WORLD WAR II was initiated by Powers whose aggregate economic potential for war was decisively inferior to that of their ultimate adversaries. There were periods when the plans of the aggressors gave promise of realization, particularly in the west. Yet everywhere those hopes proved illusory. The war dragged on until the economic potential of the victims of attack had been converted into a volume of war material sufficient to place a clear preponderance at the disposal of their commanders in the field. In both east and west the fighting ended in unmitigated disaster for the aggressors. In both theaters of war the economic base which had maintained the armies of the Axis Powers was destroyed before those armies surrendered.

Plans which came so close to success cannot be dismissed as irrational even though they culminated in disaster. They possessed a logic and rationale of their own. In an objective weighing of relative risks and probabilities, they were probably less irrational -- or at least no more so -- than certain crucial Allied decisions that are now revealed as turning points in the advance to final victory: for example, the British decision to go on with the war after Dunkirk.

The fact of disparity in economic potential, however, was all pervasive. It conditioned the plans of the aggressors for short, limited, blitzkrieg victories that would leave no opportunity for the massing of power against them, or indeed for the conversion of industrial potential into munitions of war. It conditioned the size of the armed forces that were mobilized and maintained in the field, and the rôle that was assigned to various types of weapons. It conditioned the strategy of offensive and defensive operations. Above all, it imposed indeterminate but nevertheless inexorable time limits on the planning of the aggressors. Starting with more matériel on hand, but grossly inferior in economic potential, the Axis had to make speed in the achievement of victory a consideration of primary importance.

A good general does not ordinarily begin an engagement unless he possesses a clear preponderance of effectives, including superiority in weapons and other munitions of war. That this factor is basic in successful military operations was abundantly demonstrated in World War II, where nearly all the great offensives were deferred until the side in possession of the initiative was satisfied that it enjoyed a clear preponderance of matériel. In the early period of the war, this preponderance lay on the side of the Axis. At the close it lay with the Allies, particularly the western Allies, who had unrestricted access to the huge output of the American industrial complex. An analysis of this preponderance by Raymond W. Goldsmith shows that Russia enjoyed ultimately a munitions superiority over Germany in the ratio of about six to five, while that of the Allies in the campaign in the west was in the neighborhood of two-and-a-half to one.[i]

The Nazis did not plan to engage the mobilized military and economic power of the United States, Great Britain and Russia at the same time. They planned a series of short campaigns against isolated opponents. In 1939, buttressed by the Hitler-Stalin Pact, they were confident of their ability not only to take Poland, but also to master the forces of Great Britain and France, should those countries endeavor to maintain their pledge to Poland. That this confidence was justified was proved less than a year later, when in three months, Denmark, Norway, the Netherlands and Belgium were occupied, the military power of France was annihilated, and Great Britain lay almost defenseless, a large part of her matériel lost and her forces able to provide only a modicum of defense to her far-flung Empire.

This was the type of war for which German economic potential had been mobilized. In its terms, that mobilization was more than adequate. At the end of the first year of war, Germany dominated all Europe; Britain alone fought back. Not only were German losses in manpower and matériel negligible; they were more than compensated for by new munitions production and new recruits come of age during the year. In addition, Germany had gained huge booty in the form of war stores of her victims and their stocks of raw materials. She had acquired access to the raw-material resources of the whole of Europe and mastery of the rich industrial capacity of France, the Netherlands, Luxembourg and Belgium, much of which formed an integral part of her own great industrial complex centering in the Ruhr and the Rhineland. So great were the gains and so impregnable the position that Hitler felt free at last to embark on his cherished dream, the defeat of Russia and the acquisition of the resources of the Ukraine.

The Japanese plan was even more opportunistic. It too was based upon a preponderance of forces and munitions on hand, and the conviction that these were sufficient to seize the rich raw-material resources of the Philippines, Burma, Malaya, Indonesia and the adjoining islands of the east. For this they were in fact sufficient. Japan, too, gained her self-sufficient empire, with negligible losses or expenditure of matériel. She had, however, no illusions about matching or mastering the potential power of the United States. The premise of her plan was that both Russia and Great Britain were doomed to imminent defeat, and that in the resulting two-Power world the United States would negotiate with Japan rather than face Germany with heavy commitments in the Pacific.

Just as a good general does not ordinarily embark on an offensive unless he believes he possesses a clear preponderance of effectives, no nation under rational leadership undertakes aggression unless it expects to win the victory. The fact that the Nazis did embark on an aggressive war, despite their marked inferiority in economic potential to the Powers which eventually opposed them, indicates that they counted on victory before the United States could enter the war, or before it could mobilize its enormous economic resources. The leaders of Japan agreed with the Nazi estimate of the situation.

It is well to remember these simple elements in the problem when we come to evaluate the postwar discovery that Germany, unlike the Allies, mobilized her economy in breadth rather than depth -- i.e., that she utilized her resources to expand munitions output from her existing industrial capacity but did not generally divert great quantities of those resources to the creation of further basic capacity from which a larger output of munitions could have been obtained. It is a proper source of gratification and of faith in our democratic society that we have demonstrated that, under pressure, we could meet the tremendous challenge imposed by total war and organize our economic capacity more effectively than did the Nazis. Let us not forget, however, that, from the point of view of the group of Nazis who decided in 1939 to initiate a war against possible adversaries possessing infinitely greater economic potential, the decisive considerations were the amounts of munitions that would be available in 1939, 1940 and 1941, not those that could be achieved by 1944 and 1945. It is probably true that Russia possessed in 1941 a much greater reserve in matériel than the Nazis had anticipated, but the failure of the Nazis to take Moscow before the winter of 1941 does not appear to have been due particularly to an insufficiency of munitions available to the German Army as a whole. That failure, however, initiated the long series of defeats which ended finally when the German Army was utterly crushed by the strength of the Allies. Had the Nazis correctly assessed this eventuality, the appropriate reaction would not have been to arm in depth, but rather to seek an immediate accommodation with their enemies.

It is also well to remember these enormous differences in economic potential when we review the stupendous superiority of the Allies in munitions by the end of the war. We have a right to be proud of the magnitude of American war production. Our prewar economic efficiency in production, demonstrated again in the war, corroborates our faith in the potentialities of a society that stresses initiative in the individual. We must never forget, however, that a marked Allied superiority in munitions output was wholly to be expected in a war that lasted from 1939 to 1944 or 1945. The crucial events that permitted the expectation to be fulfilled were not economic. They took place in 1940 on the beaches of Dunkirk and in the skies over London; in 1941 in the mountains of Jugoslavia and Macedonia, and on the sands of Libya; in 1942 on the seas at Midway and in the trenches around Stalingrad; and throughout the war in the submarine-infested waters of the Atlantic. These were outstanding among the delaying actions that provided the time element so essential for the conversion of our superior economic potential into overwhelmingly effective military resources. These actions, furthermore, were not generally characterized by a preponderance of mobilized effectives on the Allied side.

II

The differences in industrial capacity among the five Powers which were the major belligerents at the end of the war, and their relative success in converting this capacity to the production of finished munitions of war, are summarized by Raymond W. Goldsmith in his article already cited. At the opening of the war. the combined industrial manpower of Germany and Japan, and of Great Britain and Russia, were about evenly balanced. The average efficiency of production of the two groups, as indicated by output per man-hour, was about the same also. Consequently, the industrial capacity of the United States can be taken, in a broad sense, as a measure of the margin of potential economic superiority that lay on the side of the Allies. The margin was very great. It consisted of an industrial labor force nearly as large as either that of Germany and Japan combined, or that of Great Britain and Russia combined. Because of its huge capital equipment, furthermore, and its advanced industrial techniques, the average output per man-hour of this industrial labor force was nearly three times that of either of the other pairs of countries.

On the basis of these factors alone, it might have been expected that the aggregate munitions output at full industrial mobilization of Germany and Japan, and of Great Britain and the U.S.S.R., would be approximately the same. On the basis of the availability of trained industrial manpower, of capital equipment and of management techniques, the industrial potential of the United States might have been expected to supply an aggregate of munitions somewhat larger than that of Germany, Russia, Great Britain and Japan combined. An even larger munitions potential might have been expected from the American economy if account were taken of the ability of industrial countries with very high efficiency to divert a greater proportion of their output to munitions than can countries with less advanced industrial techniques.

These theoretical expectations, of course, assume that raw material supplies in the correct proportions were equally available for all five of the major belligerents, that all five were fully converted to maximum munitions production before the end of the war, that no one of them was obstructed by serious interdiction of its industrial plant, and that all five were faced with comparable diversions of manpower to the military services. They also ignore the contribution of the occupied countries of the west -- France, Holland, Belgium and Italy -- to the German production. In the face of these manifold complications, it is amazing how accurately the prewar statistics on industrial manpower and output per man-hour did in fact forecast the volume of munitions output achieved by the five major belligerents in the peak year 1944. According to Goldsmith's estimates the aggregate munitions output of Great Britain and the U.S.S.R., and of Germany and Japan, were in fact approximately in balance, while that of the United States was nearly equal to the total munitions output of the other four Powers combined. Huge as was the total 1944 munitions output of the United States, it was still considerably less than could have been extracted from the American industrial economy.

For a military-industrial complex to function it must possess not only an appropriate assortment of factories, industrial manpower and technical skills; in addition, it must have access to the foodstuffs necessary to sustain its civilian population and its armed forces, and to the various raw materials required for a minimum level of civilian consumption and a maximum output of munitions of war. In 1939, Great Britain, the United States and Russia possessed these essentials. Germany and Japan did not. The early war moves of both Germany and Japan, consequently, had major economic as well as strategic consequences. The most important economic decisions of the Axis Powers were those that put Germany in effective control of the resources of Europe and those that gave Japan access to the raw materials of the Far East.

By mid-1942 both of these moves were completed. The world was divided into four relatively self-sufficient military-industrial complexes each possessing foodstuffs and raw materials, or assured of access to them, in the quantity necessary to maintain at least a minimum level of civilian existence and to supply its armies. Subsequently there was relatively little movement of goods between any of these regions, that little consisting mostly of a limited but highly important stream of Lend-Lease supplies from the American-British industrial complex to Russia (Goldsmith estimates the total at not more than 10 percent of Russia's internal munitions production), a similar but very limited stream of Lend-Lease to China, a minimum supply of licensed imports to the European neutrals within the blockade, and an occasionally successful running of the blockade between Germany and Japan.

No other economic decisions of the Axis Powers compare in importance to those which resulted in the acquisition at negligible cost of access to adequate and relatively balanced resources behind strategically acceptable frontiers. With these resources in hand, success for the aggressors was possible, provided that the victory could be consolidated before the great American military and economic potential could be converted into military forces, effectively provisioned at the front. This victory had to be won in Europe, since the Japanese venture was hopeless should Germany undergo defeat, and it depended almost wholly upon military and political actions rather than economic developments.

With the full aid of hindsight, it is possible now to show how the war might have been prolonged, and the casualties of the Allies greatly increased, had Germany developed earlier the full munitions output, particularly in planes and tanks, that she succeeded in producing in 1944. It is difficult to see, however, how such increased production would have been decisive, or how it would have changed the final outcome of the war. To have achieved such a result, these added munitions, it would seem, would have had to be decisive not later than the thrust to Stalingrad. At Stalingrad, however, as at Moscow one year earlier, the German defeat does not appear to have resulted from an insufficient volume of munitions. After the winter of 1942, Germany was everywhere on the defensive. More abundant matériel might have slowed the retreat and lengthened the war. In view of the development of the atomic bomb by the Allies, it is difficult to see how it could have changed the outcome.

The main possible exception to this generalization lies in the field of warfare directed toward the destruction of the British economy. For nearly four years the U-boat campaign was distressingly effective. It did not succeed in starving Britain into submission. It did not even achieve a serious impairment of the aggregate British war production. It did, however, divert an enormous volume of British and later of American resources into shipbuilding and into anti-submarine operations. The proportion of German resources allocated to U-boat construction and to submarine operations was not excessive. That proportion could probably have been considerably increased without too serious drain upon available resources. In view of the effectiveness of the submarines that were actually in operation, it is possible that an early decision to multiply their number would have had decisive effects.

The same sort of case, but on a more theoretical basis, might be made with respect to bombing, i.e., that by a greater concentration of resources on strategic bombing, the Nazis might have achieved a success in the destruction of British industry comparable to that ultimately achieved by the Allies in bombing the industries of Germany and of Japan. This hypothesis is of much more doubtful validity. The techniques of successful strategic bombing were not generally available early in the war. The Luftwaffe failed in its endeavor to develop them when it undertook the bombing of London. It remained for the American air forces to develop them in 1944 and 1945. Even if the Germans had been able to work them out somewhat earlier in the war, it is doubtful whether the Nazis could have spared the resources necessary to exploit them successfully over an area as well equipped with fighter defenses as southern Britain.

III

It is more difficult to isolate the economic decisions that were crucial to the Allied victory. The mere fact that the Allies emerged as the victors and that one of the distinctive features of the victory was a preponderance of matériel gives importance to all the decisions that contributed to that final superiority, including those which, taken singly, did not indicate an accurate appraisal of the decisive elements of the situation. For example, the American decision in late 1939 to relax the Neutrality Act ranks high among the early actions that educated American industry to the problems of war production. To it must be credited the fact that our munitions output reached a level adequate to our requirements in the autumn of 1943 rather than some months later. Considered by itself, however, in the light of the forces that were loose in late 1939, it was entirely inadequate to the situation that faced this country. Likewise the decision to inaugurate Lend-Lease, taken in the spring of 1941, must rank on any count among the two or three most far-reaching decisions that have determined the history of our time. To the extent, however, that it was taken in the conviction, or even the hope, that disaster would be averted without full participation by the United States, it was entirely unrealistic.

Among the more important economic actions of our Allies, Russia's decision to accumulate matériel and to build a strong, deep war industry was clearly one of the most telling. It must have been taken long before the outbreak of hostilities. According to Goldsmith, the volume of combat munitions produced in Russia in the five years prior to the outbreak of the war in 1939 was exceeded only by that of Germany. It appears to have been roughly equivalent to the entire munitions output of this country from 1935 to Pearl Harbor. It was these accumulated stocks of munitions, plus the new industrial facilities that were under development in the Urals, that permitted the Russian Army to survive despite devastating defeats and the loss of important industrial territories in the summer of 1941.

There seems to have been no single British economic decision of comparable importance. What is found, rather, is a complex of decisions, no one of which was completely vital, that taken as a group was nevertheless decisive. The British pioneered in the development and application of administrative techniques for a total-war economy that made more effective use of available resources, skills and technological capacity than did those of any other Power. This in itself was a most remarkable achievement, in view of the handicaps imposed by German bombing and by U-boat operations. In developing their war economy, the British made at least two fundamental decisions that were questionable at the time, though subsequently justified by events.

One was the low priority given to dispersion. To minimize the drain on resources that would necessarily attend relocation, the British chose to make full use of existing housing and industrial capacity as it was then placed. This decision was dictated by Britain's late start and proved to be wise. Had British air defense been less effective, however, or had the Nazis been able to develop earlier an air offensive comparable to that mounted by both the British and the Americans, the outcome would not have been so fortunate.

The other was the assumption that Great Britain would continue to have access to the high seas and thus to the other members of the Commonwealth, to all her Empire, and to the nations (except those under actual enemy domination) that were accessible on the high seas. Fully as important, Great Britain assumed that she would enjoy the friendly coöperation of these governments. There was little trace of the concept of self-sufficiency, either in terms of the British Isles or of the Empire, in the planning of the British war economy. It was assumed throughout that supplies and industrial capacity would be available from overseas and that neither submarine operations, nor unfriendly or indifferent governments, would seriously impair their flow.

This decision also rested on the hard facts of the situation. Britain is a small island, completely dependent for survival on access to outside resources. No other decision would have permitted adequate conversion of her industrial potential to the output of munitions. The same decision for the same basic reasons was made in World War I. At that time, however, much less risk was involved. The British world position was still at its peak, financially, strategically, diplomatically. In 1938 and 1939, however, British industry and finance, though still important, no longer served as the undisputed fulcrum of the world's economy, nor were they any longer backed by naval and military power of incomparable magnitude. This decision, consciously taken, had major consequences in at least four important areas. First, it enabled Britain to develop her internal war production with a minimum of diversion of scarce managerial and technical talent, or of skilled labor, to unfamiliar lines of work. When particular items were more readily available abroad, she planned to purchase them. This freed her for intensive concentration on production of war material to which British industry was more readily adaptable.

Second, the ability of Great Britain to purchase munitions and supplies was not limited to her own holdings of gold and foreign assets. Through the organization of the sterling pool, the surplus dollar acquisitions of a much wider area were made available to the British war effort. By persuading countries to accept blocked sterling, huge acquisitions of supplies and services were made with no immediate drain on British resources, either in the form of exports or of foreign currencies.

Third, through the skillful use of an interlocking network of controls, based on legal and economic sanctions, and supplemented by a series of negotiated agreements, an effective blockade was developed over the whole of German-occupied Europe. This blockade, which became a joint American and British venture after Pearl Harbor, enjoyed neutral acquiescence. Its enforcement required on the whole only negligible allocations of naval forces, though these were required in fair volume at one time to interdict blockade runners between Germany and Japan. Through the blacklist and the control of shipping and of supplies from outside the blockade, the European neutrals themselves were induced, not only to turn over supplies that were highly important to the Allied war effort, but also to permit preclusive buying operations in their markets against the Germans. Furthermore, they were persuaded to curtail or eliminate German access to their own raw materials and finished goods of importance in the Nazi war economy.

Fourth, through outright purchases or through other agreements to similar effect, working control was early secured over the bulk of the outside world's shipping and raw-material production. The ability to transport essential supplies despite the submarines, and the continued availability throughout the war of the huge volume of foreign supplies required by the growing demands of American and British war production, were due in no small part to these early arrangements.

IV

It is not difficult to select the American economic decision that played the determining part in the outcome of the war. Clearly, it was the decision to go "all out" for war production after Pearl Harbor. That we were going to have to go "all out" was plain to many in the Government in the period before Pearl Harbor, and certain of the decisions taken then, and the plans drawn up for expansion in aviation and other lines, made the all-out effort successful when the time came. It was not until December 7, 1941, however, that American public opinion realized that there could be no limited aims, in the economic or any other field. That conscious decision was a great turning point of the war. Up to that point the conversion of American industrial capacity to the output of munitions had been strenuous, partly in response to our own needs for armament and partly in response to Allied requirements as expressed in orders placed directly in the United States and in supplies provided through Lend-Lease. There was disagreement within the United States, however, with respect to the scope of the effort that would be required. There was strong support for the thesis that our incomparable agricultural and industrial capacity made it possible, under the incentives of high profits and wages, to produce enough of both "guns and butter" to meet the requirements of the situation. Pearl Harbor shocked the nation into a realization of the size and speed of the needs of an all-out war, of the overriding necessity of what was in effect central control of production, consumption, scarce raw materials and scarce skills. From December 1941 on, there was no further disagreement. Though there was some grumbling about rationing of civilian goods, there was no longer any serious pretense that such action could be avoided, nor was there, for example, any debate over the extent of the demands that would be made on the pool of American industrial talent that was concentrated in and around the automobile industry.

By that decision to go all out the whole of American industry with its skilled and adaptable labor force, its enormous capital equipment, its technology and its managerial "know-how" was made available for the production of the sinews of war. This industrial power, added to the war production of Russia, Great Britain and the Commonwealth, provided an industrial potential in excess of the needs of the services, huge as these were. It meant that the United States Congress would make funds available without stint to permit the application of mass-production techniques to the whole range of munitions output. It meant that the commanders at the far-flung fronts would be supplied not only with an adequate volume of standard munitions, but with the highly specialized equipment needed for amphibious operations. It meant that the chiefs-of-staff could plan offensive operations on a scale that would assure success.

The greatest integration of industrial effort the world has ever known resulted from the American resolution to put its industrial strength wholly into the war effort. It was possible to construct a single organization, integrated through the Combined Boards, that could allocate the major part of the raw materials, the labor, the industrial and agricultural capacity, and the transport, not only of the United States, Great Britain and the Dominions, but also of Latin America, India and of the African colonies. Long before the end of the war estimates covering the military requirements of the western Allies, plus the subsistence requirements of their peoples, plus the Lend-Lease requirements of Russia, China and others, plus the commercial requirements of Latin America and other regions outside the war zones, were matched against the resources available. With these estimates in hand it was possible to make allocations of raw materials, of munitions contracts, and of transport on the basis of maximum contribution to the war effort consistent with minimum subsistence needs. With financial considerations rendered less important, because of the existence of Lend-Lease and of Mutual Aid, it was possible to disregard national financial deficiencies in the award of contracts. Munitions or supplies needed by any country could be produced in the locality best adapted to their supply.

Finally, on this decision rested the ability of the services to plan and to execute a successful attack upon the industrial resources of the enemy. Once Germany and Japan had consolidated themselves within the area covered by their early conquests, blockade alone -- though useful -- could not deprive them of the ability to fight. The only way in which their economic bases could be destroyed was by air bombardment in the case of Germany, and by air bombardment and submarine operations combined in the case of Japan. This war demonstrated that these techniques can be effective: the economy of an enemy can be destroyed. In both east and west at the time of surrender, the enemy had lost the ability to munition his armed forces. The war demonstrated also, however, that in the absence of a weapon such as the atomic bomb, the destruction or serious impairment of a large industrial economy makes enormous demands on the resources of the attackers. The utilization of a large segment of American industrial production was necessary to organize the air forces which destroyed the German and Japanese industrial power.

V

One more comment may be made on the crucial factor of time. What were the inexorable time limits imposed upon the German General Staff by the disparities in economic potential? Were German diplomacy to fail, and were the German Army called upon to face the United States, Britain and Russia simultaneously, what were the deadlines for the elimination of Russia or Great Britain or both before the dormant strength of the United States was aroused and harnessed? The reading of the German mind, in that respect, will always be one of the most interesting questions of the Second World War.

We know from the record that it was not until the autumn of 1943 that American war production reached its peak. We know that a further period would have been required before munitions output in the United States would have reached the peak of which our economy was capable. We know also that between the autumn of 1939, and Pearl Harbor in December 1941, conversion to full war output was less rapid than it might have been because of the reluctance of the United States to face the necessity of all-out war. We know further, however, that after the fall of France, in June 1940, enormous emphasis was laid on the most rapid possible development of air forces, and that nevertheless it was almost 1944 before we were in a position to undertake sustained strategic bombing in effective volume. The time required for full conversion of the industrial potential of the United States, therefore, under the economic and administrative conditions that prevailed, lay somewhere between a minimum of three years and the six years that were actually taken.

Could it have been less under a different organization of the war effort? The record of the actual administration of the war economy has been preserved by the Bureau of the Budget in "The United States at War." It tells a story of devoted men driving through a program of war production. It also tells a story of utterly new administrative problems for which there were no guiding precedents. It tells of the struggle to define the problems that waited decision, to devise effective administrative organizations to make the decisions and, above all, of the difficult task of coördination of these agencies so that their separate decisions could reinforce each other. It portrays a record that merits study, for it is probable that a further shortening of time absorbed in economic mobilization would have required a different method of organization at the top level of administration.

Yet at the best, such actions could not have greatly changed the lower of the margins estimated above. It is difficult to conceive of a situation in which the American economy, starting with as little experience in actual war production as prevailed in September 1939, and lacking prototypes of many of the weapons to be produced, could have been converted to full war output in much under three years. It is difficult to believe that military forces of impressive strength could have been equipped in less than two years. At the worst, from the point of view of the Nazis, therefore, Germany had to consolidate her victory in Europe before 1942. At best, from the German point of view, i.e., in the event the United States did not enter the war, or having entered, ran into serious difficulties in mobilization, they had somewhat longer. These dates do not differ greatly from the timetable of the major German offensives. They may help to explain why Hitler indulged in what seems the most irrational gesture of the war -- the voluntary declaration of war upon the United States after Pearl Harbor. He thought he was secure.

[i] "The Power of Victory," by Raymond W. Goldsmith, Military Affairs, Spring 1946.

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  • WINFIELD W. RIEFLER, Professor of Economics in the Institute for Advanced Study, Princeton; Minister in the American Embassy, London, 1942-44
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