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After graduating from the City College of New York in 1889, Baruch worked as a runner for Wall Street firms and worked his way up from broker to partner in A. A. Housman and Company, becoming a millionaire by his thirtieth birthday. He and his brother Hartwig formed Baruch Brothers and bought a commodity firm, Hentz and Company, with New York, Paris, London, and Berlin offices. Baruch left Baruch Brothers to become an independent speculator. As an adviser to Wilson, Franklin D. Roosevelt, Truman, and other presidents, Baruch became known as the “park bench statesman” after a favorite park bench in Lafayette Park across from the White House in Washington, DC.

To mobilize the wartime economy, the WIB under Baruch organized fifty-seven commodity sections to deal with particular industries. The government’s commodity sections worked with around three hundred semiofficial war service committees organized by businesses and certified by the US Chamber of Commerce.
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While the commodity sections worked with particular industries, the Priority Division of the WIB sought to overcome shortages. The WIB’s Price Fixing Committee set the prices of critical materials such as iron, steel, rubber, and coke. The Conservation Division sought to eliminate waste by, among other things, reducing the varieties of products that American factories produced. The Conservation Division directed the automobile industry to reduce the number of styles of tires from 287 to 9 in two years.
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The WIB and its commodity sections tended to be staffed by executives from the relevant industries, many of them “dollar-a-year men” who volunteered for no pay. For example, the Automotive Products Section was headed by the treasurer of the Studebaker automobile company, Charles C. Hanch, while the Agricultural Implements and Wood Products Section was directed by Edward E. Parsonage, the manager of the John Deere Wagon Company.
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The president of First National City Bank, Frank A. Vanderlip, ran the War Savings Stamp campaign, while Charles M. Schwab of Bethlehem Steel ran the Emergency Fleet Corporation.

The blurring of lines between the government and corporate sectors by these dollar-a-year men aroused the wrath of Jeffersonian populists and leftists in World War I and again in World War II. But in the absence of an enormous, permanent, experienced federal bureaucracy capable of performing the task, the United States had little choice but to rely on corporate executives in its mobilization efforts.

MOBILIZING THE ECONOMY FOR WAR

In addition to the WIB, a number of other agencies were established to mobilize the US economy for war. The War Finance Corporation was established in March 1918 by the same law that created the Capital Issues Committee. The War Finance Corporation funded industries, while the Capital Issues Committee reviewed the issuance of new securities.

The US Fuel Administration, created in August 1917, sought to conserve energy by means of “heatless Mondays” and “gasless Sundays.” One of the Fuel Administration’s energy-saving measures became a permanent part of American life: daylight savings time.
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In September 1916, the US Shipping Board was created to supervise a crash program of ship acquisition. Its head, Edward Hurley, a retired businessman, appointed Schwab to run the Emergency Fleet Corporation, which created an enormous American fleet from practically nothing by the end of the war, albeit at the price of great waste and enormous delays. In the winter of 1917–1918, the railroads were nationalized under the US Railroad Administration, headed by Treasury Secretary McAdoo.

Before World War I, German firms dominated the production of synthetic organic chemicals such as dyes and related pharmaceuticals. When the war halted the supply of German chemicals to the United States, key American policymakers, manufacturers, and chemists sought to build a domestic industry, and to that end German chemical patents were confiscated by the Office of Alien Property.

To prevent labor strife from crippling the war effort, Congress and the Wilson administration created the National War Labor Board in April 1918, cochaired by Frank P. Walsh, the former chairman of the Commission on Industrial Relations, and former president William Howard Taft. Strikes were punished by federal raids of union offices and arrests of labor leaders. In general, however, organized labor benefited from wartime arrangements. Between 1916 and 1918 union membership grew from three million to four million and real wages in 1918 were 4 percent higher than they had been in 1914.
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HOOVERIZING

President Wilson appointed Herbert Hoover as the head of the US Food Administration. The future commerce secretary and president of the United States had already become an international celebrity before the United States entered the war.

Born into a Quaker family in Iowa in 1874, Hoover lost both of his parents by the age of ten and was raised by relatives in Oregon. He was part of the inaugural class of Stanford University, where he met his wife, Lou. Hoover grew rich from the mining business in China and Australia. He was living and working in London when World War I began. To aid the famine-stricken Belgians, Hoover used his own business organization, winning the right for his relief ships to pass through the British blockade without being sunk by German submarines.

Hoover was a hero on both sides of the Atlantic when Wilson appointed him to head agricultural production in the United States after the United States entered the war in 1917. Hoover sought to work through state and private organizations to minimize waste and maximize production. He led a nationwide propaganda campaign for the “wheatless kitchen,” encouraging the use of wheat substitutes like potato flour and oatmeal.
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Food conservation was called “Hooverizing,” a phrase later used to mock then-president Hoover during the early years of the Great Depression.

When the war ended, Hoover’s Food Administration fed millions in Europe, among the defeated nations as well as the victors. Despite his opposition to communism, he saved millions of Soviet citizens from starving, declaring, “Twenty million people are starving. Whatever their politics, they will be fed.”
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A LEGACY OF COOPERATION

Following the armistice declared on November 11, 1918, the Wilson administration and Congress moved to rapidly demobilize the economy. An attempt to create a peacetime version of the WIB, the Industrial Board, collapsed because of opposition by the public and the Wilson administration by spring of 1919.
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The War Finance Corporation existed on a small scale in the 1920s, with a new mission of financing exports.
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In his book
American Industry in the War
, Bernard Baruch held forth the cooperative economy of World War I as a model for the future: “We have been gradually compelled to drift away from the old doctrine of Anglo-American law, that the sphere of Government should be limited to preventing breach of contract, fraud, physical injury, and injury to property, and that the Government should exercise protection only over noncompetent persons. The modern industrial processes have been rendering it increasingly necessary for the Government to reach out its arm to protect competent individuals against the discriminating practices of mass industrial power.”
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To maximize cooperation in industry, antitrust standards were relaxed during the war, marking the achievement of a longtime goal of many conservative business executives and progressive nationalists alike. Experience under the War Industries Board had made not only the big companies that dominated the Chamber of Commerce but also the small firms of the National Association of Manufacturers enthusiastic about extending the relaxation of antitrust laws into peacetime.
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In the words of the historian Eric Goldman, “Many of the dollar-a-year men went back to their fifty-thousand-dollar-a-year jobs with an idea buzzing in their heads. . . . Why not give up the talk about competition and draw firms together in trade associations, which would standardize products, pool information, advertising, insurance, traffic, and purchases, and draw up codes of proper practices?”
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Between 1919 and 1929, the number of national trade associations grew from around seven hundred to more than two thousand.

THE MODEL T

Although the electric motor, the internal combustion engine, and other transformative technologies of the second industrial revolution had been invented decades before, it was only in the 1920s that the second industrial era reached maturity. Its symbol was Henry Ford’s mass-produced automobile, the Model T.

Most of the early cars in the United States were propelled by electric batteries or steam engines. Among the latter were the Stanley Steamers produced by the Stanley Motor Carriage Company from 1902 to 1924, when it went out of business after warning in advertisements against “the internal explosion engine.” Gasoline, previously a waste product produced by refining oil for illumination, prevailed as the source of energy for cars because of the light weight and versatility of gasoline-fueled engines. Gasoline surpassed kerosene as the leading oil product sold in 1911.
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Initially, gasoline sold in cans in general stores or grocery stores. The first service station or filling station opened in 1907 in Saint Louis.

The earliest American automobiles were manufactured chiefly in New England. But the Midwest became the center of US automobile production, in part because it had an abundance of engineers who had begun in the bicycle industry.

One of them was Henry Ford. Born on a farm in Detroit, Ford began his career by working as a machinist for companies including Westinghouse and the Edison Illuminating Company, where he rose to the rank of chief engineer in 1893. When Thomas Edison died, Ford urged one of those at his deathbed to catch his dying breath in a test tube. Long before that moment, however, the breath of inspiration had passed from Edison to Ford.

Ford built his first car, the Ford Quadricycle, in 1896. Encouraged by Edison, Ford improved the vehicle and formed a company with a local Michigan capitalist, William H. Murphy. Disagreements led to Ford’s resignation from the company, which was renamed the Cadillac Automobile Company, and his founding of Ford Motor Company in 1903, with the backing of John and Horace Dodge and a coal dealer named Alexander Malcolmson.

With the Model T, a simple, versatile, standardized car, Ford created the first car for the masses in 1908. The first Model T was offered for sale on October 1, 1908. Standardization reduced its cost. Because black paint dried quickly, Ford is alleged to have said that customers could have a Model T in any color, as long as it was black (in fact, Model Ts came in different colors).

The United States surpassed France in automobile production in 1906 and by 1910 produced more cars than the rest of the world combined.
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Between 1909 and 1925, the price of a Ford Model T dropped from $950 to $250.
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The number of automobiles in the United States rose from a few thousand in 1900 to millions in the 1920s. In 1915, there had been one car for every two hundred Americans; by 1920, there was one for every ten.
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By the end of the 1920s, there was one car for every five Americans.
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In 1920, half of the world’s automobiles were Model Ts.
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THE RISE OF DETROIT

The success of one major technology of the second industrial era, the internal combustion engine, depended on the development of another: electricity. The automobile industry was the most important industry to be transformed by electric power.

Henry Ford became the leading capitalist of his age because of his process as well as his product. In 1913, Ford and his colleagues perfected the moving assembly line, putting cars together on electric conveyor belts in enormous factories. In 1925, Ford’s spokesman William J. Cameron drafted an article on mass production for the
Encyclopaedia Britannica
that was published under Ford’s name, although Cameron said later that he “should be very surprised to learn that [Ford] had read it.”
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According to the entry, “Mass production is not merely quantity production, for this may be had with none of the requisites of mass production. Nor is it merely machine production, which also may exist without any resemblance to mass production. Mass production is the focusing upon a manufacturing project of the principles of power, accuracy, system, continuity, and speed.”
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The automobile created enormous demand for the products of other industries, such as petroleum, steel, rubber, glass, felt, and paint, and produced entirely new service industries, ranging from gas stations to motels. As Rockefeller had done in oil and Carnegie in steel, Ford used vertical integration to control every aspect of production from raw materials to finished products, substituting administration within a giant corporation for market transactions among suppliers of goods and services. Built on two thousand acres of land at the conjunction of the Rouge River and the Detroit River, Ford’s River Rouge plant fed coke, steel, and iron furnaces and assembly buildings with raw materials from the iron mines, coal mines, forests, and rubber plantations owned by the company and shipped by Ford’s own fleet of freighters to the docks, where they were transferred throughout the complex along the hundreds of miles of an internal railroad system and road system. Ford sought to control all stages of input, all the way to rubber plantations in Latin America. His River Rouge plant had its own hospital and fire department—as well as its own police force, the notorious Service Department that was deployed in conflicts with striking workers.

Before World War I, Ford had subsidiaries in Canada and Britain. After the war the Ford Motor Company made automobiles in continental Europe, India, and the Soviet Union. Among other things, Ford pioneered the multinational corporation.

Like other innovative industries, the young automobile industry was populated by many startups; fifty new companies went into the business in a single year in 1902.
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The automobile industry soon evolved into an oligopoly.