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The Economic Consequences of U.S. Mobilization for the Second World War
A reminder that war is not always, or even generally, good for long-term growth
Many believe that despite its destructive character, war ultimately boosts long-term economic growth. For the United States this view is often supported by appeal to the experience of the Second World War, understood as a triumph of both production and productivity. Alexander Field shows that between 1941 and 1945 manufacturing productivity actually declined, depressed by changes in the output mix and resource shocks from enemy action, including curtailed access to natural rubber and, on the Eastern Seaboard, petroleum. The war forced a shift away from producing goods in which the country had a great deal of experience toward those in which it had little.
Learning by doing was only a partial counterbalance to the intermittent idleness and input hoarding that characterized a shortage economy and dragged down productivity. The conflict distorted human and physical capital accumulation, and once it ended, America stopped producing most of the new goods. The war temporarily shut down basic scientific research and the ongoing development of civilian goods. U.S. world economic dominance in 1948, Field shows, was due less to the experience of making war goods and more to the country’s productive potential in 1941.
Many believe that despite its destructive character, war ultimately boosts long-term economic growth. For the United States this view is often supported by appeal to the experience of the Second World War, understood as a triumph of both production and productivity. Alexander Field shows that between 1941 and 1945 manufacturing productivity actually declined, depressed by changes in the output mix and resource shocks from enemy action, including curtailed access to natural rubber and, on the Eastern Seaboard, petroleum. The war forced a shift away from producing goods in which the country had a great deal of experience toward those in which it had little.
Learning by doing was only a partial counterbalance to the intermittent idleness and input hoarding that characterized a shortage economy and dragged down productivity. The conflict distorted human and physical capital accumulation, and once it ended, America stopped producing most of the new goods. The war temporarily shut down basic scientific research and the ongoing development of civilian goods. U.S. world economic dominance in 1948, Field shows, was due less to the experience of making war goods and more to the country’s productive potential in 1941.
472 pages, Hardcover
First published October 18, 2022
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September 2, 2024
The war forced a shift away from producing goods in which the country had a great deal of experience toward those in which it had little.
Would you believe that being at war might not be good for you? Even if you are the super duper greatest country in the world that could at the flick of a switch go from refrigerators to B-24s?
The Maths
In 1981 John R. Hicks described the measurement of capital “as one of the nastiest jobs that economists set to statisticians.”
The Economic Consequences of U.S. Mobilization for the Second World War probably would have been better off as a subtitle. The choice implies a barrier to entry, which is unfortunate because the details are exceptionally easy for anyone to understand and those details build together to create a story at odds with popular history in interesting ways.
My simple (simplistic) summary of the thrust of the book is that:
(a) A lot of the productivity gains and new technology occurred before 1941.
(b) Supply disruptions due to rubber and oil affected productivity and the substituted methods of transportation/supply were mixed in efforts and results (and rarely were better than the original).
(c) The American “success” stories such as Willow Run hid issues of mismanagement with production peaking in late 1943, after the key turning points.
(d) Manpower was not limitless.
(e) Gains in making war machinery were not necessarily (or even often) transferrable to peace – after all, very few subsequent models of planes ran into the thousands and the rise of jet engines imposed very different design constraints to the piston engines that had been built. Distribution methods appear to have come closest.
… with many case examples to support the above.
The rubber shortages contributed to a number of these, including the squalid living conditions near such facilities as Willow Run. Ford planned for his workers to live in Detroit and commute, but tire and gasoline rationing made that difficult, and the conditions in trailer parks and makeshift housing near the plant contributed to a labor turnover rate of 100 percent per month in 1942
However, it is all very well to create a compelling narrative, serious statements need serious data proving indisputably the premises of the book…
…though, dare I say it, economics can be a soft science in that regard. The question of whether productivity improved during World War II depends on many variables, with complications as to measurement (e.g. the quantity of items being produced versus the quality). The Economic Consequences of U.S. Mobilization for the Second World War is as much the start of a discussion than the conclusion to one and the average reader will have to “trust” what Field is writing.
Despite this, Field makes a genuine effort to set out how he measured Total Factor Productivity in question at chapter 2, as well as explaining in detail at chapter 8 why his result is diametrically opposed to Gordon’s The Rise and Fall of American Growth . The most convincing difference Field latches on to is measuring from “peak to peak” to avoid economic recovery being caught in measurements of productivity improvements. I also want to credit Field with the number of times he uses analogies to make his points more understandable.
This idea can be made more concrete by considering a second home—a vacation house. The user costs of owning this asset will include the opportunity cost of holding wealth in this form (the monetary value could have been held in stocks or government bonds) and the depreciation on the building and its contents along with the maintenance and repair required to forestall depreciation. True, the stove and refrigerator and dishwasher and microwave may wear out a little more quickly if they are used more often than if they are not, but the computer in the house is becoming obsolete at the same rate, the roof is wearing out at the same rate, the exterior stain is oxidizing at the same rate, irrespective of the number of days of occupancy. Selling the asset merely transfers these user costs to another owner.
I cannot say who is right based on the data alone, and it would be foolish for me to cite my near-two-decades-old-barely-remembered-undergraduate-degree in support of either position. However, from my limited perspective I appreciate that Field has looked at the contradictory conclusions to his own, replied in detail, and provided an opportunity for other professionals to look at it more. I still consider it worth it for the lay person to read these sections even if you end up hazy on the details – they illustrate the work that goes into these numbers.
The Story
The U.S. synthetic rubber program eventually succeeded in meeting and exceeding production targets. But it did so at great cost, and it failed to do so in 1943, which exposed the U.S. economy and nation to grave danger.
Field goes for more of a theme/category kind of assessment rather than a straight-line history, which might possibly put readers off compared to, say, Tooze.. This is a shame, because in terms of bolstering his case from a narrative perspective (which he explicitly sets out as his intent), Field is fantastic. His style of writing is very clear, cutting at times without devolving into cynicism. There are plenty of (digestible) numbers to support what he says, and Field repackages old information in a way that feels fresh and explains knock on effects. The U-Boats “Happy Time” in early 1942 in American Waters shut down tanker shipments for the rest of the European war, forcing the Eastern Seaboard to rely on pipelines with limited capacity and limited usability after the war (though the pipelines at least ended up being able to carry substitute fuels).
It is commonly argued that the response to adversity can leave a nation or an industry better off than would have been the case had the shock not occurred. The appeal of the proposition reflects a natural human tendency to search for silver linings and the attractiveness of what may seem to be counterintuitive or surprising outcomes
Field is not arguing that America did not produce significant quantities of weapons, rather that war isn’t a panacea that will unlock golden times of super-productivity. The goal was to win the war (comparable, as Field notes, to defeating the COVID pandemic), and America did that. It suffered disruptions and set aside the opportunity to grow more, but it did it. It had additional capacity and once the wheels did get spinning, it was always going to outproduce the Axis.
To me, Field is reminding us that war is an opportunity cost – it’s good to win it, but it is not good for the economy in itself, even for the country that the mythology holds up as being better off for war (admittedly, it was, but that was for somewhat more explosive reasons). The argument is expressed far better than I can write here.
We cannot zero- base our beliefs about every aspect of the world every morning. And so we necessarily rely on conclusions reached by others, or conclusions that we ourselves have reached in the past. Coming to or accepting a position relaxes us. It feels good. It requires less intellectual and sometimes emotional energy than maintaining uncertainty and doubt. Once we hold views with a high degree of confidence, there are often very high bars to dislodging them, and indeed we may forcibly resist encouragements to reconsider. But now and again curiosity or an accumulation of discordant data loosens a settled position and moves it back to the unsettled realm, where logic, doubt, and critical thinking can again operate to full effect. As a result, some of our views, some of the time, do change
Subject to the pretty major caveat as to whether it is right on the maths (and even then, the narrative elements do support the concept that war disrupts rather than supercharges an economy), this book is a must read for those interested in the economic aspects of World War II. It seems to have snuck under the radar even though it is not its writing (where even the footnotes are interesting) that holds it back.
Would you believe that being at war might not be good for you? Even if you are the super duper greatest country in the world that could at the flick of a switch go from refrigerators to B-24s?
The Maths
In 1981 John R. Hicks described the measurement of capital “as one of the nastiest jobs that economists set to statisticians.”
The Economic Consequences of U.S. Mobilization for the Second World War probably would have been better off as a subtitle. The choice implies a barrier to entry, which is unfortunate because the details are exceptionally easy for anyone to understand and those details build together to create a story at odds with popular history in interesting ways.
My simple (simplistic) summary of the thrust of the book is that:
(a) A lot of the productivity gains and new technology occurred before 1941.
(b) Supply disruptions due to rubber and oil affected productivity and the substituted methods of transportation/supply were mixed in efforts and results (and rarely were better than the original).
(c) The American “success” stories such as Willow Run hid issues of mismanagement with production peaking in late 1943, after the key turning points.
(d) Manpower was not limitless.
(e) Gains in making war machinery were not necessarily (or even often) transferrable to peace – after all, very few subsequent models of planes ran into the thousands and the rise of jet engines imposed very different design constraints to the piston engines that had been built. Distribution methods appear to have come closest.
… with many case examples to support the above.
The rubber shortages contributed to a number of these, including the squalid living conditions near such facilities as Willow Run. Ford planned for his workers to live in Detroit and commute, but tire and gasoline rationing made that difficult, and the conditions in trailer parks and makeshift housing near the plant contributed to a labor turnover rate of 100 percent per month in 1942
However, it is all very well to create a compelling narrative, serious statements need serious data proving indisputably the premises of the book…
…though, dare I say it, economics can be a soft science in that regard. The question of whether productivity improved during World War II depends on many variables, with complications as to measurement (e.g. the quantity of items being produced versus the quality). The Economic Consequences of U.S. Mobilization for the Second World War is as much the start of a discussion than the conclusion to one and the average reader will have to “trust” what Field is writing.
Despite this, Field makes a genuine effort to set out how he measured Total Factor Productivity in question at chapter 2, as well as explaining in detail at chapter 8 why his result is diametrically opposed to Gordon’s The Rise and Fall of American Growth . The most convincing difference Field latches on to is measuring from “peak to peak” to avoid economic recovery being caught in measurements of productivity improvements. I also want to credit Field with the number of times he uses analogies to make his points more understandable.
This idea can be made more concrete by considering a second home—a vacation house. The user costs of owning this asset will include the opportunity cost of holding wealth in this form (the monetary value could have been held in stocks or government bonds) and the depreciation on the building and its contents along with the maintenance and repair required to forestall depreciation. True, the stove and refrigerator and dishwasher and microwave may wear out a little more quickly if they are used more often than if they are not, but the computer in the house is becoming obsolete at the same rate, the roof is wearing out at the same rate, the exterior stain is oxidizing at the same rate, irrespective of the number of days of occupancy. Selling the asset merely transfers these user costs to another owner.
I cannot say who is right based on the data alone, and it would be foolish for me to cite my near-two-decades-old-barely-remembered-undergraduate-degree in support of either position. However, from my limited perspective I appreciate that Field has looked at the contradictory conclusions to his own, replied in detail, and provided an opportunity for other professionals to look at it more. I still consider it worth it for the lay person to read these sections even if you end up hazy on the details – they illustrate the work that goes into these numbers.
The Story
The U.S. synthetic rubber program eventually succeeded in meeting and exceeding production targets. But it did so at great cost, and it failed to do so in 1943, which exposed the U.S. economy and nation to grave danger.
Field goes for more of a theme/category kind of assessment rather than a straight-line history, which might possibly put readers off compared to, say, Tooze.. This is a shame, because in terms of bolstering his case from a narrative perspective (which he explicitly sets out as his intent), Field is fantastic. His style of writing is very clear, cutting at times without devolving into cynicism. There are plenty of (digestible) numbers to support what he says, and Field repackages old information in a way that feels fresh and explains knock on effects. The U-Boats “Happy Time” in early 1942 in American Waters shut down tanker shipments for the rest of the European war, forcing the Eastern Seaboard to rely on pipelines with limited capacity and limited usability after the war (though the pipelines at least ended up being able to carry substitute fuels).
It is commonly argued that the response to adversity can leave a nation or an industry better off than would have been the case had the shock not occurred. The appeal of the proposition reflects a natural human tendency to search for silver linings and the attractiveness of what may seem to be counterintuitive or surprising outcomes
Field is not arguing that America did not produce significant quantities of weapons, rather that war isn’t a panacea that will unlock golden times of super-productivity. The goal was to win the war (comparable, as Field notes, to defeating the COVID pandemic), and America did that. It suffered disruptions and set aside the opportunity to grow more, but it did it. It had additional capacity and once the wheels did get spinning, it was always going to outproduce the Axis.
To me, Field is reminding us that war is an opportunity cost – it’s good to win it, but it is not good for the economy in itself, even for the country that the mythology holds up as being better off for war (admittedly, it was, but that was for somewhat more explosive reasons). The argument is expressed far better than I can write here.
We cannot zero- base our beliefs about every aspect of the world every morning. And so we necessarily rely on conclusions reached by others, or conclusions that we ourselves have reached in the past. Coming to or accepting a position relaxes us. It feels good. It requires less intellectual and sometimes emotional energy than maintaining uncertainty and doubt. Once we hold views with a high degree of confidence, there are often very high bars to dislodging them, and indeed we may forcibly resist encouragements to reconsider. But now and again curiosity or an accumulation of discordant data loosens a settled position and moves it back to the unsettled realm, where logic, doubt, and critical thinking can again operate to full effect. As a result, some of our views, some of the time, do change
Subject to the pretty major caveat as to whether it is right on the maths (and even then, the narrative elements do support the concept that war disrupts rather than supercharges an economy), this book is a must read for those interested in the economic aspects of World War II. It seems to have snuck under the radar even though it is not its writing (where even the footnotes are interesting) that holds it back.
January 28, 2024
An excellent book overturning a widespread myth about US economic performance during WWII
No, the US economy did not achieve new levels of economic efficiency during WWII. It delayed much research and shifted the focus towards weapons that could be rapidly developed. The US economy produced a lot of weapons and equipment. But it experienced a large drop in productivity at the start of the war as a result of companies starting to make products they had no previous experience making. Those companies improved their efficiency during the war. But they did that from low starting points caused by large shifts in what got made.
Why do we hear otherwise? Feel good rhetoric during the war encouraged triumphal views in order to boost morale, and in order for both businesses and government figures to argue that they were doing great jobs. Industry spent big on promoting pro private enterprise rhetoric because they wanted to reduce New Deal control over the economy after the war.
The war actually imposed large opportunity costs on businesses that lost out on the opportunity to gradually improve the efficiency of the business processes that they used to make peace time products. The US economy's productivity grew faster during 1929-1940 than during 1941-1948. Had WWII never happened, we would likely be much wealthier today.
I am persuaded by the author's evidence and reasoning. Also, a great example not mentioned by the author is the case of transistors and the computer industry. WWII delayed the discovery of the transistor by causing Bell Labs to delay solid state physics research by several years. See The Idea Factory: Bell Labs and the Great Age of American Innovation by Jon Gertner for details. The opportunity costs for delayed transistor development were massive.
No, the US economy did not achieve new levels of economic efficiency during WWII. It delayed much research and shifted the focus towards weapons that could be rapidly developed. The US economy produced a lot of weapons and equipment. But it experienced a large drop in productivity at the start of the war as a result of companies starting to make products they had no previous experience making. Those companies improved their efficiency during the war. But they did that from low starting points caused by large shifts in what got made.
Why do we hear otherwise? Feel good rhetoric during the war encouraged triumphal views in order to boost morale, and in order for both businesses and government figures to argue that they were doing great jobs. Industry spent big on promoting pro private enterprise rhetoric because they wanted to reduce New Deal control over the economy after the war.
The war actually imposed large opportunity costs on businesses that lost out on the opportunity to gradually improve the efficiency of the business processes that they used to make peace time products. The US economy's productivity grew faster during 1929-1940 than during 1941-1948. Had WWII never happened, we would likely be much wealthier today.
I am persuaded by the author's evidence and reasoning. Also, a great example not mentioned by the author is the case of transistors and the computer industry. WWII delayed the discovery of the transistor by causing Bell Labs to delay solid state physics research by several years. See The Idea Factory: Bell Labs and the Great Age of American Innovation by Jon Gertner for details. The opportunity costs for delayed transistor development were massive.
November 14, 2024
Interesting chapters on the US (partially failed) attempt to replace natural rubber with synthetic substitutes and the effects of German U-boats on the availability of oil along the eastern seaboard. Otherwise, I found the book repetitive, and its central case — that the US command economy during WWII was highly inefficient — overstated.
First, that total factor productivity for war industries fell during WWII was apparently never really disputed in the profession. The author cites Kuznets in chapter 1 to this effect. Second, the author has to spend a lot of time justifying how his time series productivity data was built — suggesting that its robustness or accuracy is in dispute. Third, it seems that a significant fraction of the disagreement between the author and Robert Gordon is in how each economist manipulated the data; it seems to me that Gordon's adjustments make sense, further undermining Field's case for using his data. Fourth, TFP for each period depends on whether the period includes 1941.
It's unsurprising, anyway, that efficiency declined. Not a secret that command economies are not good way to distribute resources. But, the US was in a special situation. What makes US performance "miraculous," or what we should judge its performance against, is how we still managed to outproduce everyone else — despite chronic rubber shortages and disrupted oil supplies. And, like Field argues, this was because of the spectacular economic growth that happened in the lead up to WWII, not because of anything done during WWII, but how this might was mobilized is certainly a WWII story. And any mobilization would have likely caused inefficiency; there are counterfactuals where our industrial performance could have been much worse.
First, that total factor productivity for war industries fell during WWII was apparently never really disputed in the profession. The author cites Kuznets in chapter 1 to this effect. Second, the author has to spend a lot of time justifying how his time series productivity data was built — suggesting that its robustness or accuracy is in dispute. Third, it seems that a significant fraction of the disagreement between the author and Robert Gordon is in how each economist manipulated the data; it seems to me that Gordon's adjustments make sense, further undermining Field's case for using his data. Fourth, TFP for each period depends on whether the period includes 1941.
It's unsurprising, anyway, that efficiency declined. Not a secret that command economies are not good way to distribute resources. But, the US was in a special situation. What makes US performance "miraculous," or what we should judge its performance against, is how we still managed to outproduce everyone else — despite chronic rubber shortages and disrupted oil supplies. And, like Field argues, this was because of the spectacular economic growth that happened in the lead up to WWII, not because of anything done during WWII, but how this might was mobilized is certainly a WWII story. And any mobilization would have likely caused inefficiency; there are counterfactuals where our industrial performance could have been much worse.
December 7, 2023
I quite enjoyed the book on the whole although it was a bit of a slog at time when explaining the technicalities of measuring things like TFP. Although I would not have the author remove those sections as they were essential to a broader understanding, it is just the nature of the beast. Having by coincadence just reads Gordon's the rise and fall of American Growth of which this book appears to be a direct response, although obviously not the focus of the book I would have enjoyed the author's take on why despite the downturn in productivity in the war why it was able to pick back up again after. The only thing preventing me from giving the book 5 stars is only applicable to audio listerners as there is no included pdf which would have made understanding the book easier.
Thank you
Thank you
September 16, 2024
Brilliant exploration of America’s war effort which comes up with some important conclusions which can be summarised by: there never was a miracle!
There was slack capacity in 1941, the government covered most of the costs and almost all of the risk, there were massive fumbles which, had the US not been so much more powerful than anyone else could have led to dramatic consequences. Above all, almost none of the so-called downstream positive externalities actually took place and from an industrial POV the war was a waste at a massive scale.
There was slack capacity in 1941, the government covered most of the costs and almost all of the risk, there were massive fumbles which, had the US not been so much more powerful than anyone else could have led to dramatic consequences. Above all, almost none of the so-called downstream positive externalities actually took place and from an industrial POV the war was a waste at a massive scale.
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April 6, 2023Very fun read but not ultimately all that convincing. He argues that US mobilization for the war held back the development of the technologies that would ultimately ensure the American boom. He speaks in purely economic/technological terms, outside politics, but even accepting his logic, his evidence is simply not all that convincing. Very reliant on TFP (aka “the measure of all that we don’t know”). Good book and reading it was a useful exercise.
Displaying 1 - 6 of 6 reviews