Fundamentals of Freedom
INITIATIVE AND ENTERPRISE PROTECT REAL SECURITY
By EUGENE E. WILSON, President, United Aircraft Corporation
Delivered at the Sixty-Second Annual Meeting of the Union League Club of Chicago, May 28, 1942
Vital Speeches of the Day, Vol. VIII, pp. 516-521.
WHEN Winston Churchill said of the Royal Air Force, "Never in the field of human conflict was so much owed by so many to so few," he might equally well have been referring to the epic of the American Aircraft Industry. When the history of this war is written, it will clearly reveal the miracle of American aircraft production, and the courageous part played by a handful of men once called, "munitions racketeers" and "merchants of death."
You will recall the performance of the last war, when we spent hundreds of millions of dollars on aircraft thatarrived too late. Out of this failure of World War I grew the triumph of World War II—and all because a few young men determined never to let it happen again.
Most of you will remember the aircraft controversy that revolved about General Mitchell. I wonder how many of you recall that President Coolidge appointed a Board, headed by Dwight Morrow, to investigate it. The report of that Board is one of the great documents of modern times, and Dwight Morrow should go down in history as one of our great statesmen.
This Board found, fifteen years ago, that a strong airforce is a fundamental requirement for National Security; that the backbone of that air force must be a strong, private industry, financially sound and technically supreme; and that a continuing program of procurement of military and commercial aircraft was essential to such an industry. That document is the Magna Charta of American Aviation—if not the salvation of our freedom!
It breathed the breath of life back into a groggy industry, and the several five-year procurement programs which followed, developed its sinews. Even then, the going was heavy. Pacifism was abroad in the land. Those who believed that the way to peace lay through disarmament, fostered Congressional investigations, profit controls, arms embargoes and propaganda designed to discourage arms production. At a time when old line defense manufacturers changed over to silk hose and pocket knives, the young aircraft industry battled its way against great odds.
Unprofitable home markets forced it into the foreign field. There, in direct competition with products of countries which, with strong nationalism, subsidized their foreign trade, it won a clear victory on the performance of its product and its low cost. American Douglass and Lockheed transports, powered by American air-cooled radial engines, dominated the world's air lanes.
The proceeds of this trade were plowed back into costly engineering research and development—to produce even more advanced types. It is not to our national credit perhaps, but American technological superiority in aircraft design had to be financed by the proceeds of foreign sales and foreign licenses.
Philosophy of Flexibility in Production
Through its own resourcefulness, our industry progressed steadily until 1938. Then, the Arms Embargo began to cut off the life blood of foreign trade. The work of a generation was threatened. The repeal of the Arms Embargo Act saved us just at the count of nine!
Immediately, foreign governments placed large orders for supplies, and financed new plants. Three years ago, our industry got under way on an expansion program that has been rapidly snowballing along, until now, our aircraft industry alone is producing more equipment than the entire output of any other nation in the world!
But this is not all. While expanding our own output, we enlisted the help of the great companies of the automotive industry, and others, to construct products of our design. To appreciate the magnitude of the conversion job of the automotive people, you must understand certain fundamentals. The secret of automotive mass production was the freezing of models and the development of single-purpose machine tools designed to reduce costs. While ideal for the automobile, built to sell at a price, this was unsuited to the airplane, designed for maximum performance measured in the highly competitive field of transport and combat. Aircraft designs cannot be frozen, they must be fluid—in a process of continual change, to provide our pilots with superior equipment at all times.
This forced development by the aircraft industry of its "philosophy of flexibility in production." We used standard machine tools, with special jigs and fixtures which could be quickly changed to suit design changes. When we expanded, we simply put the machine tool industry into quantity production on standard machines. That industry performed the first production miracle.
At the same time, we specialized in automatic controls, i.e., the push-button operation, to facilitate the training of operators. Boys and girls are trained in a few weeks torun complicated machines, so that to date, we have suffered no shortage of manpower. All this was foreseen and provided for by the leaders of aviation.
Automotive Industry Learns New Technique
Now, it is to the everlasting credit of the automotive industry that it adopted our philosophy bodily, and put it into effect. To do this, it had to scrap its old ideas and old tools, learn our specialized technique and even build new buildings and train new crews. The rapidity of conversion of the automotive industry is another of the miracles of our time.
Here stands the record for all to read who have eyes to see. The aircraft industry alone assumed to itself, the responsibility for preparing against war to the end that it would be ready with the best airplanes in the world, and the ability to expand its capacity at a rapid rate. This responsibility, it has discharged. All the aircraft delivered to date have been manufactured by the aircraft industry, and those on the way will be built to its superior designs.
Just as a measure of the whole industry's performance, let's take the record of Pratt & Whitney Aircraft, the engine manufacturing Division of my company. Even three years ago, we were one of the largest engine builders in the world. Since then, we have increased our output, manifold. This has necessitated great increases in plant and employment. The public interest does not permit revealing the magnitude of this. Four engine models are in large-scale production, including the new 2000 horsepower air-cooled Double Wasp introduced last year. In addition, we have helped Ford, Buick, Chevrolet and Nash-Kelvinator to build to our design, and have furnished priceless technical assistance and "know-how" without profit.
Any one of these four tasks would have been a major undertaking. Their simultaneous accomplishment is without parallel in history. In the face of shrill shrieks by pacifists, we have accomplished in three years, more than German industry did in eight years under the full force of a government bent on aggression.
I mention Pratt & Whitney Aircraft only as an example. Wright Aeronautical has a similar record. The industry as a whole has duplicated it. American management may be inept in politics, but it recognizes no peer in its own field— Production.
I am sure you will be interested to know how we appraise the performance of our new collaborators. Up in East Hartford, we recently disassembled a new engine built by Buick here in Chicago, and another built by Pratt & Whitney Aircraft. Then, we mixed up the parts and reassembled two composite engines. Both of them passed their tests with flying colors. No matter where our engines may fly in this wide world, parts will be completely interchangeable without any fitting of any sort, whether they carry the proud eagle of Pratt & Whitney Aircraft or the world-famous insignia of Ford, Buick, Chevrolet or Nash.
In this distinguished assembly of production men of proven competence, we have helped create and consolidate the greatest mass production team of all time.
The Cold Record of Performance
This is the cold record of performance, yet it has a deeper significance still. It means that free American enterprise still flies a broom at its masthead, the symbol of a clean sweep. The fanatics who once raised the cry of "merchants of death," now shrilly scream, "too little and too late"—but Industry marches on.
In a recent letter to me, Mr. Curtice of Buick said:
'Certainly some appreciative mention is due your good company, the simple truth being that our own program is made possible by the fact that you had developed such a good engine in the first place, and that you so unreservedly helped us with your counsel and guidance, in the second.
"I think it is good alike for industry and the country to know this. It must be heartening to the average man to realize that American manufacturers can cooperate in a crisis, as vigorously as they can compete in ordinary times."
The Superiority of American Freedom
Manufacture comprises five elements, each of which, singularly enough, begins with the letter "M." You can write a formula about it—M = m1 + m2 + m3 + m4 + m5. Where "M" is Manufacturing, m1 is money, m2 is men, m3 is machinery, m4 is material and m5 is management. The first four of these, i.e., money, men, machinery and material, are tangible. Of the four, material is at present the really critical one, because of the blockade.
Management, however, is not tangible. You can't buy it in the market place. You can't create it out of hand. It is born, not made. You don't appreciate it until you no longer have it—then, it's too late. It is that priceless ingredient, a sort of catalyst, that furnishes the impulse by which the other four m's are converted from inert, unrelated elements into a living mechanism, like, say, an aircraft engine.
Its importance is discounted by some, like the bright reformer who said of an industrialist, "All he knows is how to produce!"
Now, the superiority of American management cannot be accounted for on the grounds that we are a superior race. We don't subscribe to that doctrine. Our performance can be ascribed, however, to the superiority of American freedom. Our forefathers left us this priceless heritage, not only to free us from the compulsion and regimentation of the Old World, but to enable us to develop and utilize the resources of the New. This, we have done, while in other lands, even greater resources still lie fallow.
And the guiding light of our system has been hope—hope of reward. In business, the reward must be profit, for profit is not just material gain—it is the index of worth, the signal beacon that in the free play of natural forces, indicates which course should be abandoned and which pursued. More importantly, it is the great controller, or regulator, of costs—the incentive to get costs down. This, in turn, forces volume up, and we get the economy of abundance. We get, too, a vital, living economy—not the dead hand of bureaucracy.
Simple Fundamentals Obscured by False Doctrines
These simple fundamentals are so obvious to the businessman as to hardly warrant restatement, yet they have been obscured by false doctrines. Profit control is a major political project—almost to the exclusion of production control. We now have profit control by taxation, profit control by negotiation and profit control through price control. A nation that neglected its arms, haggles about profit with a private industry which sought only to protect its homeland! American industry, if given a chance, would control profit itself.
My own company, for instance, in the face of an astronomical increase in shipments, stabilized its net profit at the pre-war level. This reduced the percentage of net profit to sales from 7% to 5%, and now, to 2% to 3% for 1942. Pre-war earnings came primarily from business with others than our own Government, and out of plants owned wholly by the stockholders and operated with their resources. Thisestablished the policy of no extra profit out of war, to implement which, for over a year, we have voluntarily reduced our prices on fixed price contracts by many millions of dollars. Others have done likewise—even though there is no provision for increasing prices if costs exceed present estimates.
Recently, when asked to investigate the possibility of constructing a new plant with Government funds in a distant location, we offered to go ahead, with the understanding that it would result in no additional profit to our company.
However, we must clearly understand that if the profit incentive is eliminated, then the ceiling on costs is removed. Without such control, the costs of the defense program can soar. What use then, to treat symptoms of inflation while encouraging the disease itself? American business doesn't defend the profit motive through self-interest, but through the public interest as well.
If those theorists who don't understand the American way of initiative and enterprise, would quit tinkering with the spark plug, and put one drop of oil in the magneto instead, American industry would demonstrate such enthusiasm as has seldom been seen in this land! Continued hostility to industry will not only impair the one strong force which can be depended upon to win the war, but may also destroy the one thing worth fighting for.
Freedom a Dynamic Force
Our freedom is not just a pleasant material condition—it is a vital, dynamic, constructive, spiritual force. It even produced a miraculous military aircraft industry in a land bent only on peace. Where man, in all humility, avoids interference with the free play of natural forces and endeavors to conform to them and improve his employment of them, he produces a miracle of planning that no human mind could ever conceive.
The soul of America is the spirit of American freedom. Our ancestors, strongly imbued with the fundamentals of righteousness, created here a new concept. It has its origin in the idea that all authority springs from the free consent of the governed. It manifests itself in the Christian philosophy of cooperation. Its guiding light is hope of reward. The real reward is the individual knowledge of work well done, whether the outer symbols be a large house on the hill or a little medal in a case. During the era just passing, we have judged too much by the outer symbols. In the period ahead, we will judge more by service rendered.
This concept of freedom is fundamentally opposed to the Old World concept of compulsion, whose driving force is fear. This war, at the bottom, is a struggle between these two concepts, and the stakes are high indeed. And the enemy is not just the Axis:—it is that sinister force of selfish materialism, whether it be called socialism or any other reactionary ism. If we lose—it is the long shadow of a night of darkness. If we win—it is the rosy dawn of a new day.
The Profit Incentive and Real Security
We in aircraft were irked by the resistance encountered in our struggle to build the backbone of National Security, but we realize now it did us little harm. On the contrary, we were made strong by the task of overcoming difficulties. Out of it, we have developed a new sense of social responsibility. The pioneer aircraft companies are seeking to discharge a public trust in obedience to these ideals:
"We dedicate ourselves to the great Task of producing whatever is required by the war effort at the maximum rate and the lowest cost consistent with high quality.
"In the execution of the foregoing, we pledge ourselves: (1) to limit profit to that necessary to maintain the business in a sound financial position; (2) To stimulate output and reduce costs by rewarding individual initiative with adequate compensation under the best possible working conditions; (3) to take all measures consistent with accomplishment of the Task to the end that after the war we can help restore stability in the shortest possible time."
These principles combine practical patriotism with business and social sense. They recognize a stewardship of public funds, forswear excessive profits, and set fair earnings as the mainspring that drives our free-running machine. They establish salaries and wages as the index of worth, the guiding spirit of the cooperative system which depends for its motive upon the hope of reward. They accept the responsibility of private enterprise for National Security.
I am proud to say that many of our major subcontractors, acting under these principles, have voluntarily made substantial reductions in price. These have been passed on to the Government. We thus see in the making, a new concept of public service based on the sound premise of the economy of abundance, but with a broader distribution of benefits. Here, I believe, is a new emphasis on Service, and a real advance in human relations.
Industry wants no excess profit. Industry didn't want the war. It has responsibility in National Security to four groups: the Public, the Government, its Employees and its Investors. These are grave responsibilities, and only the men who have borne them, realize how heavy they are. The record of history, indelibly carved, proves over and over again that only private industry operating under the incentive of profit, can bring real security to any land. What better proof do we need than the miracle of aircraft production?
Industry welcomes change. It thrives upon it. Industry even welcomes social change and the broader distribution of its fruits. But it cherishes its freedom—its life spark. It hates slavery under any name. It wants no ism but Americanism!
Security Through Freedom
As spectacular as industry's performance has been, it still has a long way to go. Since we can now manufacture weapons faster than men can be trained to use them, or shipping provided to move them, we have the responsibility of looking ahead. The same vision that provided aircraft in quantities at a time when they were vitally needed, must be projected into the aftermath. It is industry's responsibility to provide security for our people. Today, it is security against attack from without; tomorrow, it will be security from want within. We want security through freedom— not at the price of freedom.
We in aviation are thinking a lot about this. We created the airplane in the youthful hope that it would benefit mankind. For the moment, it is diverted to other uses, but in the long run, it will come into its own. To appreciate this, we must understand its fundamental qualities.
The airplane differs from surface vehicles in the important fact that it moves at high speed and in the third dimension. From the military point of view, this is revolutionary. It is almost impossible to blockade the airplane, because of its extreme mobility.
This is profoundly important now, because we are being blockaded on both coasts. One enemy has denied us strategic materials, like rubber, by seizing the source of supply. The other denies us freedom of movement on the Atlantic by long-distance submarine blockade. This has already forced the use of aircraft for transport to a degree that couldhardly have been imagined six months ago. The history of aviation is the history of the accomplishment of the impossible, and war has always been a prime factor in forcing its accomplishment.
We are inclined to think of the striking power of aircraft as its primary function. The facts are that transportation is already superseding attack. If you have followed the newspapers, you are aware of startling changes that are projecting domestic airlines into the far-flung foreign field. And the airlines, like our manufacturing industry, simply take it in their stride. Horizons are already lost in aviation.
This means that transportation is being revolutionized. The airplane, which has already shown itself able to compete successfully with highly developed railway and highway transportation, comes into its own over new terrain. For the airplane is really the most economical form of transport, when you consider the costs of such surface rights of way as railways, highways and waterways. The right of way of the airplane is the free air.
"Great Things Are Possible With the Airplane"
Now, with cheap Asiatic sources of materials cut off, we are forced to develop resources of the Western Hemisphere. Costs and priorities preclude construction of surface rights of way. The airplane is the answer, both from the point of view of speed and cost. This is true even with present airplane designs—and yet revolutionary developments are in progress.
Among these are some that may revolutionize personal travel. Mr. Igor Sikorsky, the famous Russian designer, has at last perfected the helicopter. This rotating wing aircraft can rise and descend vertically, move forward, backward and sideways, and even hover! It is possible to construct the helicopter in the form of a light car suitable for travel to and from business. Then, when the distance warrants, you can go up and over by air to your destination! We may have seen the end of the era of the present motor cars.
Whether for transport or private travel, great things are possible with the airplane. It can be quite as revolutionary after this war as was the railway following the Civil War and the automobile following World War I. Whether it will or not depends upon whether our system of enterprise and initiative continue.
Thus, we have seen the spectacular creative work of American industry under the system of free enterprise. This shining performance belies those reactionary ideas of depression years, when men adopted "the economy of scarcity," and were mired in the slough of defeatism. Now, we are busy doing the exact opposite of everything advocated back there. Ours is a renewed faith in the "economy of abundance." This not only for the present war effort, but also, for the peace after war. For in our time, we have seen clear proof of the fundamental spirituality of American Freedom, and its philosophy of Service and Sacrifice. Let others trim their sails to every fitful wind. Our ship sails on—swept strongly by deep currents into new waters.
"We Have But Scratched the Surface"
Men close to research know that we have but scratched the surface, and untold opportunities remain for those who have initiative and courage and creative capacity. The airplane is potentially the basis of a new economy capable of bringing untold improvement to the world. Unexplored and undeveloped resources are wide open to development, and a new vehicle is ready for duty. If freedom and initiative and enterprise continue in our land, American airplanes will realize these possibilities, for while innovation and creative research congeal under compulsion, they flourish under freedom.
And so, thanks to our American principles, we stand today in a position to realize this great future opportunity.
Technically, we have a head start. Given the opportunity to function in the future as in the past, we can maintain the lead. Given freedom of initiative, American private enterprise will fly the world's air-borne commerce. And on the same wings, it will carry that freedom to the whole world.