Business: Boom, Shortages, Taxes, War

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As for those businessmen who had money left over after taxes for investment, they also found little use for it. The underwriting fraternity siphoned $1,000,000,000 into new private investment, which would have been a respectable sum in a less prosperous year. Meanwhile RFC had by Dec. 1 poured $851,000,000 into new plants and enterprises for defense. Jesse Jones was no longer a village banker preoccupied with risk and interest rates; he was putting the Government into the munitions business, partly because it was no kind of business for private investors. But meanwhile private investors found other outlets blocked by the shortage of materials and equipment.

Materials & Men. The shortages which sprang from U.S. soil in 1941 like armed men from dragon's teeth took most businessmen by surprise. Ed Stettinius got his surprise as early as February, when the vast expansion of the plane program forced him to retract his previous reassurances and put aluminum, as well as machine tools, under the first full mandatory priorities. By year's end the defense demand had also elbowed civilian demand out of the market for copper, brass, nickel, tungsten, zinc, magnesium, tin, and even steel.

The most unexpected shortage was steel, since the U.S. owned 45% of the world's steel capacity. In February Engineer Gano Dunn estimated defense steel needs for 1942 (including export) at 18,984,000 tons. Seven months later Donald Nelson estimated the same demand as 35,000,000 tons. Meanwhile steel expansion had been authorized to the extent of 10,000,000 tons. Yet when 600 steelmen came to Washington in November, OPM's Arthur Whiteside estimated their 1942 production at only 82,600,000 tons—200,000 tons less than output in 1941. For by then a new shortage had arisen that would more than offset the capacity increase: a shortage in steel's own raw materials, especially scrap.

From 1935 to Jan. 1941, the U.S. exported over 20,000,000 tons of iron & steel scrap, chiefly to Italy and Japan.

In his first fireside talk after Pearl Harbor, Optimist Roosevelt reported: "A review this morning leads me to the conclusion that at present we shall not have to curtail our normal use of articles of food."

Those not very reassuring words at present foreshadowed the possibility of the most incredible shortage of all.

It was all the more incredible to those who recalled that the farmers had been notoriously excluded from the 1940 boom. Then came Lend-Lease, and with it Secretary Wickard's appeal for huge quantities of dairy, poultry and pork products. Although the wheat, cotton and corn surpluses remained oppressive, the demands for food crops had begun a price rise, which the Congressional hayseeds, smelling Utopia, quickly climbed aboard. It took a Roosevelt veto to stop them from freezing the surpluses; but nothing could stop them from raising the floor under farm prices, nor from demolishing Leon Henderson's gingerly attempts to give them a ceiling. Result: farm prices led all prices upwards; farm income reached an alltime high of $11,200,000,000 for the year. Two days after Pearl Harbor, Ed O'Neal, for 17 years a farm lobbyist, remarked: "For the first time in history a farmer can plant a crop and know that he will get fair prices for it."