Freedom’s Forge Book Review

Freedom’s Forge: How American Business Produced Victory in World War II

Arthur Herman

Random House

2012

413 pages

ISBN 978-1-4000-6964-4

Allied victory in the Second World War owed as much to America’s productive muscle as it did to the fighting skills of its soldiers and sailors. Arthur Herman, a visiting scholar with the American Enterprise Institute, attributes America’s astonishing feats of war production to the underlying know-how and drive of American businessmen. The heroes of Freedom’s Forge: How American Business Produced Victory in World War II are industrial titans such as William Knudsen, an automobile production genius, and Henry Kaiser, who built countless Liberty cargo ships quickly and cheaply in simple yards on both coasts. The villains of the book are communist union bosses, who caused needless delays by striking, and incomprehending New Dealers in the Roosevelt Administration, who were convinced that big business was fleecing the taxpaying public.

The achievement of American business was undeniable. The productive surge was underway even before Pearl Harbor, spurred on by Britain’s dire situation, and this head start helped to speed America’s military response after it officially entered the war. America produced more airplanes than Germany and Japan combined. It equipped the air forces of its allies with thousands of warplanes and their armies with thousands of tanks.

The key was the allowance for the profit motive. In order for business to function effectively, it had to be operating of its own accord, and not commanded. Typically, war contractors received their costs back for making an item, along with a small profit. The entire system of war production organized itself. There was no way that a government agency, no matter how large, could have understood, let alone arranged, the vast web of assemblers and suppliers who built America’s war machines, such as the awesomely complex B-29. The industrial renaissance engendered by the war laid the foundation for the generation of prosperity that followed.

Marc G. De Santis

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2,000 Year Global GDP Chart

Check out this remarkable chart at The Atlantic of the relative share of world GDP over the last 2,000 years.  As you can see, the big story of the last five  centuries is the rise of the share of the western world.

I am not sure how well we can calculate GDP so far back.  The graph assumes a simple metric of one person to one unit of GDP, which may not be entirely accurate.  Who is to say?  At best, this is just a crude measure of economic output.  But the larger point is clear- that a handful of European or European-derived nations (the United States) have had an outsized share of global GDP since the Renaissance and the European discovery of the Americas – from around 1500.

MGD

The Future of the American Economy, Part Two

Here is Derek Thompson of The Atlantic‘s interesting take on the David Brooks piece to which I linked in my previous post.   My take is that the relentless drive for efficiency – in itself not a bad thing – will ultimately pose insuperable obstacles in the way of a “full” employment economy.   Even the distinction between fast and slow sectors of the economy may become increasingly blurry as more things can be done by machines.  You may not be able to ship a dentist around the world, but one day, you may have a robot dental machine cleaning and fixing your teeth.

Whither the poor dentist?

MGD

The Future of the American Economy

Thinking about the future of the American economy makes my stomach turn.  Between foreign competition from lower-wage nations and the continuing rise of advanced production machinery, it looks like fewer actual people will be needed to make the products that we purchase and use.

It isn’t just factory robots or international competitors that are changing things.  Advanced software, such as computerized logistics systems and inventory control, or online purchasing methods, such as Amazon, have made the employment of in-person servers – humans – less necessary for the functioning of the economy.   But what happens when everyone loses his job to a program or robot?  In this scenario, imagine that every last job could be done by an artificial entity.  How then will people earn money to pay for food and rent?  This will not occur today, or even tomorrow, but one day, sooner than we think, machinery, combined with advanced software, and connected by the internet will be the primary basis for the production and distribution of most of the “stuff” that we buy.

David Brooks looks at the growing bifurcation of the American economy today in his opinion piece in The New York Times.  It appears to me that what Brooks describes  is just the tip of the iceberg.  Eventually, technology will have advanced to the point where it can do work better and more cheaply than by even the most talented person.  What then will we do?

MGD