Fear Itself (53 page)

Until the order excluding persons with Japanese ancestry from the Pacific coast was lifted in January 1945, when the threat to U.S. security clearly no longer existed, Congress remained largely quiet but complicit. By voice vote in each chamber on March 21, 1942, it passed legislation that backed Executive Order 9066 by making it a federal crime to violate “the restrictions laid down by the President, the Secretary of War, or designated military subordinates.”
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Throughout the war, Congress continued to appropriate the funds, without debate, that made the camps possible.
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The main exception to congressional silence came in hearings conducted by Martin Dies’s committee. In June 1943, it featured wildly exaggerated testimony by a former WRA camp supply officer who alleged that the interned Japanese were being indulged by lax administrators who were supplying the interned with superior food and offering excessive latitude.
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With the United States fighting with a racially segregated military, with segregation and disenfranchisement the dominant forms of social and political organization in the South, and with national patterns of racism and discrimination rife in housing and jobs, the loyalty of African-Americans was also thought to be at issue. This was a particularly tumultuous period for black Americans. They debated the role they should play in the war, a discussion that was resolved in the main by strong participation, and they experienced massive demographic change, with more than three million African-Americans leaving the South for war-production jobs in the North and the West.

In June 1942, J. Edgar Hoover commissioned the
Survey of Racial Conditions in the United States
(RACON), a 730-page document that took nearly fifteen months to complete. It was part of a lKKarger effort, a monumental internal security investigation, the subject of which was labeled “Foreign-Inspired Agitation Among the American Negroes.” The FBI sought both to assess black loyalty and to monitor racial unrest, especially after the three-day Detroit riot of June 1943, in which 34 were killed and 433 wounded, and the two-day August 1943 Harlem riot in New York, in which 6 were killed, and just under 400 wounded.
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By 1945, the project had taken on Herculean proportions, producing thirteen volumes in the process. Marked “Secret,” each included newspaper clippings and reports by the Bureau’s fifty-six field divisions that offered detailed accounts based on intelligence provided by FBI agents’ paid informants, or “voluntarily supplied by various sources.” The
Survey
especially targeted persistent Japanese efforts to influence black opinion, and it focused on the role of the Communist Party in exploiting black grievances and mobilizing protest, despite the Party’s decision to downplay black rights during the war, lest it impede the war effort.
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Other targets included “non-subversive” leaders of the NAACP, then undergoing a massive membership growth, from 50,000 in 1940 to almost 450,000 by 1946, and the 155 newspapers that composed the period’s lively black press.
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Over the course of the war, these newspapers maintained a steady drumbeat of reports and editorials that highlighted racial injustice in the military and in civil society. The Justice Department, the Department of War, the various armed services, and specialized agencies such as the Office of War Information and the Office of Censorship kept persistent watch over African-American reporters and editors, worried that stories like that in the
Oklahoma City Black Dispatch
entitled “War Department Aids Hitler by Letting South Wreak Prejudice on Negro Soldiers” would produce disloyalty.
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Hoover sought to suppress that newspaper in the summer of 1942 for articles that complained about the conditions black soldiers faced on trains without food and in filthy segregated restaurants, even though he was advised by junior lawyers in the Department of Justice that there was no statutory basis for such censorship. He had to desist, but the army, by contrast, did ban African-American newspapers it thought to be subversive. The black press faced other hurdles. The U.S. Post Office Department conducted lengthy examinations before renewing their mailing permits, and its investigators decided not to mail issues they considered to be subversive. The person appointed to review the
Pittsburgh Courier,
for example, ruled that the issue published on May 2, 1942, exceeded proper bounds because its editorial projected the possibility the newspaper might be suppressed, and because it ran an article in which a future Harlem congressman, the Reverend Adam Clayton Powell Jr., compared the conditions experienced by blacks in the United States to those suffered by Jews in Germany. The examiner concluded that these articles “are designed to cause insubordination, disloyalty, mutiny or refusal of duty in the military or naval forces of the United States among Negroes. . . . This type of reading matter tends to cause persons of the colored race to advocate resistance or forcibly resist the laws of the United States and induces insurrection among these people.”
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In the name of national unity, racial distrust thrived.

IV.

T
HE
F
IRST
and Second War Powers Acts delegated to President Roosevelt more power over American capitalism than he had achieved even during the New Deal’s radical moment. The December 1941 law conferred authority to modify existing government contracts, speed up production without competitive bidding, seize foreign property for use in the war, and regulate all trade, credit, and economic transactions with other countries. The March 1942 law granted the president even more far-reaching discretionary power to control the nation’s economy. Its provisions gave him the means to allocate resources for defense purposes “in such manner, upon such conditions and to such extent as he shall deem necessary in the public interest.” These authorizations included the ability to seize immediately land and personal property for war purposes, set prices for government purchases, impose priorities on production and on the delivery of goods and services, violate prior contracts, and control all forms of transportation. Above all, the act furnished the president with “tremendous, effectively unrestrained power over resource allocation,” including a provision that he could allocate any materials and direct any facility to produce for defense or export “as he shall deem necessary or appropriate in the public interest and to promote the national defense.” This stipulation underpinned the all-encompassing economic control exercised by the War Production Board (WPB) during the duration of the war. “No greater economic power,” the economist Robert Higgs has commented, “was ever delegated by Congress to the President.”
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There was more. A National War Labor Board, created by executive order in January 1942, had granted the capacity to impose its will during labor disputes by enforcing its preferred settlements.
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That month, Congress passed the Emergency Price Control Act of 1942, which established a new independent agency, the Office of Price Administration (OPA), to prevent wartime inflation by preventing “speculative, unwarranted, and abnormal increases in prices and rents” and eliminating “profiteering, hoarding, manipulation, speculation, and other disruptive practices.” Mimicking the draft boards that had been formed by the Selective Service Act, the OPA created eight thousand local boards to police its price policies. When Congress passed the Economic Stabilization Act in October 1942 to amend the Price Control Act, the president was given the power to adjust all prices and wages as he thought necessary “to aid in the effective prosecution of the war or to correct gross inequities,” including the ability to override wage agreements even when labor and business had come to an agreement through collective bargaining.

To achieve these purposes, Roosevelt immediately issued an executive order to create the Office of Economic Stabilization. To lead it, he directed James Byrnes, the former senator from South Carolina, Senate majority leader, and future secretary of state under Harry Truman, to step down from the Supreme Court, where he had served as an associate justice for just fifteen months. Seven months later, in May 1943, Byrnes also became the head of the Office of War Mobilization, thus effectively putting wartime capitalism in politically capable hands.
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Roosevelt’s “assistant president,” as many called him, soon recruited the Wall Street banker Bernard Baruch to be his key policy adviser, fully knowing that when Baruch had led the War Industries Board in World War I, he had testified that “in modern warfare, administrative control must replace the law of supply and demand.”
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Like the peacetime NRA, this constellation of economic agencies rejuvenated early 1930s ideas about economic planning and identified a primary role for many of the country’s leading industrialists to come to Washington and work hand in hand with the government’s administrative cadres. Like the NRA, this mixed public-private system mobilized immense capacity to guide economic decisions. Tethered during the war to a massive, indeed unprecedented, program of military production and mobilization, this set of economic arrangements and tools was buttressed by an overwhelmingly united citizenry. Also like the NRA, the combination of public power and private recruitment elicited participation from the country’s best-organized economic groups and guarded the prerogatives of the big firms represented by the National Association of Manufacturers, whose profits were protected by cost-plus contracts, and the unions of the AFL and CIO, which were authorized to count all new employees as dues-paying members in plants where unions had already achieved recognition.

Businessmen working for a dollar a year, while continuing to collect their corporate salaries, were brought into the federal government’s agencies and onto boards that governed the nation’s wartime economy. Headed by former Sears Roebuck executive Donald Nelson, these recruits dominated the WPB, with powers to “exercise general direction of the war procurement and production program.”
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Working in tandem with the Defense Plant Corporation (DPC), which spent nearly $10 billion to build and modernize a huge array of factories,
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and with military planners, including the Army Service Forces, which tendered $32 billion in wartime contracts,
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the WPB coordinated the federal government’s strategy and logistics by scheduling production and keeping the flow of raw materials coming. This wartime mobilization also used federal authority to operate the civilian economy with controlled prices, restrictions on strikes, and the clear understanding that war needs and defense production must come first. In all, the federal government galvanized a planned economy whose enormous productive capacity was a key element in winning the war. Washington allocated materials and production facilities and cut off supplies to businesses not in compliance with its rules and regulations. Employers could not hire workers without authorization by the U.S. Employment Service.

Total war—a war unrestricted by limits on manpower, production, means, and ideological commitment—required unprecedented economic organization and mobilization. Many thousands of plants were converted to war production. A massive munitions industry was created. Over a thousand new factories were financed by the DPC, which provided fully two-thirds of all capital investment in the United States between 1940 and 1945. To support the air war, the DPC also built many other facilities, mainly in the Midwest and the South. New airfields sprouted across the country. Government-funded plants provided key raw materials, including aluminum for air frames and magnesium for incendiary bombs. One billion dollars of federal funds expanded the steel industry and modernized its aging facilities. The armed forces built their own plants. Many operated under contract with private firms to produce weapons, explosives, uniforms, and other defense needs. The Army Corps of Engineers oversaw the construction of massive military aircraft-assembly factories in Kansas, Nebraska, Oklahoma, and Texas. By war’s end, the federal government owned fully 40 percent of the country’s capital assets.
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Placed on a war footing, the American economy, in short, was directed by a system of planning and control that “managed almost every area of what effectively became a state-capitalist system.” This second radical moment froze prices, capped profits, and rationed commodities, crops, and commercial goods. Government agencies and policies also controlled wages and rents, limited maximum salaries after taxation to $25,000, starkly reduced consumer credit, and, in 1942, utterly banned the sale of new automobiles. A transformation of public finance was ushered in by the Revenue Acts of 1941 and 1942, which dramatically increased income-tax rates and expanded the tax base by reducing exemption levels. After 1943, steeply progressive pay-as-you-go income taxes that withheld earnings as they were paid made income taxes the main source of government revenue.
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There was also a victory tax of 5 percent on incomes higher than twelve dollars per week. These changes to public finance funded a radical increase in the federal budget, which grew from total expenditures of some $9.5 billion in 1940 to nearly ten times that amount, $92 billion, in 1945.

In all, the United States spent $350 billion on World War II, nearly half of which was funded by taxes, the remainder by borrowing.
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Spending on defense jumped from 1.4 percent of the gross national product in 1939 to 43 percent in 1944.
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In an unprecedented burst of productivity, the U.S. wartime political economy built 324,000 airplanes, 88,000 tanks, 1,060 ships, 1.5 million machine guns, 516,000 artillery pieces, and 2,400,000 military trucks. To the Allies, it sent 43,000 of these planes, 800,000 of the trucks, as well as enormous shipments of other military supplies.
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The economic effects were profound. Overall, the economy surged and unemployment disappeared, dropping from a rate of 14.6 percent in 1940 to just 1.2 percent in 1944.
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In this respect, at least, the dire years of economic suffering had come to a close.