CHAPTER V

THE MOBILIZATION OF INDUSTRY

Analysis of the problem - The two elements of marshalling industrial resources and establishing arbitrary control- Industrial inventories of the Naval Consulting Board and the War Department Organization of the Council of National Defense Munitions Standards Board-General Munitions BoardThe War Industries Board-Its duties, powers, and defects Reconstitution of the Board as an independent administrative agency-Its powers and functions- Organization of procurement through the Clearance Committee, the Requirements Division, and the commodity sections - Organization and unification of individual industries on a national basis through the Chamber of Commerce of the United StatesConversion of industrial resources to war purposes through the Resources and Conversion Section and the Facilities Division Determination of priorities in raw materials, transportation, and finished products through the Priorities Division Promotion of commercial economies through the Conservation Division - Price fixing through the Price Fixing Committee Purchasing for the Allies through the Allied Purchasing Commission - Demobilization of the War Industries Board - Continuance of certain functions by other agencies Industrial Coöperation Service Industrial Board of the Department of Commerce-Its abortive effort to stabilize prices of basic materials.

It has been pointed out that a prime characteristic of the late war was the necessity for the marshalling of practically the entire industrial resources of the Nation for its prosecution. Such a mobilization of industry required the doing of the following things: (1) the securing of as complete information as possible regarding the industrial requirements of the Government for war purposes and the essential needs of the general public; (2) the securing of data showing the extent to which existing resources and facilities were adequate to meet these essential needs of the Government and the

public; (3) the taking of steps to secure an enlargement of these resources and facilities where they were found to be inadequate (a) by creating new sources of supplies or new establishments to manufacture the goods required, or (b) by converting existing establishments from the manufacture of articles not urgently needed to those the need of which was imperative; (4) the stoppage or curtailment of industrial operations not necessary for the prosecution of the war or the satisfaction of the essential needs of the public, in order that capital, plant, materials, and labor might thereby be released for essential work; (5) the determination of the use to which such resources and facilities as were available should be put to the end that they should be availed of in the way most urgently needed; and (6) the fixing of the price and other purchase conditions under which these resources should be secured.

These last two requirements introduced the factors of priority and price fixing which have been such characteristic features of the whole problem of meeting the industrial situation arising out of the war. Ordinarily the purchasing operations of both the public and the Government are carried on in what is known as a competitive market- that is, one in which the supplies actually or potentially available equal or exceed the demand. Under these conditions all persons and all services of the Government not only may secure the supplies required by them, but may secure them at reasonable prices as fixed by competitive conditions. Under the condition of acute shortage in respect to many essential commodities that obtained upon our entrance into the war, procurement operations had to be carried on in a non-competitive market, one in which there was not a sufficiency to meet the demands of all, and in which

the prices demanded were consequently not regulated by competitive forces. In these circumstances it became imperative that authority should be vested somewhere to determine who should receive the commodities that were available and the prices that should be paid for them. If the several departments of the Government and the public were allowed to compete with each other for the limited supplies available, there would be no limit to which prices might not be advanced and profits secured, and there would be no assurance that proper services and persons would secure the supplies which it was desirable, from the standpoint of the successful prosecution of the war and the general welfare, they should secure. If excessive prices, profiteering, and the improper utilization of available supplies were to be avoided, it thus became necessary that the conditions governing the production, distribution, and utilization of industrial products should be arbitrarily fixed. The mobilization of industry thus meant not merely the marshalling of the industrial resources of the country for war purposes, but the subjecting of industry to direction and control in respect to many of its most important features.

The first step towards meeting this condition of affairs was taken as a matter of preparedness prior to the entrance of the United States into the war. The Naval Consulting Board, an account of which has been given,1 early in 1916 appointed a committee to make a survey of the Nation's industrial facilities. This committee, under the direction of Howard E. Coffin, Vice-President of the Hudson Motor Car Company of Detroit, made an ambitious attempt to list, describe, and classify all 1 Chapter II.

the industrial establishments of importance of the country. Regarding this investigation Mr. Coffin said, in testimony at a hearing of the Committee on Appropriations of the House of Representatives in 1917:

Under my direction during the past year there has been spent at a conservative estimate and entirely from private means, $250,000 in the taking of the industrial inventory. This inventory, covering some 27,000 manufacturing concerns, is now in the office of the Council of National Defense.

That this inventory proved of value is probable. It does not appear, however, that very large use was made of it. It was prepared at a time when the nature of the problem and the character of the data needed were not clearly determined.

In the same year the Secretary of War, under authorization of Section 121 of the National Defense Act of June 3, 1916, appointed the so-called Kernan Board to make an investigation of the country's munitions resources with a view to determining the practicability of the Government's manufacturing its arms, munitions, and other war equipment. The report of this investigation was published as a Senate Document 2 under date of January 4, 1917.

Upon the creation of the Council of National Defense, that body immediately undertook, as one of its major activities, to carry forward this work of rendering available for war purposes the industrial resources of the country. By a resolution adopted on February 28, 1917, it created a body known as the Munitions Standards Board, to be composed of specially competent persons, who should serve without compensation, to coöperate

2 Senate Document No. 644, 65th Congress, 2d Session.

with the War and Navy Departments in determining and adopting standards for the manufacture of munitions Frank A. Scott was made Chairman of this

of war. Board.

A month later the Council, by resolution adopted on March 31, 1917, created another body known as the General Munitions Board to coördinate the munitions buying of the War and Navy Departments and to assist in the acquirement of raw materials and manufacturing facilities to meet their requirements. The organization of this larger Board embraced the civilian personnel of the Munitions Standards Board and in addition had in its membership representatives of the supply bureaus of the War and Navy Departments. The General Munitions Board was thus much better organized than the Munitions Standards Board to cope with the problem of marshalling the munitions resources of the country, by reason of its being in touch with the Government's munitions requirements and being in a position to exercise some supervisory control of the distribution of Government orders.

In the meantime the Advisory Commission of the Council created a number of committees of producers and manufacturers dealing with materials and manufactured articles entering into the production of munitions. To obviate the confusion and overlapping of jurisdiction and duties resulting from these arrangements, the Council, by resolution of July 28, 1917, created a new body to which it gave the name, War Industries Board, to take over the duties of the Munitions Standards Board and the General Munitions Board, which bodies were abolished. This Board was created "with the approval of the President," but aside from the sanction of the Chief Executive, this action of the