The Economic Consequences of U.S. Mobilization for the Second World War

Published by EH.Net (April 2023).

Alexander J. Field. The Economic Consequences of U.S. Mobilization for the Second World War. New Haven: Yale University Press, 2022. 472 pp. $45 (hardcover). ISBN: 978-0300251029.

Reviewed for EH.Net by Jari Eloranta, University of Helsinki.

Alexander Field’s new book is a broad analysis of several important themes pertaining to the US participation in the Second World War and its aftermath. His overarching argument focusing on the overall supply side context is that manufacturing productivity declined during the war because production was shifted to producers and sectors that no prior experience in such activity as well as since the war disrupted the positive developments in innovation and human capital that preceded the war. Field’s book is an impressive new theoretical and empirical narrative to understand the war’s impacts and legacies.

How novel is his thesis? I would say it is definitely novel, especially when presented in such a comprehensive way, although economic historians have received some pieces of this argument from Field’s earlier work. While some studies on other war economies have made some similar points in a far less concise manner before, his analysis of the US case is unique. Moreover, the historical national accounting literature has touched on the topic of productivity changes due to the war only slightly, typically comparing productivity differences across countries. Many of these studies skip over the war period, which is a weakness in the literature. This book is also related to debates about the regional study of US economy during the war – for example, as Jaworski (2017) points out, the manufacturing productivity decline was not a uniform phenomenon in the US, namely in the South. Thus, there is work to be done to understand the regional and local levels comprehensively, which would possibly expose the network effects of shocks better.

There are several important insights arising from the book. First, it is a well-argued and persuasive answer to the enduring question of whether war can induce economic growth. His answer to this question is, in line with most defense economists, that in a larger sense it does not: the more limited positive impacts are outweighed by the negative effects of the actual war and its related costs. While some of the demand side implications of massive government spending are no doubt important, which Field acknowledges, the supply side disruptions to the economy have serious adverse effects. The government’s effort to prevail in the context of total war led to many detours and mistakes, which sometimes resulted in idle factories and delayed war mobilization – in fact, as he demonstrates with the skill of an experienced economist, the productivity performance of the US economy was quite disappointing during the war.

Second, Field’s book is a contribution to the larger debates about the causes and effects of the Great Depression and the New Deal in the longer run, namely whether the government interventions were effective in stimulating the American economy, both during and after the war. He argues that the command economy of the war period distorted the manufacturing sector’s productivity trajectory, and the expansion of the American economy after the war was related more to the productivity foundations in place before the war than the retraction of the government’s control of the production and rationing. The demand side expansion is not the focus in the book, and Field discusses that briefly in the concluding chapter. Yet, I think there is room to re-examine the demand side expansion too, especially the implications for the political economy and the post-war growth.

Third, this book is also a part of the newer crop of economic history scholarship in the last 30 years or so that has tackled the causes, impacts, mobilization, and aftermath of various conflicts. These studies have introduced several important contributions and findings, for example related to the world wars as the ultimate forms of total war. Mark Harrison and others were able to present a holistic accounting of what these wars meant for the larger participating states. (Harrison 2000; Broadberry & Harrison 2005) In particular, they argued that both world wars ultimately were determined by the mobilization and use of resources, with the US playing a pivotal role due to the size of its economy and industrial capacity. The richer and more democratic states were able to expand further than their authoritarian rivals, and thus they forced their adversaries into mistakes, both politically and economically. Field’s book provides much greater nuance to this aggregate view, namely that the expansion of the American war economy was also rife with problems and missteps, yet it still managed to expand way beyond what its rivals could have even imagined.

The first criticism that I would raise with this book pertains, in fact, to the lack of greater comparative content, which would have made some of the findings of the study even sharper. The similarities of the US with many other nations in terms of the missteps in the economic mobilization and output mix implications could have offered some further insights into the institutional consequences of various political decisions. Here I am referring to something that my own work has also touched on, namely how private-public partnerships evolved during the world wars, especially the Second World War. For example, Field cites Paul Koistinen’s work, but it would be interesting to know more about how producing some war goods privately or by government facilities affects the outcomes, also after the war. The MIC (Military Industrial Complex) literature suggests that the businessmen that were brought to manage wartime supply systems captured significant long-term rents in the process. Field discusses this issue for example. on p. 138, related to government-owned synthetic rubber production. He also analyzes contracts in the book at various points. However, a deeper discussion of the theoretical and empirical implications of the contracts would have been warranted, which has taken place for example in the debates of the Germany wartime supply system. One interesting book that touches on these topics is Boldorf & Okazaki (2015). To be fair, Field makes some important distinctions between the experiences of the US and the other warring parties, namely that a substantial negative output gap persisted at the beginning of the mobilization, which in turn made possible substantial supply engineering efforts.  This would be an interesting point to ponder also for other warring economies, to understand the actual mechanics of the economic mobilization better.

In general, Field has thus framed his book in terms of changes in the output mix and resource shocks that were at the core of the relatively poor manufacturing productivity performance. In addition, he touches on several themes that reinforce this powerful narrative. Perhaps the most important concerns the lack of innovation during the wartime, even though some prior literature has suggested that wartime demand side expansion had led to major innovations technology. This is a continuation of Field’s previous work, highlighting technological progress of the pre-Second World War period (and similar to Goldin’s work on human capital creation; see for example Goldin 2021). In this book, he showcases labor policies that failed to address labor shortages as well as the uncertainty the government’s contracting actions introduced. One road not taken was, of course, an industrial draft or something akin to that. Field addresses this for example on p. 220, with Selective Service draft calls actually leading to more labor shortages or distortions among the sectors of the economy. There were, of course, many forms of forced labor used globally during the war, with the use of prisoners of war as the most extreme and often inhuman option. But, in many countries there were campaigns to mobilize people for volunteer work too. All these forms were utilized in the US prior to the war, so the choices during the conflict are quite interesting and reflect the government’s willingness (or unwillingness) to address labor shortages in certain sectors. On the producer side, some were forced into converting their factories to manufacturing that they were ill-equipped for, and producers hoarding commodities and raw materials led to significant delays in firms reaching their imposed goals. Shortages were common, and rationing was an imperfect tool to manage wartime realities, although these problems were less pronounced in the American case. Again, a deeper comparative look at the rationing systems of other countries could have bolstered this argument. Field’s assertion that the US experience is unique may very well be true, but I cannot accept it on face value without a broad review of the other warring economies. And, if true, why would that be the case? There seems ample room for comparative research on this issue. Unfortunately, more often than not the study of rationing systems has not been linked with the analysis of productivity impacts.

Moreover, while learning by doing helped alleviate some of the immediate output mix problems, innovations were hard to come by even in the context of the American war economy. The US economy’s capacity to increase military production came at the cost of efficiency and distortions in the manufacturing sector. This was also enhanced, to a limited extent, by the actual war and the resources the US had to expend in fighting it. Regardless, innovations were on the decline, or at least they stagnated – Field showcases this by a detailed overview of patent and other data, which clearly suggest a dearth of innovative activity. While the overview in the book is quite convincing, Field could have gone deeper into the analysis of the patent data, in line with what some in the field are doing to capture the network effects of technological innovations and human capital creation. (see, for example, Diebolt & Hippe 2019; Esteves & Mesevages 2019)

Field also provides some interesting new historical and theoretical insights on the production and impact of strategic commodities and minerals. Chapter 3 examines the efforts to produce synthetic rubber in the US, given the loss of South Asian sources of rubber. Rubber was a crucial component for the war machine, since the vehicles that the armed forces used needed rubber for the tires, among other uses. These efforts were successful, with some missteps along the way, but they were also expensive for the American government. Moreover, these endeavors required sacrifices in other sectors of the economy, and this impacted the fossil fuel industries in particular. While the demand for rubber increased due to the military orders, rationing and limited consumption opportunities decreased its demand. In sum, the synthetic rubber production was not exactly a miracle inspired by the war mobilization and government intervention. However, he could have compared the US experience for example with that of Germany, as reflected by Streb (2015).

In Chapter 4, he analyzes gasoline and oil production, as well as other strategic raw minerals. As he notes, the war imposed some challenges to the US economic mobilization and war effort. While the overall impact of the economic warfare by Germany and Japan was limited, it did have an impact on the energy networks in the US. – moreover, it did have vastly different impacts on regions within the country. The global nature of the war meant that such commodities were not only difficult to produce in sufficient quantities but also hard to get to the various theaters of war. The economic warfare of the Second World War, for example the impact of U-boats and convoys, meant that the participants suffered significant resources losses during the most intense periods of the conflict. In this context, Field deftly analyzes the production networks and pipelines, and what the disruptions meant for the overall oil production capacity and the delivery of the products. However, he could have discussed the logic and extent of economic warfare more, again also in a more comparative way (see also Davis & Engerman 2006) For example, the Japanese war economy and its limitation would have provided further nuance into the US case, in addition to the German war economy that is discussed briefly in the book. (Again, to be fair, Field does discuss both Germany and Japan in the context of economic warfare for example on p. 150) Furthermore, he makes an important contribution to the literature on economic warfare by illustrating the lack of impact by convoys in protecting the Atlantic and Caribbean tanker traffic. What did this mean for the energy networks more widely during the war? This seems another fruitful avenue for new research.

On the whole, Alexander Field’s new book is an important contribution to the analysis of the US economic performance during and after the Second World War. It provides a powerful argument that even the massive expansion of the American war economy did not lead to lasting positive impacts during or after the war. Moreover, he highlights, based on different sectors and examples, that even the war mobilization embodied many problems and missteps. The productivity increases that carried the US into the post-war economic growth era did not arise from the wartime supply side mobilization impacts. This book is well written and cleverly argued, with a heavy dose of economic arguments and data, and it should be of interest to a large audience of scholars and general readers. If I had to nitpick about the few weaknesses of the book, I would highlight the somewhat limited nature of the comparative contexts contained in it. More engagement with the extant literature on the world wars and various country cases would have deepened and strengthened the analysis. Overall, I wholeheartedly recommend this book, especially to economic historians interested in the study of crises and warfare as well as the development of the American economy into the era of Cold War expansion.

References:

Boldorf, Marcel, and Tetsuji Okazaki, eds. Economies under Occupation: The Hegemony of Nazi Germany and Imperial Japan in World War II. Routledge, 2015.

Broadberry, Stephen, and Mark Harrison, eds. The Economics of World War I. Cambridge University Press, 2005.

Davis, Lance E., and Stanley L. Engerman. Naval Blockades in Peace and War: An Economic History Since 1750. Cambridge University Press, 2006.

Diebolt, Claude, and Ralph Hippe. “The Long-Run Impact of Human Capital on Innovation and Economic Development in the Regions of Europe.” Applied Economics 51(5): 542-563 (2019).

Esteves, Rui, and Gabriel Geisler Mesevage. “Social Networks in Economic History: Opportunities and Challenges.” Explorations in Economic History 74 (2019).

Goldin, Claudia. “Career and Family.” In Career and Family. Princeton University Press, 2021.

Harrison, Mark, ed. The Economics of World War II: Six Great Powers in International Comparison. Cambridge University Press, 2000.

Jaworski, Taylor. “World War II and the Industrialization of the American South.” Journal of Economic History 77(4): 1048-1082 (2017).

Scott-Kemmis, Don, and Martin Bell. “The Mythology of Learning-by-Doing in World War II Airframe and Ship Production.” International Journal of Technological Learning, Innovation and Development 3(1): 1-35 (2010).

Streb, Jochen. “Can Politicians Speed Up Long-Term Technological Change? Some Thoughts from a Comparison of the German and US-American Synthetic Rubber Programs Before, During and After World War II.” Essays in Economic & Business History 21 (2003): 33-49.

Jari Eloranta is Professor of Economic History at the University of Helsinki, Finland. He has published widely on the causes and impacts and causes of various conflicts in history, as well as military spending, for almost three decades, and also on the long-run economic history of the Nordic countries.

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