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What Obama Could Learn from FDR

Saturday, June 19, 2010

If President Obama intends to use President Roosevelt’s leadership during World War II as his model for handling the BP oil spill, he has it exactly backward.

The Oval Office is a room filled with ghosts: ghosts of figures both noble and ignoble, and the shades of decisions both great and disastrous. If there was one ghost President Obama wanted at his shoulder during his recent speech on the oil spill, it was that of President Franklin Delano Roosevelt.

The White House specifically said the speech was modeled on Franklin Roosevelt’s fireside chats during the Great Depression and World War II. At its climax, Obama even referenced America’s creation of the so-called Arsenal of Democracy as an example of how Americans can seize their destiny and achieve greatness.

He’s right, but Obama may regret picking that example.

On the one hand, Roosevelt is a natural role model for a president pressing the most interventionist and redistributionist agenda since the New Deal. It was FDR, after all, who broke the power of Wall Street and those he termed "privileged princes" and “royalists of the economic order” under a welter of regulations and tax increases. And it was that big government, anti-business agenda that has made Roosevelt a Democratic Party icon ever since, even though we now know it actually deepened and extended the Great Depression.

FDR built that arsenal of democracy by working with business, not fighting against it—let alone by keeping a boot on its neck.

On the other hand, if Obama intends to use Roosevelt’s leadership during World War II as his model for handling the BP oil spill, he has it exactly backward. FDR built that arsenal of democracy by working with business, not fighting against it—let alone by keeping a boot on its neck. If Roosevelt had been speaking from the Oval Office last Tuesday, he would have announcing the creation of a presidential panel of oil executives and engineers to help BP solve the oil spill, rather than a scheme to strip BP of its profits.

This is because, in the year and a half before Pearl Harbor, Roosevelt realized that the best way to mobilize a country like ours for a great task is to unleash the productivity and ingenuity of American industrial enterprise. His decision outraged some of his closest advisors and allies. It flew in the face of his own progressive instincts. But it not only helped to win World War II, it pulled the United States out of the Great Depression, and it has provided a useful model of how government needs to partner with the private sector, ever since.

Faced in the summer of 1940 with the inevitability of war in Europe drawing in the United States, Roosevelt also faced a choice. Diehard New Dealers like his wife, Eleanor, and Secretary of the Interior Harold Ickes wanted to use war mobilization to permanently extend the reach and power of federal government. By nationalizing some industries, limiting the profits of others and ordering a halt to civilian production in still others, their goal was to re-engineer the private-enterprise economy into a Washington-controlled economy. Having missed their chance with the National Recovery Administration to pound Big Business into submission, the New Deal Left and their Big Labor allies, weren’t about to let this crisis go to waste.

In the year and a half before Pearl Harbor, Roosevelt realized that the best way to mobilize a country like ours for a great task is to unleash the productivity and ingenuity of American industrial enterprise.

But FDR—under the influence of conservative Democrats like Secretary of Commerce Jesse H. Jones and the new Republican members of his administration such as Secretary of War Henry Stimson and William Knudsen, the former GM president who became head of the Office of Production Management in the fall of 1940—chose a different course. In the year before Pearl Harbor, they convinced him that the best way to get the country ready for the coming war was not to fight the profit motive of private companies and corporations, but to unleash it.

Bring the business executives, production managers, and engineers on board the mobilization effort, they said, by making it worth their while to redirect a growing portion of their production flow to make the planes and tanks we will need. Far from being overwhelmed, they’ll find a way to make the guns as well as the butter. Don’t use the war to transform American industry, they said. Use American industry, and its inherent entrepreneurial competitive instincts, to transform the war and how we fight it.

“Democracy is the antithesis of herding,” Knudsen told him. It is the epitome “of decentralization of mind and rule,” and the same should be true of how it fights its wars. Stimson was more blunt. “If you are going to try to go to war or prepare for war in a capitalist country, you have got to let business make money out of the process or business won’t work.”

After years of bashing business, it was a valuable learning experience for FDR. World War II taught him that there was a reason the United States had the most productive economy in the world.

Without industry’s cooperation, Washington would be operating completely in the dark in terms what planes, tanks, ships, and munitions could be produced, and when; indeed, the War and Navy Departments’ own mobilization plans proved wildly off the mark of how much war materiel would really be needed. By winning the cooperation of big business, however, and its tens of thousands of subcontractors, Roosevelt and his advisors discovered that auto makers Chrysler and Packard could make tanks, AA guns, and aircraft engines; that tractor maker Allis Chalmers could make landing gear for B-29s; that dam builder Henry Kaiser could figure out how to build cargo ships in record time; and GE and Westinghouse could figure out how to manufacture bazookas and torpedoes.

Meanwhile, far from running out of raw materials, American steel and aluminum makers were able to produce more of both than anyone ever imagined. From a Depression-era low of 31 million tons of steel in 1938, America’s steel mills were producing 82 million in 1941, and just under 90 million by the time of D-Day.

Josef Stalin raised a toast ‘to American production, without which this war would have been lost.’ It was a stunning tribute from the leader of world Communism to the forces of American capitalism.

After years of bashing business, it was a valuable learning experience for FDR. World War II taught him that there was a reason the United States had the most productive economy in the world, and a reason large corporations were so: Not because they were the royalists of the economic order, but because their profits brought the capacity to tackle and solve large problems, including arming for war—even (in the case of DuPont and Union Carbide) how to build an atomic bomb.

In 1939, the United States produced barely 2,100 military planes. By November 1941, total production ran to 19,290 planes, along with 50,684 aircraft engines, 97,000 machine guns, and 3,964 tanks. On the eve of Pearl Harbor, the United States was already producing more war materiel than the entire Axis put together. Even before Pearl Harbor, American business and industry had voluntarily achieved a level of wartime production that Hitler's command economy had taken five years to reach. National income ($92 billion) was already higher than it had been before the crash of 1929 ($83 billion).

Within a year, America’s factories were outproducing the entire Axis, and arming her allies as well. Seventy percent of all warplanes that flew in World War II were made in the United States, and America’s economy made up nearly one half of the world’s entire GDP. When the Big Three met for the first time in Tehran in November 1943, Joseph Stalin raised a toast “to American production, without which this war would have been lost.” It was a stunning tribute from the leader of world Communism to the forces of American capitalism—and all because FDR rejected the advice of his New Dealers and opted for a pro-business solution instead.

It was a valuable lesson for the Roosevelt and for the American future. It could still be for Obama–if he would just channel the right ghosts.

Arthur Herman, Pulitzer Prize finalist and author most recently of Gandhi and Churchill, is working on a book concerning the Arsenal of Democracy.

FURTHER READING: Joseph Loconte gives “Two Cheers for American Exceptionalism,” Arnold Kling says this is “Not Your Grandfather’s (or Keynes’s) Economy,” Vivek Wadhwa discusses “Protectionism vs. the Innovation Nation,” and John Calfee explains “How Washington Just Worsened the Gulf Oil Spill.” Kenneth Green and Steven Hayward detail “The Dangers of Overreacting to the Deepwater Horizon Disaster,” while Jonah Goldberg outlines “Oil: The Real Green Fuel.”

Image by Darren Wamboldt/Bergman Group.

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