of what is and what is not an essential business is dramatically evident in an amusing incident recounted in Frederick Paxson's "America at War", During the World War when a list was compiled of non-essential cotton manufactures, the administrative officer in charge came to corset laces and in disposing of that problem, commented: "Corset laces are certainly not essential. They can just as well wear them without any trimming." On the basis of these facts we can create a working model for M-Day.

The most immediate and widespread effect of industrial mobilization will be in the control of prices. The Price Control Commission will be set up promptly after M-Day with representatives from all of the other war super-agencies as well as the regular Federal commissions and divisions interested in the problem of prices. It is contemplated that the Commission will be able to prescribe: (1) Maximum, minimum or absolute prices; (2) Margins of profit to producers and dealers; (3) Differentials based either on primary markets or upon zones or districts; or (4) Different prices for different localities or for different uses in the same locality.

Certain commodities in war, particularly in the early stages, disturb the price structure. Among the things which contribute to this are unusual Government demands, diminished available supply for civilian use, reckless Government buying, high cost production because of the employment of unskilled workers, increased insurance, interest and tax rates, restriction of essential imports, and influence of the currency.

The exact method of price control has not yet been determined, but the following general policies will govern any price control action:

(a) Prices, when established, will apply alike to Government and civilian purchases, and win remain in force until changed.

(b) In general, all prices fixed will be considered as maximum. Minimum prices will be prescribed only when such action is necessary to stimulate production to a point higher than has been brought about by current conditions, or as a special aid to producers of a certain commodity.

In the determination of prices, a Commission to be appointed in the event of war will be guided by the fact that just compensation must be allowed. With this in view, the Commission may base its decisions (as to price or profits) on whichever of the following it deems to be most desirable in each case:

1. Profits earned by the industry or the commercial activity concerned over a pre-war period to be specified by the Commission.

2. The cost of producing the last unit of the indispensable amount of the commodity required by the war program, either throughout the industry as a whole or upon a regional or territorial basis.

3. Prevailing market prices.

4. Actual cost of production plus a reasonable return on capital.

Producers and dealers in foodstuffs, certain basic raw materials, and manufactured necessaries will be put under license control. The licenses issued to them may specify margins of profit and other conditions under which licensees are required to operate.

In order to retard the anticipated war tendency toward an undue rise in the prices of real estate and rentals, a presidential proclamation may be promulgated declaring it unlawful to buy, sell, rent or lease any real estate or dwelling, or business at a higher rate or price than is in effect at the time designated. Modification of this ruling will then be made from time to time in order to keep these prices in consonance with wages and commodity prices.

Enforcement of the price control mechanism will be relatively simple. If our executive—whether he be in the service, manufacturing, distributive or merchandising trades—is inclined to indulge in a little quick profiteering in view of the certain increased demand and expected desires to hoard commodities, the Price Control Commission will have recourse to one of the following alternatives. If the business operates under a license, the license will be revoked. By use of the priority function, the necessary power, fuel, labor or transportation may be limited or stopped to any violatory of a price decree. To regulate the civilian demand itself and therefore prevent the tendency toward increased price, necessary commodities may be rationed. Violators may be prosecuted under Federal law. Finally, there always remains the same weapon for enforcement of this control as for all other controls—the threat that any stubborn executive may have his entire place of business, plant or equipment commandeered by the Federal Government—or the business left in his hands with the Federal Government requisitioning the facilities or commodities.

Actually, however, prices cannot be completely controlled, except where there exists physical control in one way or another over the goods or services. There probably never can be established a sufficient regulatory body to control all prices, even if it were desired. It is probable, therefore, that the initial effort will be made to control the basic prices, the prices of those goods and services which go into the elementary phases of the cost of living: food, clothing, rent, as well as the basic commodities which are needed for industrial manufacture. Fix these, and the rest of the prices will adjust themselves. It is true that luxury prices, if uncontrolled, will shoot sky-high. There is, however, little sound objection to this in face of the fact that the substantial portion of the profits of the luxury manufacturers, distributors, and sellers will be recovered in war taxation. In addition, the priorities accorded to essential industry and limited to less essential industry will leave the luxury manufacturer on a precarious limb.

One of the major problems that a War Administration must face is the one which caused greatest dissatisfaction during the World War on all sides—labor migration. Solution of the labor problem may be attempted by the use of four means. These are:

(1) Control of the cost of living and the keying of the real wages to that of living cost for all workers.

(2) A single unified employment service for prevention of competition for labor.

(3) The development of public opinion.

(4) Compulsory arbitration of disputes after all means of conciliation and mediation have been exhausted.

I recognize the peace-time difficulty of publicly discussing any limitation on the freedom of labor, particularly during an era when labor has just begun to lose its milk teeth and sink its new-found molars into substantial food.

Labor in time of war will pay two prices: (1) It must furnish the almost complete bulk of manpower in protective mobilization, since the bulk of the country is actually labor in field or factory; and (2) It must not in the exercise of either whim or direct need impede the flow of production needed for the successful conduct of the war. Will labor willingly pay those two prices?

Under our form of government no matter how one-man the control, how drastic the regulation, the concessions whichwill be compelled from the various segments of our economic society must be bought. Thus, if labor is to agree to absolute non-stoppage of essential productive activity, it will demand, and must receive, the following assurances: (1) That industry will not be permitted to profiteer at the cost of the civilian population—and this means war profits control over industry; (2) That industry will not be permitted to unreasonably increase the cost of living beyond labor's ability to pay—and this means price control; and (3) That labor will have the opportunity to earn its just share of any legitimate profits which war brings to industry—and this means the continuance of the right to collective bargaining and the assurance that the legitimate demands requested in collective bargaining will be forced by the Government if the freedom to strike no longer exists.

Now we begin to see the interrelationship between the segments of our economic society. If labor is to pay its price, it demands three guarantees which, in turn, are prices to be paid by industry. Will industry pay these prices? The answer here again is "Yes" if it, in turn, is guaranteed a number of things:

(1) That labor will not be permitted to arbitrarily or unreasonably make demands for wage increases which have no relationship to the profits of industry or the cost of living;

(2) That labor will not be permitted under any circumstances to stop production in essential enterprises;

(3) That industry will be assured adequate power, fuel, labor, and the necessary raw materials which go into the construction of an essential commodity;

(4) That any war profits taxation will not only leavebusiness with a profit but leave it with a cushion on which to fall during the post-war readjustment;

(5) That it will be provided with the necessary labor, skilled and unskilled, despite protective mobilization, and that it will be able to retain those of its key men who are vitally necessary to its activity;

(6) That the determination of what is essential enterprise and what is not essential in time of war will be reasonable; and

(7) That it will be informed promptly of the ways in which business can best adjust itself and alter its activity in order to avoid war-time discontinuance and the resultant impossibility of peace-time resumption.

These are the critical problems as I see them in the control of the nation's resources in time of war; critical not only because of their complexity but because they involve human emotions and public opinion. These latter factors mean that no matter what legislative authority is secured in the early days of the war, the segments of public opinion involved must be prepared to expect the adjustments before that time. Labor must know its responsibilities and its guarantees. Industry must know its profits and its inhibitions. And above these, Government must know that it will receive, with maximum efficiency and minimum cost, the machinery of war.

Industrial mobilization is planned economy— planned economy for a specific purpose, but planned nevertheless. All life, all business enterprise, all economic functions, all normal incentives of a peace-time economy, will on M-Day be forced into the mold of a war-time economy.