AHC: United States nationalizes the military industrial complex

Bloc of text below, readers are invited to skip down to the TL;DR at the bottom if they like.

Formed after World War I, the Nye Committee, officially known as the Special Committee on Investigation of the Munitions Industry, asserted that arms manufacturers had lobbied for American entry into the war. Those same manufacturers made huge profits during the conflict, and Senator Gerald Nye called for nationalizing weapons manufacturing to prevent future war profiteering by "merchants of death" like the infamous Basil Zaharoff.

Obviously the committee never achieved this, but the anti-war movement achieved a number of "victories" and "near-victories" in subsequent years:

The Neutrality Acts of the 1930s in 1935, 1936, 1937, and 1939.
  • Among other things, these acts forbade the granting of loans, credits, or arms to belligerents in a foreign war.
The Ludlow Amendment
  • Which would have made a declaration of war contingent on a majority vote in a nationwide referendum. It was defeated in Congress by a vote of 209 to 188, arguably due to the pressure of FDR behind-the-scenes.
The Bricker Amendment
  • Which would have made treaties and other international agreements (e.g. military alliances) subject to a vote by congress. The amendment failed by only one vote in the Senate.
Shades of pro-nationalization sentiment and Nye Committee era fears about arms factory owning "merchants of death" seemed to persist even into the 40s and 50s.

World War II Shipbuilding
  • Shipyards were built by and operated by private companies, but financed funds authorized by Congress. The shipyards themselves were therefore owned by the federal government.
President Truman's nationalization of steel industry during the Korean War
  • It was reversed by a 6-3 decision by the Supreme Court.
TL;DR: Nationalization, and non-interventionism in general, was popular for a while but came to nothing. But what if? How could nationalizing the arms industry realistically happen? We're limited to post-1900 here of course, but all comments are welcome.
 

kernals12

Banned
You can still have a military industrial complex even if all your arms manufacturers are state-owned, as proved by the Soviet Union. Defense contracting is not a natural monopoly so there are no real potential efficiency gains from nationalization, and instead there will be the likely losses that come from state ownership.

It's pointless.
 
It would be more simple and realistic for the government to mandate all companies providing goods/services to the US Military must do so at cost.
 

kernals12

Banned
Nationalization of Railroads was a disaster in WWI, no one wanted to expand on that afterwards.
Not until 1971 that is
Amtrak-logo.png
 

kernals12

Banned
It would be more simple and realistic for the government to mandate all companies providing goods/services to the US Military must do so at cost.
Then either nobody would do it or contractors would use accounting tricks to make profits into costs.
 

BigBlueBox

Banned
It would be more simple and realistic for the government to mandate all companies providing goods/services to the US Military must do so at cost.
First of all, nobody would ever start, invest in, or loan money to a defense company if that was the law. Second of all, calculating the per-unit cost a project that costs billions in R&D, millions in overhead, and millions in both labor and materials per-unit is so complicated it would make Hollywood accounting seem simple and fair. Nationalizing the entire defense industry would be easier than setting up some central accounting bureau that should determine what the cost of each item would be.

A much better idea would be to force defense companies to eat their cost overruns. If a company wins a contract by claiming they can provide the latest jet fighters for $300 billion but it actually costs $400 billion they should be forced to take the $100 billion in losses.
 
Care to explain please?
From
In 1906, Congress passed and President Theodore Roosevelt enthusiastically signed the Hepburn Act into law, which overruled the Supreme Court, strengthened Elkins provisions and authorized the ICC to set maximum freight and passenger rates. These price controls greatly devalued railroad stock, leading to the Panic of 1907, which was later used to justify the creation of the Federal Reserve System in 1913. In 1910, President Taft signed the Mann-Elkins Act, which strengthened the Hepburn Act’s maximum rate-setting provisions and the original Interstate Commerce Act’s provisions on short- and long-haul price discrimination. Those concerned with regulatory overreach did not completely fail in reversing some of the Hepburn Act’s expansions of ICC authority. One provision of Mann-Elkins that sought to restrain the ICC’s power was the creation of the Commerce Court. The Court was tasked with reviewing ICC rulings and overturning those that were found to be unreasonable. By late 1911, the Commerce Court had reversed the majority of ICC rulings that had come before it, making it highly unpopular among anti-railroad interests, such as the Progressive Party, which advocated the Court’s abolition in its party platform. Following a bribery scandal that involved a Court judge, Congress passed the Urgent Deficiencies Act in 1913 that abolished the Commerce Court and placed ICC review jurisdiction with federal district courts. This reorganization reduced the expertise in scrutinizing ICC rulings and had the effect of strengthening the ICC’s power over the railroad industry. This could not have happened at a worse time. The following year, the First World War broke out in Europe and American companies started supplying the war’s belligerents. Yet with Germany’s unrestricted submarine warfare on merchant ships in the Atlantic, ship capacity on the East Coast of the United States became greatly constrained. These factors resulted in a great increase in railroad freight traffic, leading to serious congestion problems in many corridors, particularly on export traffic bound for East Coast ports. The railroad industry, shippers, and government officials recognized that congestion problems needed to be resolved. Unfortunately, several laws and regulatory decisions had greatly restricted the ability of railroads to respond to market conditions and add capacity where it was most needed. Pooling equipment and facilities could have eased the traffic crunch in the short-run, but the Interstate Commerce Act explicitly prohibited the voluntary pooling of railroad resources. In 1917, railroads appealed to the ICC for a 15-percent rate increase to help offset some of the rising costs associated with wartime traffic and afford them the opportunity raise revenue necessary to invest back into network enhancements. The ICC rejected their request. Frustrated with the growing railroad network inefficiencies during the war, President Wilson nationalized the entire railroad industry. On December 28, 1917, the newly formed United States Railroad Administration took over American railway operations. The agency immediately pooled all railroad equipment and facilities, and six months later increased freight rates by 28 percent. Federal control of America’s railways continued through the rest of the war until the Esch-Cummins Act, commonly known as the Transportation Act of 1920, was enacted in February 1920

Now after the Nationalization ended, that act also increased the ICC power even more, and this was sealed the fate of the railroad companies in the USA, with companies going in and out of receivership for then next few decades, as by law, they could not abandon failing routes, over even increase rate to alleviate the losses.

Was it all a loss?

Well the common USRA designs for cars and engines wasn't a bad thing, there were reasons why PRR ran different gear from Union Pacific

_War History of American Railroads_ by Walker Hines in 1928, estimated the cost of that Government control at $1,123,500,000
 
From
In 1906, Congress passed and President Theodore Roosevelt enthusiastically signed the Hepburn Act into law, which overruled the Supreme Court, strengthened Elkins provisions and authorized the ICC to set maximum freight and passenger rates. These price controls greatly devalued railroad stock, leading to the Panic of 1907, which was later used to justify the creation of the Federal Reserve System in 1913. In 1910, President Taft signed the Mann-Elkins Act, which strengthened the Hepburn Act’s maximum rate-setting provisions and the original Interstate Commerce Act’s provisions on short- and long-haul price discrimination. Those concerned with regulatory overreach did not completely fail in reversing some of the Hepburn Act’s expansions of ICC authority. One provision of Mann-Elkins that sought to restrain the ICC’s power was the creation of the Commerce Court. The Court was tasked with reviewing ICC rulings and overturning those that were found to be unreasonable. By late 1911, the Commerce Court had reversed the majority of ICC rulings that had come before it, making it highly unpopular among anti-railroad interests, such as the Progressive Party, which advocated the Court’s abolition in its party platform. Following a bribery scandal that involved a Court judge, Congress passed the Urgent Deficiencies Act in 1913 that abolished the Commerce Court and placed ICC review jurisdiction with federal district courts. This reorganization reduced the expertise in scrutinizing ICC rulings and had the effect of strengthening the ICC’s power over the railroad industry. This could not have happened at a worse time. The following year, the First World War broke out in Europe and American companies started supplying the war’s belligerents. Yet with Germany’s unrestricted submarine warfare on merchant ships in the Atlantic, ship capacity on the East Coast of the United States became greatly constrained. These factors resulted in a great increase in railroad freight traffic, leading to serious congestion problems in many corridors, particularly on export traffic bound for East Coast ports. The railroad industry, shippers, and government officials recognized that congestion problems needed to be resolved. Unfortunately, several laws and regulatory decisions had greatly restricted the ability of railroads to respond to market conditions and add capacity where it was most needed. Pooling equipment and facilities could have eased the traffic crunch in the short-run, but the Interstate Commerce Act explicitly prohibited the voluntary pooling of railroad resources. In 1917, railroads appealed to the ICC for a 15-percent rate increase to help offset some of the rising costs associated with wartime traffic and afford them the opportunity raise revenue necessary to invest back into network enhancements. The ICC rejected their request. Frustrated with the growing railroad network inefficiencies during the war, President Wilson nationalized the entire railroad industry. On December 28, 1917, the newly formed United States Railroad Administration took over American railway operations. The agency immediately pooled all railroad equipment and facilities, and six months later increased freight rates by 28 percent. Federal control of America’s railways continued through the rest of the war until the Esch-Cummins Act, commonly known as the Transportation Act of 1920, was enacted in February 1920

Now after the Nationalization ended, that act also increased the ICC power even more, and this was sealed the fate of the railroad companies in the USA, with companies going in and out of receivership for then next few decades, as by law, they could not abandon failing routes, over even increase rate to alleviate the losses.

Was it all a loss?

Well the common USRA designs for cars and engines wasn't a bad thing, there were reasons why PRR ran different gear from Union Pacific

_War History of American Railroads_ by Walker Hines in 1928, estimated the cost of that Government control at $1,123,500,000
,
Thanks.
 
Not until 1971 that is
Amtrak-logo.png
Passenger routes were pretty much all money losers for the RR, save for the Northwest Corridor after WWII's gas and tire rationing ended.
Passenger traffic routes were an Albatross, that by ICC regulation could not be dropped or rate changes made without approval, that was rare indeed.

The merger of the failing Penn Central, that was PRR, NYC and New Haven imploded in 1970, that at that point, the largest bankruptcy
in US history is what opened the door for Amtrak, where the RR could finally jettison those routes and spin off the gear
 
...
TL;DR:
Nationalization, and non-interventionism in general, was popular for a while but came to nothing. But what if? How could nationalizing the arms industry realistically happen? We're limited to post-1900 here of course, but all comments are welcome.

One problem here is there is not a discrete separate arms industry. The businesses that deal directly with the government for defense contracts are usually selling all sorts of other goods to other non government entities. So, if you nationalize those you nationalize a mass of non defense production. Second is the direct contractors are often not the primary manufacture of the specific item. Sub contractors make stuff that goes into a package item the DoD purchases from the primary. So, are you going to nationalize a mass of second tier manufactors? Who may not consistently make things for the DoD.

At the surface it may look like a monolithic defense industry. The reality is defense contracts are over the long haul a fluid thing that draws defense items from a constantly shifting web of connections into US manufacturing as a whole.
 
This would piss off so many people. It isn’t as big as now but US probably does have the biggest civilian market for guns and weapons even back then. The US also sells a lot weapons to many foreign nations back then and now. Individual capitalist and private businesses make a lot of money in these industries. They aren’t always just selling in the US or its civilians either. Guns then and now had a good chance of originating from the US. Also you run into the issue of what falls under definition “military industrial complex”. Ford cars and factories can be easily converted to military use later on. Ford knows that’s somewhat and will be very loud and to borderline treasonous to protect its interests which nationalization will be seen as threat to that. Same goes for many capitalist and large businesses in US.

This isn’t Europe where you have a stronger military or aristocratic class influencing stuff. You also don’t have as strong communistic or unionist tendencies in US as you do in Europe. You have representative elective republic that political system can be heavily influenced by plutocrats and mob mentalities. Wealthy people in US will throw money at US political and media outlets and demonize this as much as possible. Blackmail or pc campaigns against people images who support this would be common tactic.

Interventionist policy towards the military industrial complex is much more likely and what actually happened during and after ww2. The US would not directly control or nationalize it like USSR but they would give them a lot of benefits, privileges, tax cuts, land, resources, and money. This gives them de facto control and influence over the industry without pissing off businesses and capitalist because it’s a win win for them. They get government support and can still do private business and trade how they see fit. If it’s nationalized they can’t sell to countries the US isn’t on good terms with or people them and UN are cutting off weapons trade with. Many of them don’t give a shit who dies or who they are selling to as long as they don’t use it against them or near them and most importantly pay them well for it. In ww1 this would being able to sell to Germans and Brits/French. In ww2 this is selling to axis and allies which individual private interests did do in both. Now this is individual private interests in US selling weapons to Arab monarchs, Iran, Iraq, and Egypt even when they are fighting each other or at odds. This should point out the issues nationalization will cause.

Being super power has not changed business minded nature of the US. It just made them adept it to the situation. That’s difference between US and possible alternate pod superpowers or real world ones. They are thinking about how to make money and self gains more so then anything else. No ideology like USSR or idealism of British Empire. American capitalist will depict nationalization as socialist or communist especially right after ww1 and red scare from birth of USSR. The US maintains a large military industrial complex in otl by selling its surplus or outdated equipment to its law enforcement then to allies then to the second and third world countries. It’s actually rather smart in many ways. Highly immoral and counterproductive for international stability but smart from a business view point
 
. . . Sub contractors make stuff that goes into a package item the DoD purchases from the primary. . .
Actually, I’m going to take this as the opening.

I’m going to guess that (?) 6 is about the number of manufacturers we need for competitive bidding to really work well. So, when we have less then this, hell, government can act as the main contractor.

Plus, things tend to work well for an indefinite period from beginning to mid, before they become corrupt. With sometimes problems at the beginning, and eventual corruption being less than a hundred percent certain.
 
Pretty much all defence concerns are functionally nationalized as is.
Hell ostensibly civilian high tech industries get massive subsidies errrr investments.
 
I’m going to guess that (?) 6 is about the number of manufacturers we need for competitive bidding to really work well. So, when we have less then this, hell, government can act as the main contractor.
It's not so much the number of potential contractors, as having enough work to go around so that tenders can be awarded based on merit rather than 'who will go out of business without more work'. In that respect, having two competent competitors with a healthy orderbook is preferable to artificially maintaining a larger number of suppliers each of whom is perpetually one failed bid away from shutting down the plant.

If you really want nationalisation, the most plausible way to do it is to have some sort of scandal about the quality of goods being manufactured by 'profiteers' for the military, and have a law passed requiring that all military equipment is produced in military arsenals, naval shipyards, and the likes. There's precedent for the US military producing some of its' equipment in each category, just not all - that capability would need to be expanded rather than created new. Dual-use equipment, like aero engines and trucks, probably can't sensibly be nationalised.
 

Nick P

Donor
There is talk of some companies being nationalized because they supply items that are extremely rare or hard to make in low numbers but would otherwise go bust.
Most of these involve explosives and propellants for missiles.
 
...
If you really want nationalisation, the most plausible way to do it is to have some sort of scandal about the quality of goods being manufactured by 'profiteers' for the military, and have a law passed requiring that all military equipment is produced in military arsenals, naval shipyards, and the likes. There's precedent for the US military producing some of its' equipment in each category, just not all - that capability would need to be expanded rather than created new. Dual-use equipment, like aero engines and trucks, probably can't sensibly be nationalised.

That was one of the arguments for retaining the Army and Navy 'arsenals' post 1919. In the US there was a strong sense that "War Profiteers" had somehow stolen vast amounts of money or resources during the attempt to arm the Allies & US Army 1917-1918. Socialists and Progressives thought it better the government have a tight control over military arms manufacture. On the reverse side companies like Ford felt they had lost significant money & wanted nothing to to do with purchasing of running the arsenals at Rock Island or Philadelphia. The War and Navy Departments had to continue asking Congress for money to build cannon in government facilities because private companies seldom gave acceptable bids & most would not bid.
 
That was one of the arguments for retaining the Army and Navy 'arsenals' post 1919. In the US there was a strong sense that "War Profiteers" had somehow stolen vast amounts of money or resources during the attempt to arm the Allies & US Army 1917-1918. Socialists and Progressives thought it better the government have a tight control over military arms manufacture. On the reverse side companies like Ford felt they had lost significant money & wanted nothing to to do with purchasing of running the arsenals at Rock Island or Philadelphia. The War and Navy Departments had to continue asking Congress for money to build cannon in government facilities because private companies seldom gave acceptable bids & most would not bid.
Really? Do have a sorse on that becuse iv always read thet us companies made bank on arms supply and everybody knew it. Tho keeping the arsonals for peace time military production and adding more production by private companies during wartime is probably the best we can do.
 
Really? Do have a sorse on that ...

Kleins 'A Call to Arms' might be the quickest. Klein describes how 1917-1918 the manufactures in the US signed contracts that specified payments on delivery of product. Little or nothing up front for cost of setting up production, retooling, ect... That was not uncommon in commercial contracts in those days. The supplier covered start up costs and was reimbursed in the delivery payments. The problem is there was as Klein described the manufacturs expected the production to run through at least 1919, & possibly into 1920. The Entente was in bad shape in 1917 & the assumption was the war would drag on through 1919. When the armistice came in November 1918 there was pressure from the voters to cease war expenses and fiscally conservative Congress responded by terminating the war contracts. A portion of the manufactorers & banks were caught with large investments in setting up production & no revenue from the canceled contracts. Klein described how twenty years later when the Roosevelt administration starts industrial mobilization & new material purchases in 1939-1940 industry was reluctant to bid as they were offered similar terms as in 1917-1918 by the War Department. Those with long memories, like Ford, were convinced they'd be burned again. Both the conservative and liberals in Congress were reluctant to consider any money up front for production start up. A second related problem was rising costs. When the British a French started signing contracts in late 1939 it reversed the stagnation & decline of material and labor costs during the Depression. When the US government started large scale offering of production contracts a year later the War Dept was tendering fixed contracts. The business managers were very aware of rapidly inflating materials and labor cost and refused fixed cost contracts for anything more than a few months. Again Congress & the buercrats in the War Dept could not get their heads around the true economics they we faced with. These two factors, the free market in materials, and some other smaller problems retarded the US industrial expansion 1940-42.

Public perception was a bit different. The memories of Profiteering war contractors were still strong. They were aware of companies that were still trying to sell the Germans and Japanese stuff. People who had rising income again were frantic to replace worn out possessions. New cars, washing machines, home repairs, were surging in demand. That last thing the public would accept in 1940 or 1941 was rationing and war economy cutting off consumer goods. If industry was making obscene profits the small businessman tradesmen, and laborers should not suffer either.

It took a couple years to sort this out. A major breakthrough was in legislation following the DoW. Roosevelt got laws enabling centralized planning, control of raw material allocations by the Federal government, and ability to dictate production priorities to industry. Essentially the US became a socialist state for three years. Roosevelt reduced the influence of the New Dealers in this and many key decision makers in the government were businessmen like Knudsen. So a socialist system run by capitalists. It worked for the short term. New blood in the War and Navy Departments helped as well and the termination of the politically based power of the old Quartermaster Corps helped. Marshal centralized Army key material decisions in the Army Support Forces and cleaned up groups like the Ordnance dept. The system of 1942-45 was not perfect, but was far better than tweak and under planned non system in the 1920s & 1930s.
 
Last edited:
Top