war ii. this is a little over an hour. [inaudible conversations] >> good evening. i'm henry olsen, i'm vice president of the american enterprise institute andlso director of its nationalof t research initiative which is ate foundation or an organization a within aei -- entity, that's what i was looking for -- entity within aei that supports original domestic policy-related research and big think books of which our current speaker, t arthur herman, the author of the book that is the subject of s today's discussion, "freedom's forge," clearly is one of. .. 2012 election is, in many ways, a debate over the 1932 election. should we continue or extend the legacy of franklin delano roosevelt in establishing the federal government as one of the preeminent directors if not the

preeminent director of american economic life, or should we embrace the creative animal spirits of free enterprise capitalism and trust more to ourselves and more to the great men and women who fuel our nation's economy and whose ideas and innovations change our lives? when we look to the future of american public policy. be -- economists and historians have debated whether or not roosevelt's move in his signature domestic accomplishment, the new deal, actually helped or hurt, whether or not it prolonged the great depression or helped to bring us out of it. but whatever side you take in that debate, there's virtually unanimous common wisdom, agreement that the stimulus provided by world war ii's rearmament and continued purchase of munitions and vehicles and other things to fight the nazis and to fight the japanese ultimately pulled america out of the recession. and, of course, when we do that, the common wisdom focuses on the

collective. they focus on the government. they focus on rationing, shared sacrifice, rosy the riveter, government propaganda films, the war production board. and the implication of that sometimes voiced by many people today who argue that president obama should move more strongly in embracing this legacy is that this is a time when the government finally got the private sector out of the way. they got to steer the main ship, and they got it right. and that the problem is that we've abandoned that legacy. arthur herman's book, "freedom forge," shows that none of that common wisdom is true. that, ultimately, what saved america and saved the world was not the government finally getting it right, but private industry and all of the innovation and creative animal spirits that had been herded into the corner for the previous decade that came roaring out to save ourselves and save the world. without much further ado, let me introduce arthur herman who is a

noted historian and book author, he's the author of a new york times bestseller, and gandhi and churchill, the epic rivalry, which was a pulitzer prize finalist. we can only hope that freedom's forge brings so much critical and commercial attention. arthur? [applause] >> how are all of you? [inaudible conversations] thanks for coming out. the weather has been, shall we say, less than cooperative? but i'm glad to see so many faces, many of them familiar, many of them new to my audiences. i also wallet to thank -- want to thank our hosts, american enterprise institute, for all of their help not just with this event, but also with the work and research that i've done for this book, "freedom's forge,"

and for all of the help and support from colleagues and others who have been so instrumental in helping me to not only shape the ideas that are contained in this book, but also to give me a sense about what the real value of intellectual collaboration and cooperation is really all about. and as just as i discovered in many ways that capitalism, contrary to myth, is not just about competition, it's also about cooperation, and it is in many ways a cooperative venture. and so, also, is intellectual endeavor. now, what i want to do here tonight is to tell you a story. and this is a story that usually is told backwards. if you go to the textbooks, you go to the movies, you go to the usual discussions of this, very

often you will see an illustration something like this when talking about the theme which is american wartime production in world war ii. scenes like this. b29s being built at the fabled boeing facility in wichita, kansas. and the story, as my introducer, henry olsen, has just told you of collective effort, of government directing the resources of the, of american economy towards a single collective end and achieving in the process an outpouring of american wartime material of the like the world had never seen before. 70% of all of the war equipment used by the allies in world war ii came out of american factories. it's an incredible story. it's the industrial miracle of the 20th century, what occurred there. but what i'm going to tell you is a story that shows that the

usual version has this backwards. that where we usually start is where it should finish. and where it should start, actually, is not in factories like wichita's b-29 plant, but back in the spring of 1940. and i want to put you in the place of the man who would, in fact, set this entire process rolling, namely franklin roosevelt. as he gets news sitting in the oval office that a new kind of warfare, blitzkrieg warfare, mass mechanized warfare supported by mass air power is sweeping across western europe and overwhelming the democracies of europe -- france and also threatening to do the same to britain -- franklin roosevelt realizes sitting there that if

france falls and britain falls or remains isolated, war is coming to the united states. maybe not in a year, maybe in a year and a half to two years, but war is coming. and roosevelt realizes that when he will be facing a situation which america prepare to face an enemy whose military might looks like this, when our military might looks like this. this is the belly flop, it was an experimental vehicle tried out by the u.s. army in the mid '30s, later dropped, but it give you an idea of what the contrast in the military technologies the united states faced in the 1930s and in 1940. roosevelt realized. he's sitting there at his desk, he realizes the united states has the 18th largest army in the

world. holland has a bigger army than the united states does. hungary has a bigger army. that it has a fleet, a battle fleet, the united states navy, which is built around world war i-era battleships which has no real means of projecting power across the seas, met alone transoceanicly to europe or even more farfetched, across the pacific. and he has an army air corps, not each an air force, an army air corps which consists of about 1500 planes, most of them biplanes and obsolete trainers whereas modern air force like germany's and britain's, we're talking 5,000, 6,000 war planes, modern war planes. and he suddenly realizes he's got to get this country ready for war. he's got to get this country ready to build the kind of force that it's going to be necessary to win this war, but how are you

going to do it? where do you start? the navy and war departments have no clue. they went through the process in world war i, it had been a fiasco trying to take over factories and trying to place orders and decide what was going to be made. none of it arrived in time for our soldiers fighting overseas. he faces a congress which is deeply, deeply mired in isolationism which has no interest at all on spending any kind of money for rearmament of the united states. world war i, after all, was the war to end all wars. so authorizations? forget it. it's not going to come for any kind of massive military buildup. how are you going to deal with this situation? where do you turn to transform both the american military, but also to get the u.s. economy after a decade of depression geared up for this kind of production record? well, the place that you turn is

american business. and that's what roosevelt did. roosevelt hated business, he despised businessmen, he had campaigned two presidential elections against business blaming them for the depression, blaming them for the prolonging of the depression. he saw them as their, as his bitterest enemies, yet he had no choice. there was no one else to turn to. he's given the army, the war department's national mobilization plan to get the economy geared up for war across the country that comes to 18 typed pages. double spaced. -- double-spaced. he's got nowhere else to turn. and so at the advice of his wall street fundraiser, bernard baruch, he calls this man: bill knudsen. bill knudsen, danish immigrant who had come over to america, started work in a bronx shipyard with a riveting gang there,

worked his way up, got a job with a company that was making spare parts for ford, works his way up from the shop floor to become henry ford's right-hand man and then moved to chevrolet and then, finally, to president of general motors. knudsen was a motor city legend. the man who even more than henry ford had really perfected the techniques of what is called mass production. and had turned that into the means by which the american automobile industry had become the single largest employer in the country and had also become the master industry of technological innovation and of, and of quantitative production. so he calls bill knudsen, and he says, i need help. we face this dire situation, no one else knows what to do. how do we get this economy up and running and up and going?

roosevelt passes the buck to bill knudsen. and he says, oh, by the way, bill, in order to do this kind of job, you're going to have no kind of authority whatsoever. there's no statutory authority for what is going to take place here. you are just going to have to sort of do this with your own powers of persuasion and through the business connections that you have in the automobile industry and all the industries that are connected and then supportive at the same time. and so this becomes bill knudsen's, shall we say, job offer. in may of 1940. and knudsen's response is dramatic. now, knudsen is a republican. roosevelt's a democrat. they have sparred and have been at opposite ends of the political camp for more than a decade. but when he gets that call, the first thing he does is to quit as president of general motors, move to washington and begin the process of figuring out how he's going to get this country up and running.

for wartime production. and he, of course, now also realizes the obstacles that he faces. he's got, first of all, an american industry which has been falling into the hard times because of a decade of depression, of steel industry, for example, which is about one-half of the production capacity it had been in 1929. that he's also got the fact that many businessmen that he's dealing with, including his own boss, you see him -- there's knudsen standing at the microphone, his own boss standing to knudsen's left, on your right, alfred sloan -- tells him, you're crazy to go to washington. you're going to work for roosevelt? he's going to make a monkey out of you. this is not a project you want to get yourself involved in in any way. this is just going to be an attempt to expand and grow out the new deal, don't do anything along these kinds of lines, you're making a huge mistake. and knudsen says to his boss,

alfred sloan, he said, i'm an immigrant who came to these shores. everything that i have, i owe to america. my president called, i'm going to answer and deal with that situation. the problem he's going to face then is not just opposition from many of his fellow businessmen who hate the new deal just as much as roosevelt hates them and not just opposition from the isolationist congress, but also in labor unions. as i explain in this book here, one of the major obstacles that knudsen faced throughout his effort to try to get this economy going and geared up towards wartime occupation were the resistance of the unions. they feared the shift to wartime production from civilian production would seriously damage the gains they had made in terms of union power, in terms of the union membership all through the '30s during the new deal, and they resist the effort to wartime production to a degree that lasts not just

in the prewar period up until pearl harbor, that goes on afterwards and extends out beyond that as well. it's one of the shocking stories of this whole thing, the degree to which the labor unions haven taped a constant pattern of resistance, of strikes, every effort to get the wartime economy geared up and straightened out. and knudsen knows this, from the very beginning, that this is going to be a challenge he's going to have to face. in the end he calculates that probably 25% of production was lost as a result of union resistance to changes in the workplace, changes in rules about union membership that flowed out of the shift. all the same, knudsen still believes that he can do the job that roosevelt has put in front of him. because knudsen understands that once you set american businesses

off in a direction, give them a task to do, give them something that they need to produce here, that they will be able to deliver under those sorts of conditions, that business can go and produce any number of different kinds of things, even things that they've never made before. and, also, too, that american engineers love a challenge. and so the idea of not only producing new kinds of fabulous weapons, but designing them, designing weapons that have never been conceived of before would have tremendous appeal to them, and they'd take it on. this is the kind of job they're looking for, they've been waiting for since the depression began. and so he tells roosevelt, i'll make you a bet. he says, if you give me 18 months, that's 18 months to, basically, expand plant facilities, to retool in order to shift from making washing machines and tractors and civilian cars to making military trucks and machine guns and all

the other material of war that you're going to need, you give me 18 months, and my colleagues and i will give you more war material than you ever dreamed possible. as he says to roosevelt, if war comes, this is going to be a war of mass production. it's going to be quantity, not necessarily quality that's going to determine who controls the skies, who rules the seas and who wins the victories on land. you give me 18 months, and we'll be able to deliver the tools of victory that'll make it possible to win this war and to confront this, confront the possible, possible enemy that comes with it. and this is what knudsen does. as i explain in the book step by step, he mobilizes, first with the telephone, calling up his colleagues, colleagues in the automobile industry, colleagues in -- who he knows who do subcontracting for them. calls up and says, this is bill knudsen. i near your help. this country has got to gear up for wartime to make itself ready

for war, make itself ready for, to defend this country. i need your help in this process, and they say, you've got it, bill. we'll follow you wherever it is you want to lead. and in many cases the deals all had to be done with just a handshake. because there was no money for contracts. but knudsen says to roosevelt, if you make certain small changes, roll back certain tax regulations, for example, change the amortization schedules here, cut them in half. right now it's 12 years. cut it in half to six or even five years amortization, companies will have an incentive to invest in converting their factories over to making wartime production. it's very funny, too, because at one point knudsen has to send his colleague, edwin johnson, from at&t to go to the cabinet to explain what amortization is. which gives you an idea of the distance here between washington and business and what really, in fact, makes production possible

in this country. and in the end, knudsen was right. in the end by 19 -- already by the time bombs fall on pearl harbor, american wartime production is already approaching the level of nazi germany. already by pearl harbor, it's approaching the level of nazi germany. when war comes, the process is going to even gear up even faster. but the basic structure of it, what knudsen saw as the key to developing and bringing about these changes, remains the same. and that is that you don't do it from a top-down with washington trying to give orders, this was the demand that all the new dealers had, we need a war production czar. someone who is going to have this kind of, you know, almost like the wizard of oz, sort of hands on all the levers and make the decisions and measure output and allocate resources from a

centralized bureau. you said, no, this is going to have to happen from the bottom up. you don't shut down civilian production right away, you add the military orders on. you add the military orders on, and the factories begin to convert because they have to to meet the contracts, the demands of the contracts. and pretty soon you'll be able to have a process in which the conversion to wartime production, to trucks and guns, tanks and planes is going to be complete. the other thing, the other key element that knudsen did was to make sure that the early contracts are going to go, are going to go to the most productive and innovative sectors in the american economy. one of them was the automobile industry. biggest employer in the country, but also the one in which the largest engineering staffs who would be able to take any kind of challenge that was available to them and make any kind of conversion they could carry out. not just in terms of switching g from military vehicles to

military trucks. which was not as difficult as it looked, actually. a whole bunch of different specifications, a whole range of capabilities, it's got to have like driveroverland, for example, those kinds of things that no civilian truck manufacturer would be able to undertake. but also tanks, the military had never heard of this sort of thing. they thought tanks were going to go to locomotive companies, big transportation companies. he says, let me call my friend k.t. keller at chrysler and say, can you make a tank? and keller said, actually, i've never seen a tank. but i tell you what, if you would take me off someplace where i can see one and drive one, i think we'll be able to see that. and that's exactly what happened. and the chrysler tank arsenal becomes the largest manufacturer of tanks during the second world war. but also, too, aircraft engines retooling in order to provide

the aircraft engines for companies like boeing and lockheed and curtis and all the other airplane manufacturers for military aircraft. and then, finally, planes themselves. the most classic example, of course, being willow run outside of detroit in ypsilanti where ford takes on what seemed like the impossible task of building b be-24 liberator planes, hugely.com plex machinery, and yet managed to bring it off. and likewise gm itself, its eastern aircraft plant which takes plans provided by roy grumman's company and makes the grumman wildcats and, also, the tbm avenger torpedo bombers. george h.w. bush's plane, the one he was shot down in -- you've all seen that -- that's a tbm avenger made by general motors as were thousands of others in the course of the war. american automotive industry, one key aspect of that

productive and innovative quality. also the aviation companies as well, and you have to remember that these are aviation companies at this time, these are commercial companies that do military orders and supply those, but whose experience is building a whole range of aircraft for customers. and so the shift then to military aircraft becomes simply a process of retool being redesigning in order to meet these kinds of demands. and also the engineers tapping the skills of engineers who have been involved in commercial planes for years and asking them, turning to them to say can you design a bomber that will do this? can you design a fighter that will do that? as i discovered working on this book, every single plane that the united states flew, the war plane that the united states flew in the second world war except one was a product of pre-war designs. boeing, even the b-29, even the

p-51 mustang. these were all designs waiting in drawers to be turned loose. all they wanted were the orders. all they needed were the orders to turn loose, and knudsen set them off and gets them started with that process, and the result is thousands and thousands of planes not just for the united states, but also for our allies as well. these are p-51 mustangs, b-51 mustangs with british markings which were sold originally to the brits. the brits came over to dutch kindle berg, and said can you make war hawkes, which was a standard american war plane fighter. and he says, yeah, i can design a lot better plane than that for you. he said, give me 100 days, and he designed the p-51 mustang which was a very good plane, a really good plane. but then when the british got the idea of putting the rolls

royce merlin engine on it, then you got a superplane, the best prop-driven fighter of the second world war. and those engines, where were they being produced? the big plant at packard in detroit where bill knudsen had a approached the presidents of packard and said i need engines. first for the british spitfire, but then also for the p-51 mustang. be all the planes, all the planes then pre-war designs except one, and that's the one that came out of the grumman's plant up in beth paige, new york. and, in fact, the only reason i've been using images at all in this speech is so i'll have an excuse to show you this one. [laughter] this is during the war. this is a failed carrier landing. as you can see, that pilot's in a bit of trouble, trying to land on his carrier, and there's his, one of his batmen being sort of,

getting out of the way as it comes in. this is a photograph, by way, taken from the grumman aircraft's newsletter. and they were particularly proud of this because that plane, no one got killed. the plane didn't crash. it just powered out, circled back again and then landed safely in the process. that's the hellcat. that's the one other plane that had come about that was -- the one plane that was designed, made, put into production in less than two years. and it's the one that comes to dominate the skies of the pacific. then the construction industry. and here the man who really sort of dominates the scene of being mobilized for this process is the other main character in the book who is henry kaiser. henry kaiser, the man who was involved first in road construction, one of the builders of hoover dam, and he and his colleagues of the six companies -- people like stephen

bechtel, bechtel corporation, harry morris of morris and knudsen. that's a different knudsen, it's not my knudsen, it's another guy. i think it's now still probably the largest construction firm in the world right now, morse and knudsen, and the other company, tennessee eastman, who became involved in wartime construction. all of these understanding the process of lae-scale enterprise which they used not just to construct docks to repair pearl harbor, for example, and to prepare military facilities, but also to build ships. kaiser's liberty ships being the classic example of that. as the time in which it took to build constantly shrank down to fewer and fewer days until finally by 1942 they could launch a liberty ship every five days if they had to. in fact, a great story about a lady who comes out to christen one of the ships at kaiser's yard up in portland, oregon, and

she comes out with her champagne bottle, and the ship's already gone, sailing merrily down into the south. so one of the workmen comes back to her and says, hey, just wait a minute, lady, there'll be another one along in a few minutes. [laughter] and not just shipbuilding, airplanes, magnesium which was essential for aircraft manufacture, light metal and so on, a new experimental metal which kaiser became heavily involved in in the process. steel manufacturing. kaiser, in order to supply steel for his liberty ships built the most modern steel plant in the world out in california. at fontana, california, as a part of this sort of process. they become involved in the process, they become part of that group who, again, can do anything, build anything. and not only, not only meet deadlines, but bring you under deadline in the process. and then, also, the chemical

companies. the big chemical companies in particular, particularly dow and dupont, but also many of their other rivals and other chemical companies who become, again can, involved in a whole variety of production efforts in order to make the arsenal, make this wartime development possible here. and in the case of dow, one of the most important contributions they make is, as i explain in the book, is again to magnesium. it was herbert dow, founder of dow chemical, who had discovered this magnesium coming off as a by-product of some of the chemical processes involved in the plant in michigan. nice light metal here, very flammable and also very hard at the same time. and he said to himself, this is before world war i, he said someday someone's going to figure out way to make something out of this stuff. it's going to be the construction material of the

future. i don't know what they're going to be doing, how they're going to figure it out, but he begins stockpiling the stuff, and those stockpiles and the formula, the dow formula, becomes the basis for the american magnesium industry, of being able to supply lightweightarts for american airplanes. .. are you finding with regard to a lot of the work that she do in machine and now that is you can't get the kind of copper and steel components that she used to meet in order to make that i for production kinds of things. give it a shot. the saints are inexpensive, easn to get in the late week and so

on.ti dow comes into war in another kinddo of way and that is the problem of shipping the wartime material going across theas weli atlantic and eventually across the pacificis shipping this mats the atlantic and pacific. it has to be secured and wrapped and sealed so it is not going to corrode within these big leaking liberty ships so dow comes up with the substance to do this. i talked to a guy who worked for the shipping company in the midwest. with war supplies coming into ohio and being prepared for shipment overseas and remember when the salesman showed up, sheets of this stuff which was totally transparent, very strong, clings to everything that you can use to wrap up and make it watertight but you can see what it is you are wrapping

up. we call it iran you could wrsar and entire sherman tank. and then you can't leave out do punch becaudupont because when manhattan project organizers realized they would take laboratory experiments of splitting the atom and tearing these into theoretical calculations into experiments into real industrial production, one company they turned to automatically was dupont. dupont engineers were used to handling hazardous substances.

they were used to construction under very tight schedule. the army used them to build gunpowder plants the dupont takes on the job of creating industrial process that never existed and they do ohrid and tennessee and enormous facilities in hanford, washington where it would be processed for the atomic bomb in nagasaki. this is the process that set in motion. through the top prime contractors to the subcontractors on to the rest of the american economy and industry that gets under way. by the time of pearl harbor wartime production has gone from a standing start to approaching

that of nazi germany. by the end of 1942 when the effort really gets going with full conversion of the automobile industry over wartime production united states is out producing all the axis powers combined and by the end of 1943 the american economy is producing baltimore war material than germany and great britain combined. ford motor co. produces more than mussolini's economy. and in fact we produce enough steel and other raw materials to enable the number one wartime manufacturer of airplanes imagine enough material to enable british and soviets to the the number 2 and no. 3 aircraft in the process.

numbers are staggering in textbooks and so on, 28,008,800 -- we were producing five aircraft carriers a month during world war ii. talking 86,000 tanks, 3.5 million trucks. remember studebaker? misapplies 200,000 in the red army. studebaker trucks on the backbone of the soviet logistics' section which enables stalin's armies to go across eastern europe to the gates of berlin. 2.5 machine guns many produced by companies that had never seen

a machine gun before. companies like revenue typewriter, national postage meter, the jukebox company out of chicago which produced the m 1 carbine using design created by winchester hand over forty-one billion rounds of ammunition. outpouring -- the one in which you could depend upon to bring about a final victory in a war based on mass production. if we look at this amazing accomplishment we have to ask how they do it. is it the kind of thing the american economy can do again? i think the answer to the latter question is yes. i also think if we look at the reasons why this took place it

becomes clear why it is a reproduceable effect and the economic boom that came after the war, production muscles used for wartime production shift back to civilian production, why that kind of boost would be possible. you have to realize again that the money that is spent, $300 billion in world war ii wartime production, $3 trillion is a big stimulus check. if you think in terms of stimulus, if you are mesmerized by the numbers alone it seems like simply a matter of spending a lot of money but remember that is not just money that poured into the economy that was given out in large portions. this is money that is being used to buy famous that the government needs desperately and going to the most productive and

innovative sectors in the economy in the process and those of the companies that are being mobilized and put to work. the automobile industry and the others. the second thing to keep in mind is this involves a new labor force for wartime production. and not just african-americans. 1 million move from the south to industrial centers to work at the chrysler tank arsenal. and the work force which is incredibly mobile. people were free to go where they need to go to make this kind of -- chase after the wage.

something like twenty million people leave their home to go find work in wartime factory -- drawn by conditions and better pay and opportunity these kinds of work and industrial surge would be able to create. mobility in waiver. people could go where the jobs are where the productivity is based. unlike the soviet union or britain no one tells american workers where to go. no one even until the end of the war although washington was worried about this until the end of the war, the same is true -- is a voluntary system washington created. nobody told anybody what to think. you were offered a chance to contract but people were drawn to it in order to get a government contract and shift your plan to production and make a contribution to the war effort

and make some money while you are doing it. a wonderful book came out in 1942 call your business goes to war put together by an outfit called the research institute america. i reproduced appendix b of the book. pages suggest to you if your business makes these kinds of things these are the kinds of wartime production you could shift to and offered to make. make razor blades for example you could probably shift over to making little blades that go into the rotary engine on aircraft engine. if you make lawnmowers to make lawnmowers you could go and shift to for example manufacture machine shrapnel to use for high explosive shells. if you make vacuum cleaners -- vacuum cleaners? make the transition to making helmet liners. really quite fascinating to see. these the things industry had done and changes they carried out which is the sort of thing you can do too.

you could get a government contract as well and shift in that direction. wartime production miracle turns out to be a production miracle that springs not out of wartime necessity, not out of washington's decision that the war had to be won and it would take on any means necessary to achieve its direction but the real industrial miracle was the american free enterprise system turned loose on a major project which it could address challenges and overcome. that is the conclusion i had to draw working on this book is the real freedom is forge is not the arsenal of democracy bill newton built and the term that he

claimed that roosevelt stole for december of 1945, the real thing is the american economy. when you turn that loose and take away the restrictions and constraints it can accomplish anything. it can accomplish any kind of goal. working on this book, one thing i've found so fascinating was not just the role serve people played in setting up the process but also the other kinds of people who were drawn into it. business men, kaiser, charlie sorensen who built be 24s, people who sat in the factories and worked in the factories and made new lives for themselves and stories are incredible. and meet people who have done

this work legal didn't realize the degree to which they were part of what we call the greatest generation. we thought they risked their lives on the battlefield and germany and japan. in 1942, killed and injured in a related industry outmbered the number of americans killed and injured in uniform. that is the year of guadalcanal and midway and the battle of the atlantic. the number of civilians and casualties by a factor of 20-1. and shocking to realize that 189

senior executives by on the job. and they paid the price for the war effort that they made and mobilizing their skills and talents and abilities for the great war effort here. the people you will meet in this book, as a result of writing, i fell in love with them. i hope after reading the book you will too. thank you very much. [applause] >> we will conduct a q&a. >> we are all friends here.

>> dorr. okay. someone who used to try to teach principles of economics, economists are trying to look at the inefficiencies -- you can imagine all these different markets with a big increase in demand. how much did the attempt to control prices memo down this effort? >> i like the we put that. you are standing on heads. what they tried to impose on economic transactions was the issue about raw materials and price control. in the end what to many seemed like a good idea they remember during world war i that the

onrush of demand for materials for war productions and prices skyrocketing, huge inflation in world war i. they were determined rather than live through that experience to restrain it in the process and also allocate materials as well. what didn't occur to them was happening under their noses had a paid any attention to it was what made the new materials available, critical materials, steel, copper, aluminum and magnesium wasn't allocation of resources and rationing out of them but increased production. in fact that was the way you saw material shortages, produce more. huge shortfalls before the war begins. by 1942 it is reaching critical factors and wondering why we call these great restraints on civilian manufacture.

the fact was once you got alcoa and other companies coming online and producing, speeding up the process as one more production board put it, we have it coming out of our ears. the process with steel critical to the war industry. let's ration of supply we got and the real solution was technological breakthroughs coming like electric furnaces which will send production skyrocketing and supply all the allies. rubber is another classic example. how do you go to war without rubber? you needed for tires and all this other stuff. let's scrap rubber draw. roosevelt's secretary of the interior in charge of that effort. where do we convert all our tires and so on? just convert it all here and the

stockpiles, got to the point where it was sending people around to pick up rubber mats around white house to go into the stockpile. what was the solution? static rubber. the coming together of chemical companies and oil companies in order to produce synthetic rubbers that unnecessary to create an entire new industry by getting companies involved in the process. if they had sophisticated understanding not just of economics but also how american business works, all the wartime rationing controls were probably completely unnecessary yet for most people's lives that is what they remember most.

rationing of sugar, rationing of coffee, shoes. >> christopher hollyman, small business administration. what changes in government policy? you alluded to them at the beginning in terms of the new deal taking an antagonistic view towards business and the undistributed profits tax which took a very hard toll on business. what kinds of concessions did they bring out of the government to make changes to make production more effective? >> amortization was one and one economic historian said those changes and amortization which seemed like a minor thing did more than anything else to spur wartime production in the prewar period, the crucial 18 months that was crucial. the other big changes the

antitrust dogs. attorney-general fetterman arnold who was an antitrust crusaders, seems like a drop now but in those days was a sizeable commitment of justice department resources investigating antitrust violations and key industries like the oil industry and the aluminum industry under investigation. at the very time they are trying to get this process started. we can't have these companies spending all their time and energy deal with antitrust suits when we need their full wartime production. the dog will get called off on antitrust. that is another crucial change that takes place. there are a lot of safeguards to protect against the evils of capitalism. there was an excess profits tax

that was imposed, income-tax raises across the board and renegotiation law congress passed in 1943 that allowed the government to renegotiate contracts where they felt the charges in terms of cost was exorbitant and that really did happen and one of the reasons was the contract would take certain costs for raw materials but its production takes off and the costs go down so one way for companies, aircraft companies in particular to get around excess profits, that sir charge when you voluntarily renegotiate the contract and reduce the numbers of costs in the process your profit goes down but it won't be taxed at that excess profit kind of level. small-businesses, there was a

small battle over business. the lot of fear in congress that contractors will control everything. and the little guy will get nothing. there was a defense contract committee that was set up. there was a big crusade in washington to do that. once you engage the big corporations as prime contractors there will be plenty for everybody in the subcontractor network to let everybody not only gain improvement but spawn half a million new jobs in the process and that is exactly what happened. >> thank you. i am economic historian at gw university. i am fascinated by your story

especially about the prewar buildup of production. what i am wondering is these contracts the firms were competing for, where do they come from? where they building up a stockpile of material i anticipation of wartime contract for work contracts let out early? >> contracts were a question to produce certain specific materials but the aircraft engines, they didn't exist yet. most companies didn't know how to make them. the additional contract came with advance. this is different from the way defense contracts have been awarded for the war that advanced to allow you to expand your planned, to reach full the kinds of expenses that would go with conversion to wartime process but most of the money was not coming from congress.

pearl harbor, they were not all interested. very suspicious of the process so a lot had to do with loans, reconstruction finance corporation left over from the depression years and converted into defense planned corp. and a lot of it was letters of intent which is another important thing. we intend to give you an order for 1200 fighters. you took that letter to the bank and before you had a contract drawn up but often it was done with hedging, this is what i need to. somebody goes out, let's do it. get set up to go. the army was suspicious that what they were setting in motion was truly unstoppable. and in fact army procurement official dealing with the aircraft industry began to take on the rule of free.

ever heard about the rule of free? if you place an initial order with somebody, a thousand two engine bombers at the end of the year they deliver 3,000 once the conversion was all done. they grow by a factor of 7, at the end of the third year there was -- the only limits to production and expansion was raw materials and labor and labor was always a problem and always a drag not just in terms of union resistance to wartime conversion they might lose power over the shop floor but everyone is working somewhere else. this became a constant problem. where the you put factories and expand new places and not siphon away labor from vital wartime

work that is already underway and also draw a pool of labour which you need and can be trained to do the kinds of work that can be done and economic opportunities for upward mobility. people don't talk a lot about the number of hispanics to get employed in places like california shipyards huge for african-americans. we don't care what you look like and we will train you to do the job you need to do. >> from george washington university. i am interested in roosevelt. roosevelt set the process in motion and sees it being very successful so did it influences attitudes towards the business community? >> that is a really good

question. i have to say roosevelt's attitude was surprising. i would have thought he would of endorse the view of a lot of his new deal france including his own wife. we need to convert overnight to wartime production and the sacrifices should fall on the head of business. roosevelt didn't do it. your fused to appoint an all powerful war production czar. and later on we have people with certain unified positions they never have any kind of real power. the real problem is how do you shut this down? this fountain head of production taking on a life of its own? in many ways historians give him all kinds of ignoble reasons for doing that. he didn't want -- power over

those war production and give up his own power as commander-in-chief. they had statutory authority to close factories or open factories or tell people what you could make and not command that basically mean you have a second president on your hands. i think maybe -- i also think to a degree he was realizing there was nowhere else to go. if the new deal played out and they ran out of ideas how to direct and control an economy in peacetime loan gearing up for wartime and he was going to see what happens. in many ways it may be that he instinctively realize the war production average, national effort, any kind that required commands issued from washington probably wasn't going to be much of an effort after all.

had to come from bottom of the. did it change his attitude? not all. in the state of the union address of 1944 having seen the transformation of free enterprise what it could do, next step now was the chance to get the deal finished and done in the process. the economic bill of rights changed to a civilian collective economy in the process and truman carries out aspects as well until the republican congress stopped him cold. >> the cato institute. i want to pick up a couple questions that harry raised at the outset about parallels to

the present. the depression policies didn't get us out of the depression, the war production did and toward the end you said something that caught my attention. government was buying things that government needed. one could think today about government buying things that government needs. you are a historian, not an economist but are you suggesting paul krugman might be right? >> you know the story w .. world war 2 production machine by declaring war on aliens on mars or something and we would suddenly mobilized a new arsenal of democracy that would appear out of nowhere. subsidize and paid for by more

washington deficits spending. i am not endorsing that. the point that you made that we have to subtly but correct that world war ii got the country on of the depression. you could place some argument that it prolonged the depression's certainly in terms economyivation of the consumer >> look at the productions and way. the rate of increase ofcle of world war ii getting better way, compared to rate of increase of twenties is half. the 20s was much more productive over the course

of the decade. looking in terms of numbers. real wealth 1940 through 1945, what you really see world or to production did not end the depression but year ashley world for making things and engaging and treating a work force ins building warehouses into stock inventory and create machinery that could then be used after the war with turne private investment. there is nothing to spend itinge on.

and now coming back with consumer demand. they go back to making refrigerators but they do it in a much leave your factory with streamline production now they know how to adjust for pro a tremendous boost to unleash the potential. then comes private and then whereonsu the consumer economy can grow. >> i am working on a j documentary thaten followsng wlw getting world were totheir meril veterans to see their real. nda. been the contributionsthema of the factory workers it

happened is 70 years ago. what resources were available to identify the workers and capture their stories? out >> there o is a number of web sites. bottom of richmond california at the war real. a lot of it is oral history and the story is incredible.ial also material you could find. they published their stories mint cannot wait to tell.mplishs resources are tremendous.tori ae stories are incredible.

i received a letter from the richmond shipyard, but the rar teen-ager married to a read the survey of the pacific. she says i would like to think i am building the ship to bring new home. >> i am with 80 high. the southern blacks are moving north more than the 75 years prior.

of fair employment practicesr commission that is overpressure from the march on washington, what role did business leaders are the auto company guides make concerted efforts to seek black workers from the south? >> that is interesting aspect. they thought the fair practices was the wrong way go fry by he would go factory by factory.conv t the show example said a stepep-t by step process.ntract bcontra not to blanket changes. but the role of segregation company the gm plant was completely integrated.

wasre was a shock to those coming yen to sit down at lunch. yet they were separated kaiser's plant is the degree did. 70% of the employees on his payroll combat is the crucial role that they played. and this out there is a a racial tension that it is tteresting to one segmentting that was not protected whoe acte receive no federal support o but who benefited the most most, very interesting.

[applause] >> pulitzer prize winning author has been researching and writing his book barack obama the story. he speaks the president's role to find lake victoria also the family home of the origins of his mother's family. coming out june 19 but we would give you an early look with exclusive pictures including our third trip to kenya. joined us. later the also would help

with their cable partner to explore the culture of the area. >> my name is sayre. we're in kansas. the store opened and 1877 and he opened a store because there was a lack of stores to go in after reading a review and have a conversation with someone who knew it they were talking about. there was a few chains but we manage the same business through three moves and the store has grown and evolved.

>> what type of books to the people read it? >> what is local. anything that is quality. local stories, human interest from other friends. but one of the reasons we save businesses because we can go through all the books through university press, a small press, and make recommendations on things we think will be relevant to their lives where the might not be as popular in new york it can still be sold to the customer. of the bricks and mortar

footprint, a large amount of the square footage you use it for hiking or the ocean. we are sponsored by the american booksellers association. we were able to sell e books a quote -- around 2010. it is interesting. natalee that the physical books sales increased more than rethought. we had more traffic to the website but the advice is

growing. the perception is that is the perception that comes across. but the market is split 80% still have physical books. we still have a huge volume. i think physical books will be renowned. i know my representatives lives here and they had a sales meeting. >> i faint but i know we are

exploring options through a period of ways to reach our customers and leaders.