Jim Lacey is not the first to draw attention to the role of economists in contributing to US victory in the Second World War (Robert Fogel, “Simon S. Kuznets, 1901–1985”, 2001, pp. 213–214; Alexander Field, A Great Leap Forward, 2011, p. 328). But the story is not well known, and Lacey provides a more complete account. Key personages included Kuznets, the Nobel Prize winning father of national income accounting, and his former student, Robert Nathan.
Initially, the economists pushed the military toward more ambitious mobilization plans. Having deferred to an often isolationist Congress after the First World War, military leaders were, prior to Pearl Harbor, unwilling to provide even guestimates of what might be needed. Devising a workable mobilization plan required knowing how much slack there was in the economy, given its “normal” or peacetime potential, how much additional labor could be mobilized among women and those retired given the extraordinary conditions, and how much civilian consumption could be depressed without adversely affecting the war effort. But a plan could not go forward [End Page 176] without numbers for projected men in uniform at specific dates, as well as targets for planes, tanks, ships, and munitions.
A critical issue in estimating potential was whether one used estimates of national income or gross national product (GNP). Capital consumption (depreciation) allowances and indirect business taxes are included in the latter but not the former. Since depreciation expenditures can be deferred, GNP was a more appropriate measure of the size of the overall envelope. National income estimates had been developed in the 1930s, but it was not until January of 1942 that the Department of Commerce produced the first GNP numbers using Kuznets’ framework. These numbers were 25 percent higher than national income, suggesting the possibility of substantially higher military output.
These estimates, as well as prior work by the statistician Stacy May, lay behind President Roosevelt’s announcement, in his 1942 state of the union address, of a “must” list of planes, tanks, antiaircraft guns, and ships. The military now embraced much higher expectations of what could be produced and when. General George C. Marshall, e.g., wanted a cross channel invasion in 1942. The economists soon realized that when one added in all the men and material complementary to Roosevelt’s list, the proposed production plan simply would not work.
On August 12, 1942 Kuznets delivered his feasibility study, which “reiterated his conviction that military production objectives were so massive that any attempt to carry them through would result in fewer rather than more finished products” (p. 105). He anticipated shortages in 1942 of rubber, nickel, trinitrotoluene, smokeless powder and likely in aluminum, vanadium, wool, and toluol. For 1943, he frankly saw the production targets as impossible. He estimated, e.g., that what the military was asking for would require 3 million tons of copper, but could not anticipate availability of more than 2.2 million. He foresaw serious labor shortages by the end of 1943, unless resources were devoted to moving and housing workers where they would most be needed, as well as shortages of machine tools, many of which were by necessity special purpose. Shortages of zinc, rubber, wool, toluol, ammonium, nitrate, and smokeless powder were inevitable, and there would likely be acute shortages of aluminum and steel ingot.
Even if raw material supplies were adequate, shortages of fabricating facilities would create bottlenecks. Parts of the plan easy to fulfill would be, but surpluses of production capacity would coexist with shortages, because upstream supplies or downstream processing facilities were not available. Men and material, desperately needed elsewhere, would be wasted constructing and operating facilities that could not be run at full capacity. [End Page 177]
General Somervell vigorously resisted, in a memorandum sneering at Kuznets and suggesting that his estimates be kept from the eyes of “all thoughtful men” (thus the book’s title). Somervell complained that only a few months before the economists and statisticians had advocated large increases and...