“We are at war,” Emmanuel Macron declared in a national address as France confronted the rapidly spreading coronavirus pandemic.
The French President is not the only politician drawing wartime analogies. U.K. Prime Minister Boris Johnson has spoken of the virus as “a deadly enemy” which must be combated. Venture capitalists too have counseled entrepreneurs on the value of becoming “wartime CEOs.”
Certainly efforts to enlist industry in the fight against coronavirus—from automakers converting factory lines to produce ventilators to fashion brands turning looms over to mask production—and talk of rationing essential items, from toilet paper to flour, evoke nothing so much as the transformation of the economy during World War II. That’s when industry, particularly in the U.S., helped build “An Arsenal of Democracy,” churning out tanks, planes and ships by the thousands, and rationing and price-controls were widely used to prevent hoarding.
But how relevant is the Second World War experience to the coronavirus pandemic? Are there lessons governments ought to be drawing on from the way it so successfully harnessed industry back then?
Historians who study the wartime economies of the 1940s say there are significant differences between then and now, but that there are still policies governments could emulate in this crisis.
The first, and perhaps most important lesson, is that government has a critical role to play in coordinating production and providing the right incentives to business, says Mark Wilson, a history professor at the University of North Carolina Charlotte.
In the U.S., the Wartime Production Board was established immediately after Pearl Harbor to coordinate the manufacture of vital military supplies—and it became the umbrella organization for a number of efforts aimed at boosting the manufacture of ships, planes and ammunition, says Wilson, author of the 2017 book Destructive Creation: American Business and the Winning of World War II.
That’s why Wilson says he found it bizarre that, as the coronavirus outbreak spread in the U.S., the federal government often seemed to abdicate its role in coordinating the procurement of supplies. U.S. President Donald Trump hesitated to invoke the Korean War-era Defense Production Act, which would allow him to order companies to produce medical supplies for the government and to seize supplies bound for export or private customers. The U.S. Chamber of Commerce reportedly lobbied Trump not to invoke the law. On Thursday, Trump finally did invoke the Act to speed the production of ventilators and, in the case of surgical mask manufacturer 3M, he ordered the seizure of a shipment of masks overseas that had been bound for Germany.
Trump has told individual states it is primarily up to them to purchase their own ventilators and protective equipment. “Respirators, ventilators, all of the equipment—try getting it yourselves,” U.S. President Donald Trump said on a conference call with governors on March 16. This week, a desperate New York Governor Andrew Cuomo, his state’s hospitals running critically low on supplies, was left to plead for federal help. “Really, the only hope for a state at this point is the federal government’s capacity to deliver,” he said.
Worse, without federal coordination, U.S. states have been forced to bid against one another for vital equipment and supplies—driving up prices. Wilson says the U.S. had learned from bitter experience during the Civil War, when states were at first largely left to equip their own regiments, how problematic this kind of approach can be. Just like now, the states wound up competing for scarce material with one another, driving up prices, and “leading to big disparities between military units from larger, wealthier states, like New York, and poorer ones, like Indiana.”
“I am stunned that 160 years later, we failed to learn that lesson,” Wilson says.
In the Second World War, the government also stepped in to prevent the kind of price gouging that some states have encountered when trying to procure vital medical equipment. Many items that were in demand for both the military and the civilian population—such as sugar, gasoline and shoes—were subject to rationing and explicit price controls.
Wilson says that most WWII-era contracts the government handed out were on a cost-plus basis. This encouraged suppliers to produce needed goods, since they were assured of making a profit, but it capped those profits at a modest level. In fact, the government insisted on clawbacks in most contracts with military suppliers that would allow it to claim back any excess profits. These clawbacks persisted in military contracts through to the Korean War. What’s more, the government set extremely high tax rates—as high as 90%, in some cases, of corporation’s “excess profits.”
Many of these World War II policies were informed by Americans’ experience during the First World War when “war profiteering” by some U.S. industrial companies became a major scandal after the conflict ended. Similar public anger might be directed at companies this time around that are found to have minted money by over-charging states for essential medical supplies while people die and the overall economy tanks. New York State has, according to a ProPublica investigation, paid almost $250,000 for a portable X-ray machine that normally costs between $30,000 and $80,000 and 20 cents for gloves that normally cost less than five cents.
Another lesson from Second World War industrial policy, according to historians, is that government should rely on existing products and manufacturers, working with them to expand production through the licensing of their designs to other manufacturers—and not waste time trying to design or invent new devices. David Edgerton, a history professor at Kings College London and author of the book Britain’s War Machine, says that while the war effort did inspire innovation, most of these new technologies took years to be perfected and were not ready for use until near the war’s end. “World War II was largely fought with pre-World War II technology,” he says.
Often, government pressured the original patent holders and designers to license their products to other manufacturers. For instance, Pratt & Whitney aircraft engines were produced under license by the Studebaker Corporation, as well as by factories in the Soviet Union, and British Rolls-Royce Merlin aircraft engines were produced in the U.S. under license by the Packard Motor Company.
Edgerton worries that contemporary policymakers have fallen for the myth, which he said also afflicted U.K. Prime Minister Winston Churchill during the war, that new technology can somehow magically go from drawing board to deployment in mere days, when in reality that process, even during wartime, took years. “Most procurement in the Second World War was ramping up the production of things already being procured,” he says.
To meet the current surging demand for ventilators, the British government initially tried to convince manufacturers who expressed interest in making the devices to create a brand new design. Dyson, best known for vacuum cleaners and hair dryers, has, in fact, created an entirely new ventilator in just 10 days—but now it has to get regulatory approval for its device, a process that may delay its deployment. Other manufacturers balked at the government’s suggestion and, instead, have agreed to license designs from existing ventilator makers.
The myth of retooling production
Another myth from World War II that historians say may stymie current efforts to fight the coronavirus is the idea that a large number of factories were retooled to produce weapons. While some assembly lines were, indeed, reconfigured—for instance, General Motors plants stopped making civilian cars and started making trucks for the U.S. Army, and some brass fittings factories produced bullet casings—Wilson says most key weapons were produced in brand new factories, built at government expense, and then operated under contract by corporations. That, he says, is how most aircraft, tanks and ships for the war were produced.
But, of course, building brand new factories takes months. And the coronavirus outbreak is expected to peak within weeks. So parallels to the Second World War production efforts may be superficial, Edgerton says. “The analogy would have to be with particular events in World War II” — say the way civilian vessels were used in the evacuation of Dunkirk — “rather than the entire war effort.”
Mark Harrison, an economic historian at the University of Warwick in England, agrees. Writing on his blog, Harrison says that the fact governments have had at most just a few months to gear up for the coronavirus pandemic is a big difference from the Second World War, in which governments had spent years before the war’s outbreak thinking about how they might organize society to fight it—plus they had the relatively recent experience of the First World War to learn from. “Here we are in the middle of our war with a blank sheet of paper,” Harrison writes of the COVID-19 outbreak.
One area where there might be time to invest in brand new facilities is in the production of pharmaceuticals, Wilson says. The scale at which vaccine doses in particular will need to be produced may strain existing capacity. And, with a vaccine likely at least a year away, the government could invest now in constructing new facilities and contract their operation out to existing drug manufacturers.
When it comes to macro economic policy, historians say there aren’t many parallels with the current crisis. Harrison writes that World War II caused an explosion in demand—for both capital and labor. As a result, many government policies were targeted at controlling inflation. That’s not true today, with many businesses closed due to social distancing measures and millions of people out of work.
The current situation, Wilson says, actually more closely parallels the Great Depression. And it might require similar programs to help keep people employed, and bolster demand. Wilson says the U.S. might consider taking a page from President Franklin Roosevelt’s New Deal policies and invest in infrastructure projects—just to get people working again. But, on the other hand, he acknowledges, the need for social distancing at the moment argues against policies that would see a lot more people going to work.
The coronavirus is likely to exacerbate Western societies already accelerating income inequality, the historians fear. The Second World War “killed, injured, and bereaved millions, but no one was cast into destitution because everyone had a role, and could find a job,” Harrison writes. “After the war, British society was a lot more equal than before.”
That’s not likely to be the case this time around.
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