Business: Boom, Shortages, Taxes, War

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On the factory end, the basic assumption was that the new U.S. arsenal should be built from scratch, alongside its civilian economy. The fact that there would not be enough materials to supply both was not foreseen. Another assumption (all too true, as it turned out) was that defense contracts would be closely scrutinized for profiteering; by putting up with a Truman Committee now, munitions makers might avoid a Nye Committee later. Thus many of the most important contracts signed had noblesse oblige written all over them.

Such contracts were designed for plants whose post-war usefulness was in doubt. They meant that the Government, after the war, might own a good piece of the aluminum capacity of the country, as well as gun capacity. Meanwhile, for the contractors, they meant that however deeply their patriotism was engaged in war work, their money and their self-interest were not. On its first $32,000,000 deliveries of all defense products, Chrysler's profit was 1-25th of 1%.

Average hourly earnings in 25 industries reached 85.3¢ in October, highest on record, 10.7¢ over October 1940.

As the nation's banker, the Government was generous. It contracted to put some $5,800,000,000 of new plant at industry's disposal, on terms which appeased industry's financial vice presidents. But Government also became the nation's No. 1 customer in 1941; and in that role Government was neither generous nor smart. Its contracts offered no risk, and left no margin for entrepreneurial initiative. Almost none were devised, for example, that provided a bonus for early delivery, or for extensive subcontracting. Defense left untapped one of the greatest U.S. resources: the profit motive.

As a crowning irony, left-wing critics accused the $1-a-year-men of stealing the country. But the $1-a-year-men sacrificed more than the country knew. Few of them are really rich. They depend on their salaries (which their companies usually continued to pay) for a living. This living includes the large insurance premiums which many executives have substituted for the stockmarket as the path to security. After deducting those, taxes and expenses of his family back home from a $50,000 salary, the typical $1-a-year-man was lucky to have $10,000 left.

Life in Washington took that. He paid the Mayflower up to $10 a day for a cubbyhole. He paid $2 for lunch at the Occidental when he could get" into the place; he shared a two-by-four office in the Social Security Building with three other men; he held his confidential talks in the corridors; and he commuted on weekends to New York or his home town in order to keep sane. By year's end most $1-a-year-men would have been glad of a thank-you letter from the President and a chance to go back to the factory. There, where they knew the ropes, businessmen could really win the war.

One of the problems that completely buffaloed these strangers to Washington was the U.S. Army & Navy. It even buffaloed Sears, Roebuck's ace purchasing agent, Donald Nelson.

Technician Nelson was able to save the Army a lot of time, money and unnecessary unpopularity. When the Quartermaster Corps wanted to order cot wire of a kind that U.S. mills no longer make, he persuaded the Corps to change specifications. He taught the Corps how to place its huge orders in ways that would least disrupt the economy.