AHC: United States nationalizes the military industrial complex

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. . .
Funny story. When I was in third grade (age 8), I sometimes hung out with the older boy next door who was like 11. He gave me a quarter to ride my bike down to the local gas station to buy enough for him to mow the grass. On the way back I found 11 cents on the pavement. He thought I was lying and messing with him. My mom overheard the argument, and while the two of us were riding back to the gas station, she called the gas station. To her credit, because then the man at the station took us seriously.

He told both us boys, the gas war is over.

This was way back in 1972. Years and years later, like after I had taken one economic class in high school and two in college, it occurred to me, Wouldn't a really healthy free enterprise system have price wars on almost all products almost all the time? And I guess I settle out that there are main sweet spots on price and quality, and I suppose minor sweet spots that appeal to some subsets of buyers and sellers.

This somehow seems relevant, will try to tie it in later on (unless anyone would like jump in and help out! :))
 
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For awhile the navy had it's own shipyards and aircraft factory. If I remember correctly goverment build factory's and leased them to private companies.
 
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.
FDR and many New Dealers did seem very centralist more then anything. Not really left wing at all. I’m usually pretty open to ideas but I can’t see the US nationalizing military industrial complex without going full on socialist or communist. Even a US that was neutral in ww1 and stayed economic power would likely keep this private because they would make even more by trading to warring nations across the world especially Europe.

The US does not interact with businesses like many other nations do especially when compared Europe. In Europe a business is often expected to do what it is told and not seen as even equals to government authority by public or legal system. They are not above government there even in democratic countries because the government their is seen as more with the people or in their interest. In the US private interests have secured themselves in both public and private sectors matters. Even if they aren’t always in position of power they do still have a lot of legal protection and past legal case rulings to support their points. Many who came to American and lived the “American dream” were Bourgeois middle class people who came to US to get away from exactly that. You know why a middle class German industrialist or capitalist still wanted to come to US even when Germany was more well off before WW1? It’s because he knew he could become a lot more wealthy and powerful there and have less government oversight. It’s the land of opportunity more so then total equality. More high tech or skilled labor companies still rather be in the US over Europe for this reason. Even the conservative elements who founded and came to America could be described as more “new money” or not your traditional upper class seen in Europe. This is one reason nationalization has always lean more to taboo there. Americans often only care about their own self interest because that’s often the people who were the most attracted to coming here. Europeans then and now have more communistic view of government even when its democratic and liberal. Americans do not. Many Americans will think its unfair they can’t trade and sell to who ever they want even if their product is m16s, ARs, tear gas, and tanks. Disney company worked and sold to Nazi Germany and so did other companies until the very day they declared war on the US but these people went back to working with some of these same people after war and even helped some get out of trouble for war crimes or helped change their image and downplay their Nazis past. What does that say about their mindset and desires. These people and groups are actually very loyal to US in a do or die situation or when directly attacked by outside elements because they understand this is one of or only place they can do stuff like this. Also they get pissed off themselves because they are often the ones who sold the aggressors weapons at some point. Japan and al-Qaeda being good examples of this.

The government actually often works with businesses like it is one themselves. They make contacts and negotiations. Like an actual business they will give benefits and privileges in exchange for certain things. For example, the US wants tanks so they ask Ford. In exchange for their best tanks and conversion of civilian factories they are now a government sponsored organization or one greatly tied to them through multiple legal contracts. This works so much better for these people. Nationalization costs a lot of money and pisses off a lot people. The government basically brides them into doing what they want. They don’t have to directly do that stuff and they have complete deniability or escape goat when one of these businesses get caught doing some shady shit or breaking international laws. The one thing you can still find anywhere in the world that still has good chance of saying made in US is a gun or weapon. The other being Russia but you can usually tell difference by just which guns and weapons they use. Also selling outdated weapons to enemy or rogue nations have probably not seen as counterproductive until modern unconventional war took off. Private businesses could still sell our outdated or lower Quality products to nations they don’t want to see strong and sell better ones to our allies while US gives their best stuff to themselves. You play them before the conflict even breaks out and set them up for failure in a direct military. That’s why USSR tried to out do US quantity during Cold War when funding people with weapons. Those weapons won’t win you a conventional war against the well trained and funded US or ally militaries but in unconventional war they can bleed you dry and with globalization and modern terrorism your now creating a shit load of unexpected issues that wasn’t an issue decades ago.

The more I talk and think about this, the more I think nationalization just seems dumb. The problem with American economics isn’t so much making money and how effective it is. The issue is just the lack of standards and moral to its legal system and practices but governments don’t always care about that so from their view point nationalization would be dumb. Even if public became hostile to the military industrial complex wouldn’t it be more likely disbanded or regulated much more closely? Nationalization seems like a unnecessary money drain especially if they want to stay a global military power
 
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The basic problem is this: the reason some people wanted nationalization in the 1930's was that it was believed that the private arms trade to belligerent powers helped bring the US into the Great War. Nationalization would solve that problem since it is illegal under international law for a neutral government (as opposed to private manufacturers in a neutral country) to sell arms to belligerents. But the idea soon occurred to people there was a much simpler solution to the problem--just have Congress outlaw private sales to belligerent governments. That in fact was what was done under the neutrality laws of the 1930's. (Of course it didn't prove so simple--almost immediately questions arose about civil wars like Spain or undeclared wars like that between China and Japan. And eventually in November 1939 the law was changed to allow arms sales on a cash-and-carry basis because while Americans didn't want the US to enter the war, many of them felt that the arms embargo unfairly favored Germany.) With that available, there wasn't much support for nationalization except from people who were way too far to the left to prevail in Congress.
 
The basic problem is this: the reason some people wanted nationalization in the 1930's was that it was believed that the private arms trade to belligerent powers helped bring the US into the Great War. Nationalization would solve that problem since it is illegal under international law for a neutral government (as opposed to private manufacturers in a neutral country) to sell arms to belligerents. But the idea soon occurred to people there was a much simpler solution to the problem--just have Congress outlaw private sales to belligerent governments. That in fact was what was done under the neutrality laws of the 1930's. (Of course it didn't prove so simple--almost immediately questions arose about civil wars like Spain or undeclared wars like that between China and Japan. And eventually in November 1939 the law was changed to allow arms sales on a cash-and-carry basis because while Americans didn't want the US to enter the war, many of them felt that the arms embargo unfairly favored Germany.) With that available, there wasn't much support for nationalization except from people who were way too far to the left to prevail in Congress.
Wouldn’t neutrality more likely end with the US becoming more strictly neutral outside of the Western Hemisphere but still for free trade and business with everyone else? The only reason the US joined both world wars was because of the foolishness and aggression of Germany(ww1) and Japan(ww2). Also the passive aggressive nature of FDR towards them did not help the US avoid war. This doesn’t justify anything the axis powers did but FDR did unnecessarily antagonized them when many Americans wanted to avoid that completely and do business with everyone. He wanted an excuse for a war but knew he needed a real good reason to convince most Americans and the public.

Neutrality doesn’t mean nationalization. It would actually mean more privatization of military industrial complex and all government relations with these businesses not direct. The US is dealing with highly paranoid and fanatical people in ww2. This goes for leaders and public. FDR embargo on Japan isn’t a neutral action and also indirectly encouraged the more fanatical elements to attack the US thinking it was necessary. Without the embargo they don’t attack. To be neutral you have to sell to everyone and be very very clear about it. Even Switzerland is clear on how they will respond if their neutrality was violated. They had no issue shooting down axis or allies planes that flew over their country during the war but they also did trade with both. The US would have to be more like that to preserve neutrality. Countries know when you play favorites and Americans actually make more money by selling to both sides.

Additionally I think Germany and its leaders in ww1 did not understand the US wasn’t trading more with the UK intentionally. It was just easier to trade with them and harder with Germany since its ports are blockaded for the most part. The British navy still a big factor in trade. Also it wasn’t the government doing that it was mostly wealthy New Englanders who had ties to UK. Neutrality in either world war would be eliminating of US politics and government from weapons industries. They are private but can freely sell to any foreign power while government basically tells Europe stay out of our Hemisphere and if you want to trade you have to bring your ships here until the war is over. This includes the UK too. That would be the most likely impact of neutrality. Neutrality doesn’t prevent the rise of US weapons industries internationally. Honestly it might make it even bigger and more widespread.
 
. . . (Of course it didn't prove so simple--almost immediately questions arose about civil wars like Spain or undeclared wars like that between China and Japan. . .
Naturalizing may help us avoid running months — or years! — behind the curve. In a high trajectory scenario we make better case-by-case decisions. Maybe since it is directly tax payer money, more press coverage, thus the wisdom of crowds, etc.

Of course, won’t necessarily be high trajectory, but sometimes I think it’s funner to play with 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.
That is fasnating! What about companies supplying the allies before the us DOW.
 
How is that in a centrally planned economy of America not cause starvation like in the USSR?

It was run by business men & administrators with many decades of experience and proven success. Not ideologes with no substantial management experience. Men like Knudsen intervened only as far as necessary to direct critical factors and left local managers free to deal with business as usual. Unlike the Marxists, Lenninist, or Stalinis there was no effort to manage the small details from the top. Also it only lasted three years, so there was not time to wreck the underlying economy. Klein used 800 pages in his book & still only briefly summarized the US economic effort.

Marshals reorganization of the US Army and elimination of the politics ridden Quartermaster Corps after 1941 was a separate issue as was reorganization of the Navy procurement. Sommervels management of Army Service Forces accomplished many of Marshals goals. There were some Army Green books published on this subject tho I've not looked at them.

That is fasnating! What about companies supplying the allies before the us DOW.

When the Brits and French came with cash in hand and blank checks in October 1939 there was so much slack in the US economy their early orders did not create significant problems in resource allocation. Production to fill French orders for 1940 amounted to under 3000 air craft. By contrast US combat aircraft production for 1944 was around 105,000. The French and Brit orders for 1940 could be managed within the existing industry with some expansion. The expansion to the 1944 level required drastic measures.

The warning signs came as 1940 progressed. The Army Air Corps was handed a blank check, and the USN Navy a second check with no amount stated. At that point the free market system broke down, with steel, or coal, or aluminum going at random to the highest bidders. Suppliers reneged on delivery contracts to send to others offering more. This completely blew up in the autumn of 1940 when the emergency mobilization started. Taking near three million prime males out of the labor and management pool, and adding the cost of turning them into a combat force began to stall military procurement. The Two Ocean Navy plan and the Army mobilization aimed at providing a 1,600,000 expeditionary force became increasingly difficult to achieve as industry fell behind on both civilian economy and defense orders.

The Brits were affected badly as to get what the needed they had to out bid everyone else. The interventionists in Roosevelts group tried to help the Brits with Lend Lease & and related legislation, but that had its limits.

1941 turned into a knife fight of every supplier & manufacture grabbing at whatever they needed at inflating costs 7 extending delivery times. The Declarations of war in December 1941 enabled two things; 1. A Constriction of the consumer economy through rationing and materials allocation. 2. Setting & enforcing priorities in allocation of key items like steel, concrete, aluminum, fuel, alloys, and transportation capacity. That rationalized the industrial mobilization and enabled a organized expansion of arms production.
 
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