Felix Morrow

Effects of Monopoly on War Production

(February 1942)


Source: A review from Fourth International, New York, February 1942, pp.38-43.
Transcription/XHTML Markup: Ted Crawford and David Walters
Copyleft: Felix Morrow Internet Archive (www.marx.org) 2004. Permission is granted to copy and/or distribute this document under the terms of the GNU Free Documentation License


Roosevelt has answered the widespread dissatisfaction with the condition of war production by “reorganizing” the OPM into the War Production Board as the definitive “solution” of the problem. We confidently predict, however, that the WPB, like its predecessors, will shortly be the object of bitter indictment. It will not and cannot solve the anarchy of production, nor do away with unemployment, nor protect small business, nor curb the astronomical profits of the monopolies. Like its predecessors it will prove to be the pliant tool of the monopolies against the workers and small business and against production.

Practically all discussion about utilizing to the full America’s productive capacity for the war proceeds from the worthless assumption that the problem is one of industrial engineering. It assumes that, given efficient enough planning and organization in Washington and in the factories, all the forces of production can be geared to the war economy. This absurd assumption is, of course, a corollary of the myth of national unity. It is completely disproved by the actual course of events.

The War Production Board is the fourth of its kind. The National Defense Advisory Commission was established in July 1940; it was replaced by the OPM headed by Knudsen in January 1941; this in turn was superseded by the SPAB on August 28, 1941; and this by the WPB on January 13, 1942. Essentially the same personnel constituted all four. The OPM had all the powers it needed, but evaded using it, declares the Truman Committee. But if it didn’t have, the SPAB did. SPAB head Donald Nelson was specifically asked by the Tolan Committee at a hearing October 28, 1941, whether the SPAB had sufficient power to carry out its program. Nelson answered: “Given the knowledge of how many implements of war of all kinds we need... it is comparatively easy for the President to organize the production set-up and the machinery for control. The SPAB or Supply Priorities and Allocations Board sets major policy. It is appointed by the President with the authority to make decisions—decisions which can be overruled only by the President himself...” But now, the alibi is, the SPAB didn’t have sufficient authority.

The fact of the matter is that all these loudly-heralded changes in production organization took place here for the same reason that Britain has had a new Minister of Supply every five or six months. An industrial engineer just returned from England, Alex Taub, testified before the Tolan Committee that “failure to coordinate production on the necessary scale aroused so much criticism that popular opinion had to be allayed by changes in the Ministry of Supply every five or six months.” The latest British formula has been to give Minister of Supply Beaverbrook a new title - Minister of War Production.

Popular opinion may temporarily be allayed by Churchill and Roosevelt’s changeovers—but the fundamental flaw in war production continues. That flaw is that war production, like peacetime production, is geared not to use but to profit. Whether the customer is the average man or the Army and Navy of the United States, his consumption is regulated not by his needs but by those ways and means whereby Big Business can make the greatest profit.

Not the War Production Board but monopoly capital controls war production. And the anarchy of production under monopoly capital in peacetime is transferred to the sphere of war production. Not even for the sake of its own imperialist interests for which the war is being fought can monopoly capital subordinate its anarchic system of production for profit to the needs of the war machine.
 

Investigating the Monopolies Again

Proof of our contention is provided by the investigations of the Truman Committee of the Senate and the Tolan Committee of the House which record in their own way the control of war production by monopoly capital.

These latest investigations are in line with an old tradition. Practically every advance of the monopoly octopus has been followed by a governmental investigation, pressed for by the small business interests who have suffered another amputation at the hands of Big Business. The most notable of these investigations were the Trust Investigation of 1900; the Armstrong Committee of 1906 (insurance); the Stanley Committee of 1911; the Pujo Money Trust Investigation of 1912; the Industrial Commission of 1916; the belated expose of war profiteering by the Nye Committee in the 1930’s.

The gigantic advances made by monopoly under the protection of Roosevelt’s NRA codes led to the O’Mahoney Monopoly Committee (Temporary National Economic Committee was its official title), which began its work in 1938. The special message to Congress asking funds for this committee suggested “a thorough study of the concentration of economic power in American industry and the effect of that concentration upon the decline of competition.”

The earlier investigations were generally led by avowed trust-busters. But World War I so consolidated the power of the monopolies that trust-busting became, clearly, a case of Don Quixote tilting at windmills. The most the New Dealers in charge of the O’Mahoney Monopoly Committee talked about was of “regulating monopolies.”

Now the monopolies are so much in the saddle that the Truman and Tolan Committees don’t even talk of regulation. All they do is whiningly beg Big Business to leave some crumbs for small business.

The reports of these Congressional committees, especially the Truman Committee, are nevertheless extremely valuable for the information they provide. If we take these rich materials and analyze them, they throw a great deal of light on the starkly reactionary economic and political consequences which are resulting from this “war for democracy.”

War Production: A Monopoly The astronomical sums being spent on the war machine are being siphoned into a few hands. “During the past year,” Assistant Attorney General Thurman Arnold reported for the fiscal year 1941, “three-fourths of all our vast war contracts have been let to 86 concerns.” The Vinson (House Naval Affairs) Committee reported January 20, 1942, that 15 large companies received over 60 per cent of all Navy contracts. This included both completed and uncompleted contracts. Analysis of the committee’s figures show that on the main naval expenditures—still uncompleted contracts—ten large corporations have over 60 per cent of the contracts.

The Tolan Committee indicates in another way the concentration of war production in few hands: 20 industrial centers received about 60 per cent of all contracts, 71 per cent of the contracts are concentrated in 12 states.

In the years of preparation for the war, the Army and Navy surveyed 25,000 manufacturing plants, bothering only with the large plants (no survey of any kind was made of 160,000 intermediate and small plants). Yet even of those surveyed, the Truman Committee reported, 60 per cent have not had a single armament contract or subcontract.

The latest reports show an even greater intensification of the monopolistic tendency. On February 5, 1942, a special Small Business Committee of the Senate (Senator Murray, Chairman) reported that 56 corporations now have over 75 per cent of all war contracts.

The monopolists of war production are, of course, thereby getting a stranglehold on the future. In November 1940, the Truman Committee warned:

“We particularly desire that the United States should avoid the bitter experience of England, where 20,000 manufacturing plants were shut down almost overnight when a complete shift from what may be called a business-as-usual program to an all-out war effort program was attempted. As Mr. Odlum stated: ‘A shut-down plant and disbanded organization will be hard and oftentimes impossible to revive.’

“A large number of small businesses are already closing their shops. Still more are discharging many of their employees, and the results of restricting materials are only just beginning to be perceived. Great care must be taken to assure that we do not destroy the American way of life by adopting the wrong methods of defending them... It is of paramount importance that we take now the necessary steps to permit the legitimate interests of small business to be safeguarded.”

Two months later, however, the Truman Committee had to record that its warning had fallen on deaf ears and that the favored few were intrenching themselves not only for war but for peacetime:

“It is clear that their competitive position in the economy of the nation is being vastly improved by the war, and at a time, moreover, when tens of thousands of small businessmen are being forced to stop production while they watch the value of their plants destroyed and perhaps see their machinery seized and transplanted to the plants of large defense contract holders.”

Profiteering in the Form of New Capital

To what extent the monopolies have increased what the Truman Committee euphemistically calls “their competitive position in the economy of the nation” becomes clear when we analyze what the monopolies are getting from war contracts.

If what happened during 1914-1918 is characterized as war profiteering, then one must find a new term to characterize what is now happening, for the gigantic governmental sums being absorbed by the armament oligarchy are quantitatively so far beyond its profits of 1914-1918 as to constitute a qualitatively new phenomenon.

The most significant item to understand is not profits, in the ordinary sense, but the capital being handed out by the government.

Seven and a half billion dollars has been provided for “expansion of wartime facilities” out of approximately the first thirty billions in war contracts. This figure is as of January 1, 1942—that is, prior to the main war budget. If the same ratio continued up to July 1943, by which time the government estimates a total outlay of 150 billions in war contracts, the armament oligarchy would have added 37½ billions to its capital. Let us, for the sake of ultra-conservative figures, cut the probable capital aggrandizement by nearly a half, down to 20 billions. To grasp the meaning of that figure, it may help to point out that the total railroad system of this country is valued at 20 billions. Such is the reward in capital which the armament oligarchy will be receiving—and this is exclusive of “ordinary” war profiteering on government contracts. Nor do “excess profits” taxes even touch this increase in capital.

To prevent the masses from understanding this grant of tens of billions of capital outright to the armament oligarchy, the grants are disguised in several ways. The disguises are transparent, however, and even the timid Truman Committee declares: “The capital expenditures for plant improvements for defense purposes will ultimately provide the contracting corporations with some of the newest and finest machine tools and factory buildings practically free of charge.”

Two main methods are employed, tax amortization certificates and government-financed plants for giving this capital to the armament oligarchy.
 

1. Tax Amortization Certificates

One-fifth of the 7½ billions already provided for new capital—1½ billions—has been advanced by private capital, which k reimbursed through tax amortization allowance. These corporations will. during a period of 60 months charge off their capital outlay in the form of depreciation charges, against taxes due on profits. For example, Bethlehem Steel ordinarily computes depreciation on a steel plant as 2.85 per cent annually; under tax amortization certificates it can charge off 20 per cent annually for five years. This amounts to the government paying for the plant.

The Internal Revenue Code permits five-year tax amortization by issuance of a certificate from the War or Navy Department, certifying that the new plant facilities are “necessary in the interest of national defense,” which is supposed to mean that all productive facilities in the given industry are already being utilized for war production and that new plants, being probably usable only in the “emergency,” should be paid for by this help from the government. But, the Truman Committee found:

“Just as the habit of the Army and Navy procurement officers was to favor single large manufacturers, so the tax certifying authorities of the Army and Navy were inclined to grant certificates to similar large companies. The result was to discourage the use of existing small plants and to award the privilege of increased tax deductions to companies which had already been given profitable defense contracts.”

The method of tax amortization certificates is utilized particularly by corporations seeking to expand and dominate hitherto untrustified industries. One example is aircraft production where, the Truman Committee reports, 19 companies have a monopoly of war contracts while sixty others have been frozen out. The favored 19, thanks to the new plants provided by tax amortization, will absolutely dominate the industry. In addition these companies have benefited from about a billion dollars of direct government-financing in the form of loans and new plants.

Tax amortization certificates are granted not only for construction of new facilities, but also when corporations “reconstruct, or acquire new facilities.” Through these loop-holes Big Business can take anything. One example is described as follows by the Truman Committee (which apparently has been forbidden to give the names of the companies involved: the committee remarks in general on such secrets, “Much of our so-called secret information is secret only from the public.”):

“Company A applied for a certificate for amortization on a new plant, admitting its new plant would not increase productive capacity, but claiming that a new building was necessary in order to avoid dangers from sabotage existing at the old site. Although a tax amortization certificate was granted to this concern for such construction, a further certificate was also issued to Company B for the purchase of the first company’s discarded plant, even though Company B was using that plant as a subcontractor on the very contract for which Company A had stated that a new plant was necessary.”

That is, the government is paying for both the old and the new buildings, without any increase in production in the industry.

Furthermore, “industrial replacements, made in the ordinary course of business,” are being paid for by the government through tax amortization. That is, new machinery replacing worn-out machinery. This was a little too outrageous for the National Defense Advisory Commission (predecessor of the OPM), which, in opposing amortization for this purpose, had “a considerable division of opinion” with the Army and Navy, the Truman Committee reports. Since then, however, the Army and Navy have received from Congress the sole power to issue tax amortization certificates. One example of what the monopolies can do under this system is found in Bethlehem Steel’s financial report for 1941, which subtracts from profits and adds to its charges for depreciation an item of 13 millions, “representing acceleration of amortization of equipment doing war work as allowed in provisions of the Internal Revenue Code” (NY World-Telegram financial section, Jan. 31, 1942). Thus Bethlehem is charging off against taxes due an item of 20 per cent depreciation on its regular equipment.

Corporations can find ways to collect twice from the government for new “emergency” facilities, the Truman Committee points out—once through tax amortization and a second time through the fact that “It is possible for the corporation to make such charges in its contract with the Government as would reimburse it for the cost of construction or acquisition of the emergency plant facility.” To guard against such double payment, the tax amortization statute provided that, before a corporation take advantage of the 60-month amortization benefits, it must prove that its contracts do not already include charges covering the cost of the new plant. But, the statute also provided, the corporation is not obliged to prove this if there is issued to it a “certificate of nonreinbursement” by the Secretary of War or the Navy, testifying there is no double payment. And these certificates have been forthcoming in abundance. In the discreet language of the Truman Committee:

“The War and Navy Departments have believed that non-reimbursement certificates should be issued with a maximum of liberality, and that it is not necessary to indulge in an extensive review of the taxpayer’s cost factors in order to determine whether its contract with the Government is, in fact, reimbursing him beyond the point which the tax amortization statute allows.”

The other four-fifths of the seven and a half billions so far allotted for plant expansion have been directly provided by the government, through the Reconstruction Finance Corporation, its subsidiary Defense Plant Corporation, and the Federal Loan Administrator (all three of these, incidentally, controlled by Jesse Jones).
 

2. Government-Financed New Plants

This method, leaving formal title to the new plants in the government’s name, is preferred to tax amortization particularly where monopolies already exist. Requiring no further expansion for the purpose of dominating the industry, the monopolies build new plants only on the basis that the government advances all funds. If the monopolies find use for these plants after the war, they can “buy” them from the government; if not, they can then turn over to the government the keys to useless factories. We cite but a few examples.

In the strategic aluminum industry, dominated by the Mellon family (Aluminum Corporation of America), the Truman Committee made a thorough investigation resulting in a special report on June 26, 1941. It declared:

“With the completion of the entire program bringing the aluminum-producing capacity to 1,400,000,000 pounds per annum, the Government will be furnishing 70 per cent of the power capacity required. The greatest dollar investment in the facilities for the ‘production of aluminum is represented by the power facilities, and therefore the Government will have the predominant investment the entire facilities. To the extent that funds invested by private capital are permitted to be amortized over five pears against income for tax purposes, as provided by law, the Government will in the final analysis, also provide the funds for the nonpower facilities.”

With the government providing the money, “The furnishing of management skill and services is all there is left” for the company to provide. “Under such conditions there is no basis for large profits to private interests,” concludes the Truman Committee—meaning there should be no basis.

Big and Little Steel now hold 22 contracts for building new plants at government expense, amounting to 260 million dollars. US Steel’s subsidiary, Carnegie-Illinois, holds the largest building contract, for 117 million dollars. An even larger contract is pending between Bethlehem Steel and RFC’s Defense Plant Corporation; the draft of that contract, published by the Truman report, epitomizes the whole business.

This plant is to he located within the Sparrows Point (Maryland) domain of Bethlehem. The plant is leased to Bethlehem for 35 years, with the government having the right to cancel if the rate of production during five-year periods should fall below 25 per cent of capacity. But such cancellation simultaneously obligates the government to remove the plant from Bethlehem’s land. In plain English this means the government provides free of charge to Bethlehem a great steel plant which Bethlehem may or may not use as it chooses, and the only right the government has is to remove the plant, “a right of dubious value as the cost of removing the facilities might well approximate, if not exceed, the salvage value.” In short the government’s only right is to junk it.

Counsel for the Government’s Defense Plant Corporation analyzing this contract—which was drawn up by Bethlehem by agreement with OPM, Army and Navy officials— said:

“Either Bethlehem did not desire to expand and has therefore submitted a proposal which it believed would be rejected, or Bethlehem was using the defense program to obtain at government expense, modern facilities which would have a material value in peacetime-operations.”

The counsel indignantly added:

“In times of emergency it would be fatal for the government to concede that it is weaker than any of its corporations and that it must accede to their demands, however outrageous, in order to obtain arms and supplies with which to defend itself.”

Fatal it may be, nevertheless Bethlehem Steel is sitting tight, certain that the government must consent to this contract. As a matter of fact the contract would probably have been signed already except for the publicity created by the Truman Committee investigation of it. The others in steel, and in all other fields, are only less brazen in form. In content they all come to the same thing. Consider, for instance, the government-financed plants built by the Big Three of auto. Under the pretext- that conversion of the auto plants was impossible, the Big Three had the government pay for entirely new plants for war production. In the Detroit area alone, by August 31, 1941, new plants at government expense were contracted for amounting to over 241 million dollars.’ Ford was building within its River Rouge domain a Pratt-Whitney plant for 35 million and a Ford bomber plant at Ypsilanti for 80 million dollars; Chrysler was building a huge tank arsenal in the Detroit area and, three months later, a 100 million dollar airplane engine plant in Chicago. By August General Motors alone had obtained 121 million dollars for new plants.

The government retains formal title to these plants, with the companies having the usual option to buy them “after the emergency.” What does that mean, concretely? For one thing, the Truman Committee points out, “In the event of inflation, which is at least a possibility, the companies having such options may, by exercising such options, be enabled to purchase the facilities constructed with Government funds at a small fraction of their true value.” This, however, is but one of the ways open to the companies for securing formal title to the plants they are actually operating. Not only operated by them, but built and tooled to their specifications, the Big Three, we can be sure, will see to it that these plants are useless to any post-war. purchaser except the Big Three, if they want the formal title to the plants. What bargaining position is the government in, under these conditions, except to continue to lease or “sell” these plants to the Big Three on their own terms?

What, for example, will the government do with the great airplane plant it “owns” within the River Rouge domain of Ford? All transportation facilities there are geared into and controlled by Ford; no other corporation would dream of trying to operate that plant under those conditions.

Furthermore, most government-financed plants are “scrambled” together with the plants of the corporation involved. That is, the government-financed plant is not in itself an integrated unit for the production of a product, but provides additional facilities for several operations toward creating the product. Such is the case, for instance, with the proposed plant in Bethlehem’s Sparrows Point yards to which we have already referred. The Truman Committee, dealing with the question why “scrambled” facilities are insisted upon by the companies rather than enabling the government to build complete production units which the government could later either operate or sell advantageously, says: -

“One of the principal arguments, which’ Bethlehem and other companies desiring similar contracts for ‘scrambled’ facilities have advanced for not giving the Government adequate rights to protect its investment by purchasing and operating the plants in question, is that the best way to increase production facilities is to limit the new construction to those portions of the plants which constitute bottlenecks and to make the new construction a part of the old existing plants rather than to build new plants for integrated operations. There is, of course, substantial merit to this argument, except that there very definitely is a point at which the steel companies of their own volition should have constructed the additions necessary to remove the bottlenecks that existed in their own plants, and they should be willing to finance at least a considerable portion of such facilities themselves.”

But why should the monopolies finance “a considerable portion” when they can get the government to do so, knowing full well that “after the emergency” the government will directly or indirectly turn title over to them?—if they want it.

Such, then, are the rewards of war contracts: 25 per cent of the total spent going to the armament oligarchy as new capital, quite apart from profits in the usual sense.

And the foregoing analysis, let us underline, deals with the methods of aggrandizement employed between July 1940 and January 1, 1942, that is, almost entirely before the declaration of war. The future is certain to see even more brazen looting. Speaking to a private meeting in New York of “many of the principal holders of government war contracts,” on January 29, 1942, WPB head Nelson told them:

“If any of you men have war contracts pending which are being held up while you negotiate on terms or while your lawyers are arguing over terms, get into production now and settle the details later.

“To hell with stopping to count the cost. Start turning out the stuff and we can argue the terms at our leisure. Turn it out by inefficient methods if necessary and figure out better ones as you go along—but get the stuff moving, whatever happens” (New York Herald Tribune, Jan. 30, 1942).

“To hell with the cost.” This blank check from the government will he filled in with astronomical numbers by Big Business, we can be certain.

Disastrous Effects on Production

Monopoly control of war production does not only mean that the monopolies loot the public treasury of the present and future funds squeezed from the masses; it also means that, amid the talk of “all-out” production a large part of the productive facilities of the country remain idle. We shall outline only the main ways in which production is fettered:

1. UNUSED PLANT. This includes (a) the 60 per cent of the 25,000 large and intermediate plants whose facilities were surveyed by the Army and Navy before the war but which had not received a single contract or subcontract by November; (b) 30,000 other manufacturing plants employing more than 20 persons each and (c) 130,000 other manufacturers employing less than 20 persons each but who, in the aggregate, employ approximately 10 per cent of all persons gainfully employed. These figures are from a Truman Committee report. Between 30,000 and 45,000 of group (c) are engaged in the metal-working industries and hence a considerable number of them have probably already been closed down by priorities since the figures were compiled.

The latest report—by the Senate’s Small Business Committee, February 5, 1942—confirms these previous figures: 56 firms have received over 75 per cent of contracts, 6,000 other firms received the rest, leaving frozen out 178,174 plants.

Not all the small manufacturers will perish. The alibis presently being employed against subcontracting are in large part merely opposed to present governmental regulations for subcontracting. Once the government permits subcontracting in the way that the Big Three in auto have always done with auto parts—with the subcontractor at the mercy of the prime contractor and no acounting to the government on what the prime contractor is paying the subcontractor—Big Business will “discover” that it is possible to use small manufacturing plants. The tendency to monopoly has always included in some cases also a tendency by a monopoly in one industry to keep another industry disorganized. The classical example is how Steel and the railroads keep coal mining a “sick industry,” broken up into small units. The Big Three in auto keeping auto parts atomized is another example. This tendency is now the only remaining limit on the growth of monopoly!

2. UNEMPLOYMENT. The anarchy insisted upon by the monopolies bars from use a large part of the most important of all forces of production—the workers. There were still seven million unemployed on January 1, 1941, and curtailment of civilian production during 1941 kept that figure at least static. The Tolan Committee estimates that two to three million will be rendered unemployed by priorities throughout most of 1942, among them a million construction and building materials workers and most of the auto workers. Few of the unemployed will be put to work through the WPA war projects. The Tolan Committee estimated in December that “less than half the persons eligible and certified for WPA employment are on the project rolls,” finding 1,200,000 persons so certified but not assigned. In addition, of course, there are probably two or three times as many who have sought certification but have not been certified—this is an old WPA trick to keep figures down. After citing the above figures on Dec. 17, 1941, the Tolan Committee adds: “The winter decline in private employment will increase this proportion of unmet need.”

We cite these facts here solely from one aspect—the tremendous labor forces of production which are going unused during the “all-out effort,” thanks to monopoly control of war production.

3. MONOPOLY UNWILLINGNESS TO EXPAND PRODUCTION. The most annihilating summary of this tendency was given in his annual report for the fiscal year 1941 by Assistant Attorney General Thurman Arnold:

“Looking back over 10 months of defense effort we can now see how much it has been hampered by the attitude of powerful private groups dominating basic industries who have feared to expand their production because expansion would endanger their future control of industry. These groups have been afraid to develop new production themselves. They have even been afraid to let others come into the field. They have concealed shortages by optimistic predictions of supplies, and talked of production facilities which do not exist.

“Antitrust investigations during the past year have shown that there is not an organized basic industry in the United States which has not been restricting production by some device or other in order to avoid what they call ‘the ruinous oversproduction after the war’...

“Concentration of defense contracts have aggravated the situation. During the past year three-fourths of all our vast war contracts have been let to 86 concerns. If we are to scatter these contracts there must be a vigorous curb on all the concealed coercions and combinations which have created this problem. The emergency power to impose price ceilings becomes a mockery in industries where costs are raised by artificial restrictions on production.”

What Mr. Arnold leaves out of his picture, however, is that while his small anti-trust division in the Department of Justice is investigating the evil-doers, his quarry is in charge of the WPE, the Army and Navy procurement services and, in short, is beyond his reach.

We shall limit ourselves to but a few examples of Arnold’s generalization.

STEEL: Since the monopoly in this field, like all others, is based on price-fixing through complete control of production, the steel magnates looked upon expansion as a menace to post-war control of prices and production. Hence the notorious Gano Dunn reports of February 22 and May 22; 1941, sponsored by the OPM and solemnly vouched for by Big and Little Steel. Those “authoritative” reports estimated a surplus capacity of steel of 10.1 million tons for 1941, and a surplus of 2.1 million tons of steel for 1942. After a time, however, Mr. Gano Dunn resigned from OPM as the scandalous disparity between the tale and the realities grew. Not until September and November 1941, however, were contracts signed to build new steel capacity—and then only with the government footing the entire bill.

ALUMINUM: The catastrophic shortage in aluminum, which is sharply curtailing airplane manufacture, can be directly traced to the resistance of Alcoa to expansion of production in the industry which it monopolizes—a resistance in which it was aided by OPM.

The Truman Committee reported on June 26, 1941:

For months the Defense Advisory Commission and the OPM had said that talk about a shortage in aluminum was misleading and that it was unpatriotic to talk about the possibility of such a shortage. As recently as December 1940 news releases had been issued calling attention to the adequacy of the supply for all military and civilian needs... During all this time the OPM had apparently completely relied on Alcoa as a source of information as to the availability of aluminum and had discouraged anyone else from going into the business of producing aluminum. Alcoa was at the time the only producer of aluminum... Alcoa had long followed a policy of maintaining high prices and building new capacity only when certain that it could sell at its fixed prices all that would be produced.”

The result was that a Truman Committee hearing in May 1941 unearthed a 600,000,000 pound annual deficit in aluminum. The OPM tried to cover up its culpability with a great campaign to collect aluminum pots and pans, which produced scrap equivalent to about four days of the amount of the annual deficit. Expansion of production was arranged for finally—at government expense—on August 19, 1941. The plant expansion will be available for actual production about August 1942.

AUTO: The Big Three differs from other monopolies in manufacturing directly for the consumer. Their resistance to expanding war production, therefore, took the form of successfully insisting on continuing regular auto production and holding up war production until new plants could be built at government expense. The pretext was the impossibility of conversion of the regular plants. The Tolan Committee held hearings in Detroit, late in September 1941, and reported that “representatives of the auto industry were unanimous in their argument that the production equipment of the industry was not to any practicable degree convertible to defense production.” President Wilson of General Motors told the committee that not more than 15 per cent of equipment was adaptable to war work; auto spokesmen told the War Department in June that “only about 10 per cent of our tools” were useful for armament work. The Big Three had its way, producing pleasure cars for a bull market, using up enormous stores of strategic materials. This cynical affair is best summed up by the following from an interview with Knudsen in the Washington Post of January 6, 1942:

“Knudsen was asked if he believed that more conversion was possible now, with passenger-car production stopped, than was believed a year ago.

“’Of course,’ he answered, ‘now that there is nothing else to do.’”

COPPER: The Truman Committee sums it up:

“Copper production in the summer of 1940 was larger than the demand for copper at that time. This was particularly true of foreign production available to the United States, and it would then have been possible for us to have built up a large stock pile of copper... In addition one of the largest producers of foreign copper attempted in November 1940, to sell a large quantity of foreign-produced copper at a price between 9 and 10 cents per pound, as compared with the present price of 12 cents per pound. But the importation of such copper was opposed by some of the leading producers of copper in the United States, who were interested in protecting their market. The NDAC (Predecessor of OPM) concluded that such copper was not necessary or desirable. As a result, the production in foreign mines was reduced, and we lost an opportunity to obtain 100,000 tons of copper at a time when shipping would have been no great problem, and at a cost very much less than we are paying today.”

Belated arrangements for expansion will bring new production into operation about January 1943. The monopoly of course remains.

“It was informally stated to committee investigators that when the extent of the shortage of copper was realized in July 1941, the necessity for action was so imperative that the OPM did not have time to give attention to the small producers or to the opening of small mines or the reopening of those which had been closed down.”

All the facts we have adduced demonstrate that the productive capacity of the country and the actual possibilities of war production under monopoly control are two very different quantities. In wartime, as in peacetime, there continues virulent contradiction between the forces of production (productive capacity) and the social relations of production (private property, now dominated by monopoly). In peacetime to mention but one example-200 billion dollars of productive capacity remained unused and therefore lost between 1930 and 1937, according to the conservative figures of the governmental National Resources Committee. To grasp that figure of 200 billions, let us recall that the government estimates that the entire cost of the war will be less than that. The same fetters upon production which during 1930-1937 led to mass unemployment, the ploughing under of wheat and killing of hogs, the NRA codes legitimatising industry-wide agreements for curtailment of production, etc., are operating today tinder war conditions.

Hence the “solutions” for war production proposed by the small businessmen and the trade union officials—a Small Business Division in the WPB, labor representation in the WPB, etc.—are beneath contempt. Such proposals avoid reference to the basic factor: the rule of monopoly over economy and therefore over the WPB, which makes it inevitable that no matter who constitutes the WPB or the government will be a tool of monopoly so long as monopoly rules economy.

Out of the compelling facts, then, and not out of arbitrary theory, flows the transitional demand around which the great masses can be rallied against monopoly capital, even while the masses are still imbued with patriotic illusions and illusions concerning the class character of the government:

Nationalization of the war industries and their operation under workers’ control.

 


Last updated on: 8.1.2006