Workers at the Glenn Martin plant in Omaha, Nebraska, where Enola Gay was built. Lockheed Martin Corporation
America is the only country that is constantly being reborn.
—William S. Knudsen
THE WAR WAS OVER.
All at once work in the Richmond shipyards stopped. Factories everywhere that had been making tanks, landing craft, rubber boats, and artillery shells sat silent. At Grumman aircraft factory in Bethpage, New York, thousands of workers had been turning out Navy fighters and torpedo planes at four plants at once. Now the vast empty buildings that had once been coursing with frantic activity had a strange, eerie quality. “It was like coming to work on Sunday,” one worker remembered.1
Bill Knudsen was in Germany when he got the news of Japan’s surrender. After resigning his commission from the Army on June 1, he had returned to Detroit, where there had been a big parade with floats and bands and American GIs marching down Woodward Avenue. General Marshall and Undersecretary of War Robert Patterson were there on the dais, paying tribute to the man who had built the U.S. armed services into the greatest military machine in history. The mayor gave him a key to the city. When Knudsen spoke, he said simply, “Good night, my friends, and God bless you all.”2
Following Japan’s surrender, Bob Patterson, the War Department’s original tough guy, penned Knudsen a heartfelt letter from his new air-conditioned office at the Pentagon. “To me you are the great American,” he wrote. “You have never done anything for yourself, only for your country. You have never spared yourself.”3
Nor was Knudsen sparing himself now. Only two days after he came home to his family, Alfred Sloan asked him to go to Europe to see what was left of GM’s shattered plants after Allied bombers and Russian looters finished with them. Knudsen was able to speak to his family in Denmark for the first time in seven years, and had lunch with the Danish king. When he had last been there, Hitler had been lording it over Europe, and America had been totally unprepared for the conflagration about to engulf the world. So now, as news of final victory came, Knudsen must have had a moment to think about what he and his colleagues had done.
From the moment Knudsen kicked off the armament program in July 1940 until August 1945, the United States had produced $183 billion in arms. Aircraft and ships together accounted for half that total.
In those five years, America’s shipyards had launched 141 aircraft carriers, eight battleships, 807 cruisers, destroyers, and destroyer escorts, 203 submarines, and, thanks to Henry Kaiser and his colleagues, almost 52 million tons of merchant shipping. Its factories turned out 88,410 tanks and self-propelled guns, 257,000 artillery pieces, 2.4 million trucks, 2.6 million machine guns—and 41 billion rounds of ammunition.
As for aircraft, the United States had produced 324,750, averaging 170 a day since 1942. That was more than the Soviet Union and Great Britain combined, although the U.S. supplied enough raw materials to enable those two allies to be the number two and number three airplane producers in World War II, respectively.4 For the U.S. had not only armed its own troops, marines, and sailors, it had armed its allies as well—some $50 billion worth through Lend-Lease. When Stalin, Roosevelt, and Churchill first met at Tehran in 1943, and Stalin raised his glass in a toast “to American production, without which this war would have been lost,” it was a stunning tribute from the leader of world Communism to the forces of American capitalism.
Yet America had done all this while remaining the least mobilized of the Second World War combatants. The smallest percentage of the male population entered the armed forces. Compared to the Soviet Union or Great Britain, more women remained at home rather than going to work—more than 60 percent. And the United States converted the least of all its economic output to the war effort, just over 47 percent in 1944 compared to almost 60 percent for Britain and more for Germany and the Soviet Union, only to outproduce everyone else put together, including Japan.5
Yet the output of consumer goods was larger every war year than it had been in 1939, despite the restrictions and rationing. In 1945 Americans ate more meat, bought more shoes and gasoline, and used more electricity than they had before Hitler invaded France. The dream of an economy vibrant enough to produce both guns and butter had been realized thanks to American business.6
By contrast, the supreme war effort had left Europe in ruins, and not just from Allied bombing. Albert Speer’s reign as Nazi production czar had boosted arms production as he had promised, almost doubling output. But it came at the cost of turning Germany and much of the rest of Europe into a vast slave labor camp, employing some 17 million unwilling foreign workers—including inmates at places like Auschwitz and Treblinka—while devouring every last shred of normal economic life.7 Britain’s mobilization had consumed one-quarter of its national wealth; Russia’s would have been impossible without America’s Lend-Lease aid, which fed and clothed civilians and soldiers alike—and which gave Britons one out of every four meals they ate during the war.
No one had foreseen this, except Bill Knudsen. He had sensed from the beginning that Washington didn’t have to command or ride herd over the American economy to achieve new heights of production, even after a decade of depression. All you had to do was put in the orders, finance the plant expansion, then stand back and let things happen. And they did, in prodigious amounts.
Total economic production in the United States had doubled;* wages rose by 70 percent. American workers were twice as productive as their German counterparts, and four times more productive than the Japanese. Later critics would point out that those numbers were no different before the war than they had been during it.8 But that was the point. What made America productive wasn’t the war or government dictates or a supreme sense of national urgency. It was the miracle of mass production, which, once turned loose, could overcome any obstacle or difficulty.
That included what happened next.
Starting in 1946 nearly 10 million men and women in uniform would be coming home, eager to return to normal life, including a house and a job. They would be returning to an American economy—even after a year and a half of gradual reconversion—still geared around producing tanks and planes, not clapboard houses and refrigerators. And the unions whose record of cooperation had been less than stellar in the war years were poised to resume their battle with private management—in the case of the auto industry, demanding postwar pay raises from Ford and GM as high as 30 percent.
How could America afford it? Now accustomed to anticipating and paying for everything that happened, Washington became worried again. A report released by Senator James Mead of New York predicted massive unemployment and inflation in the war’s aftermath, as America’s fighting men would be returning to empty factories and empty store shelves. “There should be no mincing of words” with the American people, the new head of the Office of War Mobilization and Reconversion, John Snyder, warned President Truman. The end of war production would mean the end of prosperity, and lead to eight million unemployed by the spring of 1946. Economist Leo Cherne thought that number wildly optimistic. It would be closer to 19 million, he asserted.9 And Professor Paul Samuelson, later the dean of American economists, warned that unless the government took immediate action, “there would be ushered in the greatest period of unemployment and industrial dislocation which any economy has faced”—one that would equal the Great Depression.10
Others were not so sure. One was Knudsen’s old boss Alfred Sloan. As he told the American Manufacturing Association in New Jersey back in June 1944, he foresaw a postwar world filled not with gloom and the pinched faces of the unemployed, but with a bright new explosion of American growth as the workers who had been saving away their paychecks now turned those savings loose.
“Out of this situation that I speak of, this tremendous aggregation of purchasing power, the tremendous demand for goods,” Sloan predicted a very different future. “If American industry stepped forward and planned boldly and dramatically with courage, and expanded its operations, expanded its capacity, to take care of this post-war demand,” then the result would be a huge jump in national income and rise in standard of living far greater than anything Americans had experienced before.11 The dream of the future he and Knudsen had offered at the 1939 World’s Fair would be realized within his lifetime.
Sloan was right, the doomsayers wrong. There was a brief hiccup in the last half of 1945 and early 1946, as national output dropped and unemployment rose to 3.9 percent. As price controls were lifted, inflation rose by 20 percent.
Then things smoothed out. Private capital investment, which had gone flat and even turned down during the war, tripled from $10.6 billion in 1945 to $30.6 billion in 1946 and never looked back. Companies began to turn to the capital and bond markets to raise funds for their postwar ventures. Stock prices surged, and by 1947 shares had gained value by 92 percent. As one economist has put it, “As the war ended, real prosperity returned almost overnight.”12
It also turned out that for every returning veteran, there were three jobs waiting. The vast majority of women who had gone to work in the aircraft plants and steel mills set aside their welding tools and union membership and went home. Inflation eased, and factories that had converted to wartime use learned how to convert back to civilian production even faster. Companies like Frigidaire, Allis-Chalmers, and Walter Kidde quickly found their feet again in the new consumer-driven market. When the first Ford and Dodge and Chevrolet cars in four years rolled off the Detroit assembly lines, the buyers lined up to buy.
The gross domestic product of the United States in 1947 stood at $231 billion—roughly what it was in 1945. It rose to $258 billion in 1948, paused there for 1949, and then went from $285 billion in 1950 to $398 billion in 1955. In the two decades after 1948, GNP grew at an average annual rate of 4 percent. It was, as historian Michael Barone notes, “the most awesome economic growth ever seen in human history.”13
It was a growth helped by a government debt much lower than it should have been, thanks to tax increases during the war, when everyone’s incomes were rising. Federal tax receipts, which had been $5 billion in 1940, jumped to $49 billion the year of Hiroshima. This was followed in 1946 by a tax cut—imposed on a reluctant president by Congress, led by a coalition of Republicans and conservative Democrats—that pumped still more private investment into the reviving economy. Growth came on so fast that it could withstand the renewal of war in Korea in 1950 without missing a beat—and sustain a massive Pentagon budget all through the Cold War. Guns and butter had come to stay.
While the new U.S. military establishment built by American industry during the war guarded the free world, the new postwar American economy saw no limits to its growth. By 1960 the United States dominated the globe economically and strategically as no nation had ever done, before or since. A political scientist at Yale University, William T. R. Fox, coined a word to describe it: “superpower.”14
And the man who had pulled the trigger on it all never lived to see it.
Bill Knudsen had come back from Europe exhausted but still willing to assume new duties at General Motors. But Alfred Sloan drew the line. “No, Bill, I’m sorry,” he said, “you know the corporation’s retirement policy.” At age sixty-five, executives automatically became inactive.15 Knudsen retired back to his house at 1501 Balmoral Drive. He worked with an automotive writer, Norman Beasley, on his memoirs, which were published as a somewhat rambling biography in 1947.
But his health had been broken by his unstinting service during the war. His granddaughter remembered visiting him and seeing a frail shadow of the big, boisterous grandfather her family had known before the war. In 1947 the American Legion hosted a dinner in his honor, but Knudsen was too ill to attend. On April 27, 1948—seven years and eleven months after President Franklin Roosevelt read the headlines about the collapse of France and picked up the phone—the world learned that the man everyone called Big Bill Knudsen had had a cerebral hemorrhage and died in his Detroit home.
“All of us,” Knudsen wrote before his death, “have a duty to perform in this world.”16 Knudsen had performed his, with spectacular results. But already by his death the memory of what he had done was being erased, like a bronze monument being eaten away by acid rain.
Those who had been disappointed about being left out of the major decisions about the economy during the war—New Dealers and others—took their revenge by seizing control of the historical message. Business had had nothing to do with the miracle of war production, went the narrative. In fact, there was no miracle at all; it was the vast resources and extended reach of the federal government all along. As Bruce Catton, editor of American Heritage magazine, wrote in his memoirs of his years as public relations officer at the War Production Board, big business constantly got in the way by demanding it be well paid for its services and refusing to embrace a new social contract combining government, business, and labor—an American version of socialism, one in which “labor moved up to partnership with ownership in the great U.S. industries” and government respected “its right and duty … to disregard the last vestiges of property rights in a time of crisis.”17
Catton’s version of the war years in Washington, which cast big business as the great obstructionist villain, joined up with the narrative put together by acolytes of economist John Maynard Keynes. Far from demonstrating that government intervention failed to revive the American economy during the New Deal years, they argued that war mobilization proved the opposite. Roosevelt in the thirties simply hadn’t spent enough, they claimed. Three hundred billion dollars of deficit spending for the war completed the job the New Deal’s $50 billion couldn’t. The implications were profound. Keynesians asserted, in wartime or peacetime, all you had to do to generate economic growth was increase demand through growing the federal budget or by running government deficits, or both. From 1940 to 1945, business and industry had simply been the lucky recipients of federal largesse. In peacetime, the poor, disadvantaged, and elderly would be next to receive the blessings of big government deficit spending. “Our mixed economy,” wrote economist Paul Samuelson—the same man who predicted economic depression at war’s end—“has a great future before it.”18
Knudsen had forced Washington to give up the illusion of M-Day—of government effortlessly mobilizing an economy of war with the throw of a fiscal switch. Now the illusion returned, disguised as a Keynesian miracle rather than a mass production one.
Even before the war was over, Keynes’s disciples occupied key posts in the Office of Price Administration, the Commerce Department, the Bureau of the Budget, and Treasury. When Keynes appeared at the international economic conference at Bretton Woods in 1944, the delegates sang, “For he’s a jolly good fellow.”19 Knudsen and the businessmen who had made production possible were already forgotten. Samuelson’s Keynesian account of World War II in his best-selling textbook, Economics, completed the process of amnesia.
But then, the people Knudsen had recruited early into the war effort, the roll-up-the-sleeves men who had built their companies up from the ground and had spent their lives learning to make more things better and cheaper, were also disappearing. Henry Ford died a year before the big Dane, in April 1947. Bill Jeffers, the railroad man who built the synthetic rubber industry from nothing, went the way of all flesh in 1953. Andrew Jackson Higgins, the landing-craft wizard had died the year before, as did Alvan Macauley of Packard, whom Knudsen had called when he needed someone to build Rolls-Royce Merlin engines.
Kaufman T. Keller, whom Knudsen had also called that summer of 1940, quit as president of Chrysler in 1950. That year the unions and the big auto and steel makers, acting under the watchful eye of President Truman, cut a deal that allowed union wages and fringe benefits—in 1943 Congress had exempted health and pension concessions from federal taxation—to steadily rise in exchange for those companies knowing what their labor costs would look like, year to year. Keller stayed on the board of the company until 1956. His death followed a decade later.
Tom Girdler, Kaiser’s steelmaking mentor who had turned Consolidated Aircraft into a mass-production giant, died in 1965. Felix Kahn was struck down by a heart attack in 1958—as it happened at the Shoreham Hotel in Washington, where his old Six Companies partner had headquartered the Kaiser war effort.
As for Knudsen’s old rival Charlie Sorensen, he stayed as tough and ornery as ever. When Henry Ford II took over his father’s company in December 1943 and failed to offer Sorensen any part in senior management, Cast-Iron Charlie abruptly quit. He switched to Willys-Overland, the makers of the jeep, and supervised their conversion to peacetime production, including turning out more versions of the most famous Army vehicle of World War II.
Sorensen went through more than one clash with the Willys board, but managed to hang on until 1950. Then he retired and took off for the Caribbean, where he sailed his beloved yacht, White Cloud, and nursed his many resentments.
Three years later Willys was sold to the other giant of the war years, Henry Kaiser.
Kaiser was one of the last of the old breed, and the most complicated.
He had anticipated the postwar boom by four years. “We have only a glimpse of what the future holds,” he told an audience in September 1942, echoing Alfred Sloan’s words at the World’s Fair three years earlier. “A pent-up consumer demand will be released, seeking satisfaction in every artifice and device we know how to make.”20
When the war ended, Kaiser plunged out in every direction. He struggled hard to keep the Richmond and Portland yards open. In August 1946, Richmond No. 3 was still employing 3,500 workers. But in October the Maritime Commission officially wrapped up operations in both yards. A tearful Kaiser told his workers and managers of his “deep regret” at having to shut down what had become the most famous shipyards of the war.21 But in his own mind, he had already moved on.
He expanded his steel and magnesium operations, and started up Kaiser Aluminum in 1946, turning a $5 million profit his first year of operation. His experience with building homes for shipyard workers drew him to the possibility of postwar home building. He recruited designer Norman Bel Geddes—the same designer who had built GM’s Futurama for the 1939 World’s Fair—to create a prefabricated three-room steel frame house for only $1,300. He launched Kaiser Community Homes, Inc., which built miles of sprawling suburban homes across places like Panorama City, California—the ancestor of the tract housing development.
In the postwar glow, it was easy to forget the shortcomings of the Kaiser empire. After all, there had been the Hughes debacle, the cracked Liberty Ships, and the ubiquitous but cheaply made and under-armored baby flattop carriers that the sailors who sailed them called “Kaiser coffins” and “one-torpedo ships.”22 What finally pulled the public up short, however, was his disastrous venture into the Detroit auto industry.
Just as he had humbled Big Steel and Big Aluminum, so Henry Kaiser figured he could teach Ford, GM, and Chrysler something about how to make cars. He had all the elements of the Kaiser success formula. There was the teaming up with Willys-Overland’s knowledgeable boss, Joseph Frazer; the sweetheart deal with the United Auto Workers, including health benefits for all workers; a plant that he could boast was the largest in the world—nothing less than Charlie Sorensen’s Willow Run, which he had bought from Ford for $12 million. Then there was the Kaiser public relations machine, splashing raves across the pages of Time and Life; and an award-winning automobile design, the “Henry J.”
The one thing missing was generous government funding. Kaiser learned that selling to the American public was more difficult than selling to the federal government. He had to rely instead on private investors and the Bank of America, and soon found himself fatally undercapitalized. He planned to build the Henry J. for less than four hundred dollars—something his car allies told him was an impossibility.23 No one bought his cars, so Kaiser opened plants in Argentina and Brazil, hoping to attract Latin American buyers. In desperation he reconverted Willow Run into an aircraft factory, to make transoceanic cargo planes—reviving the old Hughes dream.
Nothing worked. A discouraged Henry Kaiser had to sell his entire operation in 1958. It had been a spectacular disaster. Although he went on to launch successful construction ventures in California and Hawaii, his new adopted home, and Kaiser Aluminum remained a powerful industrial enterprise, his reputation as America’s entrepreneurial wizard was permanently tarnished.
Still, the master builder now in his sixties remained as tough and tireless as ever. Associate Tim Yee recalled doing a full day’s work in Honolulu, then catching a red-eye back to the mainland with the old man, which meant discussing business all night and a normal workday on arrival. Clay Bedford’s brother Tim recalled a whirlwind trip to Brazil to find investors for Kaiser-Frazer, which involved an all-night flight from Oakland and deplaning in a hot, sticky early-morning Rio de Janeiro. There was no time to change or visit the hotel. Instead, he and Kaiser trooped off to a series of meetings with Brazilian notables through lunch, drinks, and cigars until late afternoon. Kaiser decided Bedford needed to go over some of the figures they had presented that morning, but also insisted he accompany Kaiser and the Brazilians on a tour of Rio nightclubs.
Sometime after midnight Bedford got back to the hotel and reworked the numbers. At 5 A.M. he threw himself into bed. Two hours later the phone rang. It was Kaiser, who had spent the night partying with his hosts. “Where are the figures?” he wanted to know. He and Bedford scanned them over breakfast, then headed back to a second round with the Brazilians. Henry Kaiser did the presentation himself. “It was dynamite,” Tim Bedford had to admit, “he was just incredible.”24
By 1966 the man who used to rise regularly at 4:30 A.M. and hit the telephone to associates around the world finally began to flag. Building Hawaii Kai on Honolulu Island was his last great construction project. At the insistence of his second wife, Ale, he had slimmed down to 225 pounds for his eighty-fourth birthday. But the old drive was gone; more and more time during the day was spent in bed. What revived him were visits by those who had been his allies during the war years, like his son Edgar and Clay Bedford. Sensing this, the faithful Alonzo Ordway sent him a letter, dated February 6, 1967.
It concerned the day they jumped off the train, at the start of the great adventure.
You probably recall that it was 46 years ago this month when you and I walked into the general offices of the Division of Highways [in Redding]…. Now their headquarters is in a large multi-story building just opposite the Capitol and covers about a block. Possibly you recall that the receptionist the first time we called (who was also the switchboard operator) told us her feet were cold, so we went out and bought an electric heater for her, which of course paid for itself many times over in our later business….
I would like to visit you someday for a few hours at your convenience so that I can see your pet project and enjoy smelling dirt with you. I would only plan to be there for part of the day….25
Ordway never got the chance. In late August of 1967, at age eighty-five, an increasingly bedridden Henry Kaiser slipped into a coma and died on August 24. Ordway would be a pallbearer at the funeral.
Already the era of American industrial exuberance that characterized the arsenal of democracy was fading. Thanks to two decades of concessions to unions, Kaiser’s steel and aluminum companies were about to suffer from the same problems as the rest of industrial America: high costs and low productivity plus cutthroat overseas competition—ironically, from Japan and Germany, where Kaiser Engineers had helped to install new efficient steel- and ship-making facilities after the war. The same fate was about to befall Detroit, the heartland of the arsenal of democracy. From Fontana to Pittsburgh, manufacturing America was in headlong retreat. The term “smokestack industry” would soon become a term of derision, even abuse, as it conjured up images of pollution, drab company housing, and dead-end blue-collar jobs.
Yet no man had tried to do more for his own employees than Henry Kaiser, and no firm left a more important legacy for the future of privately funded health care for workers than Kaiser Permanente. And no one gave America’s push for victory in World War II a sunnier, more optimistic face than the bald man with the glasses and the big grin.
It was the same optimism that had animated Bill Knudsen: the sense that America carried the seeds of its own renewal, the capacity to overcome failure and disaster and push forward. Even on his deathbed, his grandson Henry F. Kaiser remembers, he always spoke about the future, not the past.
After Kaiser’s death someone remembered his encounter with a discouraged workman at a work site ruined by a passing storm. Everything, including the big earth-moving equipment, was submerged in a sea of mud.
“What are we going to do?” the worker moaned. “Just look at this mud.”
“What mud?” Kaiser said. “I see only that big sun shining down. It’s going to turn that mud into solid ground.”
See the sun. Smell the dirt.
* It had not come without a human cost. The number of workers, male and female, who were killed or injured in the U.S. industries in 1942–43 exceeded the number of Americans killed or wounded in uniform, by a factor of twenty to one.
And not just workers. One hundred and eighty-nine senior GM officials died on the job during those five years of intense mobilization and activity. The obituary pages of American Machinist in those years show the names of one corporate executive after another who “died unexpectedly of a heart attack” or was cut down “after a brief illness.”