The American Synthetic Organic Chemicals Industry: War and Politics, 1910-1930

6. Surviving the Peace: Economic War, 1919–1922

172 6 / Surviving the Peace Economic War, 1919–1922 The armistice on November 11, 1918, ended the fighting in Europe but initiated a turbulent postwar economic transition from a war economy to a peacetime economy. The three years following the war proved crucial to the American synthetic organic chemicals industry, particularly the dyes and pharmaceuticals manufacturers. Most industrialists felt they still lacked the ability to compete on equal footing with the German industry and continued to work closely with the federal government to encourage the development of the industry. The policymakers and American manufacturers strove to prevent the return to the prewar globalized commercial network, which they believed would spell disaster for most American manufacturers. During the war, the industry profited from the market protection provided by the war’s severance of international trade and by embargoes imposed as war measures. After the armistice, the synthetic organic chemicals manufacturers and their supporters attempted through legislation and regulation to extend the beneficial aspects of the war economy. In fact, the supporters frequently employed the metaphor of war to describe the conditions the domestic industry faced after the armistice. Blending the dangers of World War I and the expected economic battle, industry advocates urged the government in the name of national defense to protect the industry from foreign competitors. The public debate over the kind and degree of government help to the industry occurred in the context of the immediate postwar years when nationalist sentiments and fears still ran high. In the aftermath of the war, industry advocates found few opponents who denied the strategic significance of synthetic organic chemicals to the military, although some debated whether any organic chemicals except intermediates were crucial to national defense. The most extreme of the industry proponents—Francis P. Garvan, in the Office of Alien Property, especially—conflated the German military opponent and the German economic opponent, insinuating that international trade with Germany bordered on treason. surviving the peace / 173 This chapter covers the domestic industry’s strategy to win the postwar economic contest for the American synthetic organic chemicals market. Throughout the immediate postwar years, the manufacturers benefited from creative public-private cooperation designed specifically to aid the industry, which proved effective but also raised questions about decisionmaking processes without sufficient transparency to Congress and other interested parties. The industry also reaped rewards from the continuing resentment toward Germany and German Americans, which helped win additional support for protective measures, especially because the industry advocates urged promotional policies in the name of national defense. By mobilizing political support in the wake of the war, the manufacturers received exceptional help from Congress and a variety of agencies in the federal government. At the end of 1922, a collection of federal policies were in place that shielded the domestic industry from most outside competition and promised to foster this relatively underdeveloped industrial sector. In chapter 7, we see that the policies of the war and immediate postwar years required ongoing defense by the industry advocates. The Chemical Foundation, Inc. Europeans had established the rationale for patents by the time the new United States embedded a patent provision in the U.S. Constitution. Nations granted patents in the expectation that they would facilitate economic development by encouraging and diffusing knowledge of new technology. Inventors publicized their inventions in exchange for monopoly powers for a limited period of time. The writers of the U.S. Constitution, by granting Congress the power to issue patents “to promote the progress of science and useful arts,” accepted the justification that a patent system would increase the amount of knowledge in the public domain. By the late 1800s, Americans wondered about the monopoly power of patents and whether the rise of corporations with research and development (R&D) facilities had fundamentally altered the limits that traditionally constrained the power of inventors. The ability of corporations to obtain a group of related patents, or to pursue excessive infringement suits, to bolster their market power posed a challenge to American antitrust policies. When Germans wielded the monopoly power of U.S. patents, the fear of the corporate power of patents grew among the generation of World War I. Supporters of an American domestic synthetic organic chemicals industry saw the German chemical patents as an intolerable obstacle in the way of the industry’s success. And invalidating German patents, as the British had done, would not be enough 174 / surviving the peace help for the...