Business: The Great Gamble

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In 1951, said Defense Mobilizer Charles Wilson, we took "a gamble . . . perhaps the greatest gamble in our history." By "we," Charlie Wilson meant the United States of America.

The gamble was that U.S. business could expand fast enough to 1) produce the armaments needed for possible war, and 2) furnish the U.S. people with all—or almost all — the civilian goods they wanted.

With the year's end, the reckoning is in: the U.S. both won and lost. U.S. industry expanded at a rate undreamed-of at the-start of the year, and kept civilian-and even luxury-goods production at a phenomenal high. But the U.S. fell shockingly short of building up its strength against the threat of a major war. It failed even to turn out the arms needed for its immediate safety in Korea and Europe.

"Business as Usual." By working furiously, the U.S. added machines and plants for the basic sinews of war roughly equal to 69% of the national output of England. Steel, oil, chemical and electric power production and expansion reached new highs. Then why the arms failure? The chief reason was that the Administration was more worried by a presidential campaign in 1952 than a world war. It tried to run the arms program in a way to inconvenience no one—worker, employer or consumer. "Business as usual" was the prevailing slogan. Unions gave up none of their wage demands or strike privileges; businessmen, in the words of one top executive, "too often moved heaven & earth, politically and otherwise, to keep civilian production going on as usual."

"Business as usual" cost the U.S. most heavily in planes, for which a third of the entire $94 billion arms appropriation was earmarked. As the year began, President Truman cockily predicted: "Within one year, we will be turning out planes at five times the present rate of production." Actually, the rate barely doubled. Against Truman's goal of 15,000 planes, the U.S. produced fewer than 5,000—and many of these were trainers and transports. The same failure marked the rest of the arms program. At midyear, guided-missiles production was 70% below schedule, tanks 40%, electronics 30%.

But part of Charlie Wilson's gamble —part of his policy, in fact— was to build up the U.S. productive capacity so that, in the event of all-out war, U.S. industry could shift to all-out war production without stripping a gear. In this expansion, the U.S. was successful to a degree realized by few at home and almost no one abroad. "Dynamic," often a businessman's cliche, was the right word for U.S. industry in 1951.

Shoot the Works. From the standpoint of total production, the U.S. was never more productive or more prosperous. Output of goods & services rose to $325 billion, nearly 15% above the previous peak, in 1950. Almost half this gain was due to higher prices, but the important half was due to increased productivity, thanks to more and newer machines.