How American Business Saved Civilization

How entrepreneurialism and innovation inspired business leaders across the country to mobilize the “arsenal of democracy” that allowed the Allies to triumph
in World War II.

March 12 2013 by JP Donlon


The unsung heroes of World War II did not wear a uniform or fire a gun, according to historian Arthur Herman. The true heroes were the businessmen, engineers, production managers and workers, both male and female, who built the arsenal of democracy that gave the Allies the tools to defeat the Axis. This included 86,000 tanks, 2.5 million trucks, half a million jeeps, 286,000 warplanes, 8,800 naval vessels, 5,600 merchant ships, 2.6 million machine guns and 41 billion rounds of ammunition. All this and the world’s most advanced super bomber—the B-29—and the atomic bomb.

When Stalin, Roosevelt and Churchill first met in Tehran in 1943, Stalin raised his glass in a toast “to American production, without which this war would have been lost.”

One might expect to find some commemoration, a plaque maybe, to this effect somewhere in Washington, a town whose streets and squares are crammed with memorials of all kinds. One might look in vain. Hence, Herman wrote Freedom’s Forge: How American Business Produced Victory in World War II.

Herman tells the story through the narrative experience of two very different business leaders: William “Bill” Knudsen and Henry Kaiser, who managed through sheer force of will and minimal help from Washington, to organize the nation’s resources, such as they were. From 1918 to 1938, the U.S. military had shrunk from the 4th to 18th ranked power—about on a par with Romania and just behind the Netherlands. In 1939, Hitler had 2,000 tanks. When General Patton took command of Army’s armored brigade, he had 325 tanks. The Army Air Corps had less than a fifth of the Luftwaffe’s 8,500 fighters and bombers.

Knudsen, a Danish immigrant who came to America to build bicycles, worked his way up from the shop floor to become president of General Motors. Kaiser was a problem child who grew up in upstate New York and moved west. His company was one of the six that built the Hoover Dam. One fellow knew how to make things with metal. The other could build stuff. Neither had an MBA. Some of their colleagues didn’t even attend college.

Many paid the ultimate price for their efforts. The number of workers who suffered death or injury in war-related industry was 20 times greater than the deaths of wounded servicemen in the 12 months of 1942. At General Motors alone, 189 senior executives died on the job due to work-related causes. Bestowing belated Purple Hearts would not be out of order.

Reading Herman’s account of Knudsen’s efforts, it is a miracle that the U.S. was able to switch from peacetime production at all. Ever suspicious, the New Dealers in FDR’s administration did little to help him, conceding grudgingly that “he knew how to make things.” With no official title or power, Knudsen and Kaiser leveraged their knowledge of the enterprise system to put U.S. industry on a war footing. In the process, America raised itself to an entirely new level of coordination and complexity, one that paralleled what was going on in the uranium plants in Oak Ridge, Tennessee, and presaged what the country could do to reach the moon 24 years later. Chief Executive spoke with Herman recently.

You say that American business won the war but lost the narrative. Why was business denigrated by the New Dealers and why, after the New Deal had gone, has business not gotten the credit you think it deserves?

Your questions go beyond the scope of Freedom’s Forge, but I’ll tell you what I discovered with this book that helps to shed some light on [these issues]. Obviously, the big narrative of the 1930s was that business and specifically Wall Street were responsible for the Great Depression. The American public, to a large extent, was willing to believe that the root of the difficulty was untrammeled capitalism, corporate greed and the Wall Street crash. Textbooks always sort of elide from the Wall Street crash to suddenly the bread line. The accepted narrative is that only the intervention of the federal government changed this.

We know that this is, in fact, not true. For example, Amity Shlaes’s book, The Forgotten Man, documents that actions the New Dealers took not only didn’t revive the economy but unnecessarily prolonged the Depression. Both Bill Knudsen, and Alfred Sloan, who by 1937 was chairman of General Motors, believed that the real solution to getting the American economy back and reducing unemployment was a revival of business and of business productivity—prefiguring supply-side economics before its time in the 1980s.

The story that I tell in Freedom’s Forge is of Franklin Roosevelt’s realizing the country is going to war in about two years, maybe less. There were absolutely no resources with which to deal with it. There was no defense industry. The navy department and the war department had no idea how they would get the kinds of weapons that they would need to fight this new, modern war.

In desperation, Roosevelt called Bill Knudsen, the president of General Motors, and said, “Can you help?” The narrative for Freedom’s Forge is how Knudsen then steps forward to do that. But underlying it was Knudsen’s realization that what Roosevelt was really doing was asking American business—and the know-how that they had—to turn around this situation that went far beyond just the question of American military readiness.

At the very beginning, Knudsen realized that he had at his disposal a way in which he could use this wartime production effort as [a] means to revive American business and industry and [to get] the economy moving forward—because the tools that were necessary were there in the business community all along.