Advertising at War: Business, Consumers, and Government in the 1940s

Chapter 1. Prelude to War

1 Prelude to War The advertising industry concluded the turbulent decade of the 1930s with some sense of accomplishment. Its public relations campaigns appeared to have marginalized the consumer movement’s most radical demands, and the five-year battle over federal regulation of advertising had culminated in the Wheeler-Lea Amendment, a law that for all practical purposes sanctioned existing advertising practices. Nonetheless, the years from 1938 through 1941 were fraught with danger in the minds of industry leaders, who perceived the notorious New Dealers to have intensified their critical stance toward advertising as the decade drew to a close. Many were of the opinion that the federal government was determined to crack down on advertising, or even destroy it.1 A series of events reinforced this notion. One was the formation of the Temporary National Economic Committee (TNEC) in 1938. Although the committee’s objective was not specifically to investigate advertising practices , its focus on monopoly building cast advertising as a tool used in the creation of uncompetitive markets and as an impediment to economic recovery . Subsequent investigations by the Federal Trade Commission (FTC) were more explicit in this regard and put the advertising industry in a defensive stance. While the industry worked frantically to debunk the claim that it was fostering monopolistic tendencies, the escalating war in Europe generated additional concerns. Raw materials were becoming increasingly scarce as production shifted from consumer to military markets, causing critics to question the need for advertising of consumer goods. Promotion of products that were in short supply might have an inflationary effect and could lead to the emergence of black markets. A series of bills were proposed in Congress that would have effectively halted advertising during the war, leaving advertisers to fear that the public might not be eager to return to an advertising-laden society once the fighting was over. The industry was faced with a formidable challenge in attempting to justify its role in the economy and fight back. Advertising, Business Concentration, and Antitrust Problems surrounding economic concentration and monopolistic tendencies had been an ongoing concern in the United States since the latter part of the nineteenth century. Congress had responded by passing the Sherman Antitrust Act in 1890, which prevented monopolies and cartels from obstructing competition and harming consumers in the marketplace. Enforced primarily by the Antitrust Division of the Justice Department, the law prohibited contracts, combinations, and conspiracies in restraint of trade, as well as monopolization, and it prescribed substantial fines, even prison terms, for violators. But the legislation was far from perfect. If a corporation violated the law, it could simply dissolve and reorganize as a new corporate entity. And because corporations had traditionally been created by state governments , they were not subject to federal control and oversight.2 Concerns about corporate dominance of markets continued into the twentieth century, becoming a cornerstone of Theodore Roosevelt’s presidency. In 1914, Congress augmented the Sherman Antitrust Act with the Clayton Antitrust Act, which addressed specific types of restraints not covered by the 1890 measure, including exclusive dealing arrangements, tie-in sales, price discrimination, mergers and acquisitions, and interlocking directorates. With the Justice Department’s Antitrust Division and the Federal Trade Commission jointly overseeing compliance, it was quickly apparent that the new law would not be vigorously enforced. Business consolidation continued to strengthen after World War I and had become a problem by the time the nation plunged into the Great Depression in the 1930s. Many blamed the economic stagnation on monopolistic pricing structures and production restraints.3 Between 1930 and 1938, the per capita U.S. income was $397 a year, down from $606 in the previous decade. The decrease was shared by all segments of the population.4 By 1937 the economy had finally returned to 1929 output levels, and unemployment had been reduced from a peak of 25 percent to 14 percent. The Depression 18 . chapter 1 appeared to be over. Then the economy unexpectedly went into a tailspin: by early 1938, manufacturing had fallen 30 percent from its 1937 high, five million additional Americans were out of work, and the unemployment rate was nearing 20 percent.5 The economic crisis, now approaching a decade in length, began to look as if it might never end. Some liberal economists, joined by Thurman Arnold, the assistant attorney general in charge of the Antitrust Division, saw this as an opportune moment to turn their attention...