End of the Great Depression

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End of the Great Depression

The 1930s were a troubled decade, economically and politically, throughout much of the world. In the United States the stock market crash in 1929 and the economic depression that followed brought widespread unemployment reaching up to 25 percent of the workforce (over twelve million workers) by early 1933. Most other workers experienced pay cuts. President Herbert Hoover (1874–1964), who served during the early years of the Depression (1929–33), made only a limited response. As economic conditions worsened, Americans lost faith in Hoover, and there was considerable social unrest. Franklin Roosevelt (1882–1945) was elected as president in 1932, and when he took office in early 1933, he brought hope with his massive New Deal social and economic recovery programs. But even with Roosevelt's aggressive approach, the depression did not significantly improve. In Europe, the economic hard times led to radical politics, including the rise of Adolf Hitler (1889–1945) and the Nazi Party in Germany. Germany and Italy as well as Japan began programs of military expansion, forcefully taking control of other nations.

Finally in September 1939 another world war erupted in Europe, only two decades after the end of World War I (1914–18). This new global war would pit the Allies—primarily the United States, Britain, China, and the Soviet Union—against Germany, Japan, and Italy, the Axis powers. After the surprise Japanese attack on Pearl Harbor on December 7, 1941, the United States entered World War II. The U.S. entry into the war started a full industrial mobilization effort in 1942 and 1943. (Industrial mobilization involves the production of massive amounts of war goods, including ships, tanks, arms, ammunition, and warplanes.) Roosevelt had had strong differences with business interests over New Deal policies through the 1930s, but he had to seek cooperation from business for the war mobilization effort. As a result, many policies and programs introduced by Roosevelt to combat the effects of the Great Depression, including regulation of industry, would come to an end. Funded by large military contracts, industry provided millions of new jobs, and wages were higher than the pay offered during the Great Depression. The increase in jobs and pay finally brought the Great Depression to a close. With increased military spending for production of war materials, optimism over the national economy returned.

The Cost of War

Wars are expensive, and the U.S. government was willing to spend whatever it took to win World War II. The federal budget grew from less than $9 billion in 1939 to over $95 billion in 1945. A total of $290 billion was spent on the war effort. The United States raised half of the money through general taxes and the rest by selling war bonds and obtaining loans. The Revenue Act of 1942 established a national tax system that would continue into the twenty-first century. The gross national product (total value of all goods and services produced by a nation's workers) jumped from $90 billion in 1939 to $212 billion in 1945. The total amount of war materials produced by 1945 was staggering. U.S. factories had made almost 300,000 warplanes, 86,000 tanks, 64,000 landing ships, 6,000 navy vessels, millions of guns, billions of bullets, and hundreds of thousands of trucks and jeeps. By itself, the United States produced more war materials than the Axis powers (Germany, Italy, and Japan) did as a group.

A reluctant nation

In Europe the end of World War I (1914–18) had brought peace but not prosperity. Dire economic problems arose in Germany after its defeat in the war, and these difficulties opened the door for Adolf Hitler and the Nazi Party. Hitler promised to return Germany to power through military expansion. At the same time, a weak civilian government in Japan was replaced by the Japanese military, which harbored desires to expand into China and other East Asian areas. Poor in natural resources, Japan wanted control over resources located in neighboring countries. In the United States, President Roosevelt kept a watchful, worried eye on the gathering international storm. He had little support to prepare for another war: The American public, for the most part, had no desire to become involved; World War I had been enough. It had been called the "war to end all wars."

Meanwhile, German forces under Hitler began storming through Europe. When Germany invaded Poland in September 1939, Britain and France declared war on Germany, and World War II formally began. For the United States involvement in the war would require massive production of war materials, and a large military force would need to be raised. Though the United States remained officially neutral, Roosevelt proclaimed to the nation that it was time to plan for possible war. Roosevelt feared that if Europe and Britain fell to Germany, the United States would be the next nation to face Germany's fearless and well-armed military.

Industry and government at odds

Private industry and Roosevelt disagreed on how the nation should mobilize for war. For a successful mobilization effort the United States needed to convert privately owned industries from domestic production to war production; increase the mining and processing of raw materials used in manufacturing; control distribution of the raw materials; and oversee the military purchase of war goods. The military had always relied on the nation's largest corporations to be their primary contractors. However, the New Dealers under Roosevelt wished to end this reliance on big business by directing wartime contracts to small businesses as well. They especially wanted to get military contracts to the smaller companies located in parts of the country still suffering from the effects of the Great Depression. They thought that mobilization efforts should be centralized in strong government agencies that could plan the overall war effort and direct contracts to a wide range of businesses in various parts of the country.

Most industries, on the other hand, did not want to interrupt their production of domestic goods or have the government interfere with their economic markets. They believed the war would be brief, and they did not want to convert to a short-term project and give up the profits that they were currently enjoying as the nation was gradually recovering from the Depression. They wanted military production to occur only in plants built with public funds or through special financial arrangements in the government contracts guaranteeing they would receive substantial profits. They also wanted to be as free as possible of New Deal social reforms and labor laws. Businesses feared increased wartime regulation and the creation of new, permanent federal agencies that would control war mobilization and perhaps even the U.S. economy after the war. They insisted that mobilization should rely on corporate volunteerism organized through temporary government agencies that could be easily dismantled following the war.

Given that the nation's business leaders opposed creation of any large New Deal-like agencies to oversee industrial mobilization, Roosevelt had to rely on a set of small temporary agencies heavily staffed with private business advisers, industry advisory committees, and military personnel. Roosevelt first created the War Resources Board (WRB) in late 1939 to plan how to mobilize the nation's industries. The WRB was the first in a series of mobilization agencies. It developed a plan based on voluntary industrial cooperation. However, the plan to convert industry from domestic to military production was never fully put into use because industry was still reluctant to convert and the public still did not fully support mobilization.

When France fell to Germany in June 1940, the United States began providing shipments of arms and other provisions to Britain. Roosevelt was reelected in November 1940, and he established the Office of Production Management (OPM) in January 1941 to finally get industrial production of war materials under way. The head of the OPM was William Knudsen (1879–1948), former chairman of General Motors. Like the WRB, the OPM had little success in convincing industry to replace their production of civilian goods with military production.

A new relationship between industry and government

As in the First World War, the United States entered World War II late. The Japanese attack on Pearl Harbor on December 7, 1941, was the trigger for full U.S. mobilization. The surprise air attack on the U.S. Pacific Fleet by more than three hundred warplanes was intended to keep the United States from challenging Japan's continued military expansion in the Far East—especially in the Philippines, where strong U.S. interests existed. The United States suffered thirty-seven hundred casualties, and the American public was shocked and enraged. The United States declared war on Japan the following day, December 8. Three days later Germany and Italy declared war on the United States.

The following month, January 1942, President Roosevelt established the War Production Board (WPB) to assume control over wartime mobilization. The urgency of declared war now brought public support much more strongly behind government efforts to mobilize industry. Industries were now required to convert to military production. The WPB sought to distribute workers and raw materials to those industries most crucial for the buildup. The manufacture of certain domestic goods, such as refrigerators, cars, and toasters, became limited, or completely stopped, so that raw materials such as steel and aluminum would be available for manufacturing war materials. Industry began working around the clock, using several shifts through the day.

In addition to stopping passage of any more New Deal reforms designed to regulate industry, such as labor laws regulating wages and maximum hours worked, Roosevelt also offered financial and legal incentives to businesses to conform with the mobilization requirements. Although industry was "required" to mobilize, Roosevelt had limited legal power to actually enforce conversion. Therefore, incentives were used to help avoid confrontations with industry leaders. These incentives included major tax breaks for building new plants to produce war materials, suspending certain laws so that competing companies could instead cooperate, and issuing military war production contracts that guaranteed good profits. Roosevelt essentially turned the wartime economy over to the country's business leaders to ensure more effective cooperation by industry.

Acknowledging the influence of industry in shaping U.S. mobilization policies and seeking to unify the nation, Roosevelt appointed Republican Henry L. Stimson (1867–1950) as secretary of war. Stimson, a strong big-business advocate, took the lead in working on war preparations with industry leaders.

Under Stimson's leadership, manufacturing contracts were primarily awarded to the largest corporations, which had research departments, established assembly lines, and large numbers of workers. Business advisers in government contended that these large companies could most readily convert from domestic to military production. As a result, the ten largest corporations received one-third of all war contracts; smaller companies were largely left to seek smaller contracts from the big companies. What followed was unprecedented in the number of ships, tanks, planes, guns, and ammunition produced. The roles of government and business had suddenly changed. During the Great Depression the federal government had taken the lead with great public support in stabilizing the shaky economy. However, government assistance in the economy brought with it certain regulations unpopular with business. The war put the U.S. government in urgent need of industrial production—in other words, it put businesses in a good bargaining position. They were able to dictate their own terms, shed New Deal restrictions, and turn their sights to bigger profits with minimal government intervention.

Mobilization progresses

In dramatic contrast to the massive unemployment of the 1930s, labor shortages quickly appeared as over five million Americans joined the military services. Industry began attracting new workers, including racial minorities and women. Competition between industries over the available labor supply grew. To help with labor shortages, the War Manpower Commission (WMC) was created in April 1942. This agency directed laborers to the most critical jobs. In February 1943, to further ease the labor shortage, President Roosevelt relaxed some labor standards that had been established by the New Deal in 1938. He set a minimum forty-eight-hour workweek for workers in some critical industries and in certain areas of the nation where labor shortages existed. The WMC identified which industries and areas would be affected. These changes added greatly to workers' earnings, especially in industries producing aircraft, automobiles, ships, steel, and electrical machinery.

As mobilization progressed in 1943, disputes continued to occur between industries over access to raw materials and labor and over other production issues. To resolve the disputes Roosevelt created another small temporary agency, the Office of War Mobilization (OWM), in May 1943. Led by former U.S. Supreme Court justice James F. Byrnes (1879–1972), the OWM helped coordinate activities among industries.

By July 1943 the conversion to a wartime economy was substantially completed. Less than a year later a massive Allied force would land at Normandy, a region in France. This successful invasion to reclaim Western Europe signaled a major turning point in the war as Allied forces clearly gained an upper hand over German forces. Though months of hard fighting remained, it was just a matter of time before Germany would collapse. Germany finally surrendered in May 1945, ending the war in Europe. Japan surrendered in September 1945 after the United States dropped atomic bombs on Hiroshima and Nagasaki.

Effects of mobilization

After more than ten years of economic depression, war mobilization dramatically revived the U.S. economy. The rate of production of goods and services in the United States more than doubled during the war years, with employment eventually reaching 98 percent of the workforce. Nine million workers had been jobless in 1939, as the nation struggled to make its way out of the Great Depression. By 1945, just six years later, that figure dropped to one million. Many new jobs had been created in private business and industry, and the federal government had grown substantially larger during the war. Already on the rise during the Depression, the number of federal civilian employees grew by 400 percent between 1941 and 1945. In all, seventeen million new jobs were created in private business and government sectors.

With so many new jobs available, more Americans than ever were taking home paychecks. Their hourly pay rates increased 22 percent through the war years. By mid-1943 about 60 percent of factory wage earners, or over eight million workers, earned between 50 cents and $1 an hour, and 3 percent of the workers made over $1.50 an hour. These rates were well above what they received during the Depression. Debts that had built up during the Depression were paid, and savings began to grow. Through war mobilization, corporate leaders regained prestige and political power lost during the Great Depression. By 1943 factory towns, quiet since 1929, were suddenly prosperous.

Farms recovered as well. Prices for crops more than doubled during the war as the demand for food to feed the Allied armies grew and farm production in Europe was greatly disrupted. Farmers' profits soared. After twenty years of economic problems, farmers once again enjoyed prosperity. Farm income rose from $5.3 billion in 1939 to $13.6 billion in 1944. Farm communities prospered, and some became economic leaders in their regions.

The New Deal programs introduced after 1933 had helped relieve some of the economic hardships brought on by the Great Depression, but it took massive war mobilization to actually end the Depression. As the nation's economy gained strength, the New Dealers largely faded to the background.

New Deal Programs Wind Down

By 1940 Roosevelt's push for social and economic reform was largely over. A conservative Congress and numerous business leaders, who strongly believed that New Deal programs inappropriately intruded in private business, had gained sufficient political strength to stall war mobilization until Roosevelt changed his domestic policies. In order to prepare the nation for war, Roosevelt had to decrease federal commitment to social reform. Disappointed, many loyal supporters began leaving government. Over the next few years many New Deal programs were closed.

Social Security, the Securities and Exchange Commission, farm programs, and other New Deal programs would live on beyond World War II, but other key programs came to an end during the war. For example, the Civilian Conservation Corps (CCC), one of the more popular New Deal programs and one of Roosevelt's personal favorites, was ended in 1942. The CCC was originally established in 1933 to employ young men on projects that would improve public lands. When World War II began, the CCC began teaching enrollees how to read blueprints and do other tasks that would be useful in the military. As many CCC enrollees began joining the military services, Roosevelt promoted the CCC as a beneficial agency for youths below the military age. However, Congress cut its funding, believing the CCC was too much in competition with private business.

Similarly, the Works Progress Administration (WPA), another New Deal program, lost most of its workers to the war industry, where pay and jobs were better. Created in 1935, the WPA was closed out by the end of 1943. The National Youth Administration (NYA), also created in 1935, lasted until 1943, primarily because it was teaching youths vocational skills that would be useful in the war industry.

The New Deal ends

With industrial mobilization complete by 1943, Roosevelt began thinking about the postwar U.S. economy. The president asked the National Resources Planning Board (NRPB), a New Deal organization created in 1933, to devise a postwar plan. The NRPB was originally created to coordinate industrial recovery during the early years of the Depression. In planning for the nation's postwar economy, the board expected that the war industries would reduce their number of employees while shifting back to production of domestic goods. Therefore, board members proposed expanding Social Security for the needy and creating public works projects for veterans returning from the war who could not readily find a job. Business leaders and conservatives in Congress quickly opposed the proposals, fearing that government programs would once again exert their influence in private business. Congress cut off funds to the NRPB, and the board ceased operation.

Not only had the New Deal ended during the war, but its leader was lost as well. President Roosevelt died suddenly while relaxing at his Warm Springs, Georgia, retreat on April 12, 1945. Vice President Harry Truman (1884–1972) took over the presidency as military victory in World War II was in sight and America was poised to enter a new era as a world superpower.