War Mobilization and a New Political Economy

The impact of the war on political-economy

• economic mobilization - government management of economy

• government management of money markets

• development of associational approach - integration of public and private interest

• conflicts between volunteerism and antitrust

Economic mobilization

• War Industries Board - delegated authority to business associations

  • decentralized structure

• reliance on business executives, corporations and trade associations for expertise

• trade associations exercised public authority to control and direct production

  • continued associations after war

War mobilization

• Army Reorganization Act of 1916 - doubled size of Army; navy greatly expanded number of ships

• Emergency Revenue Act of 1916 - increase in income tax to finance war effort

• national inventory of industrial capacity - 1916

• creation of War Industries Board to mobilize resources for War

War Industries Board

• board and functional divisions

  • price fixing

  • conservation and efficiency

  • requirements for raw materials

  • priorities for production - public/private

• power to establish priorities and fix prices

  • could not coerce business

• relied on trade associations to exchange information on supplies and resources

Price fixing

• cost plus acceptable return

• price fixing through committee

Conservation measures and standardization

• Conservation Division

• regulation of standards reduced variety of goods

• means to eliminate smaller companies

• narrowed range of competition

U.S. Food Administration

• agricultural price controls

• decentralized power to county level

Demobilization

• political-economy relations maintained through associations

• associations were favored over government control

  • inadequate to cope with depression

Federal Reserve - lacked foundation to intervene to offset depression

• monetary policy

  • oversight

  • reserve requirements

  • open market operations

• fiscal policy

  • limit fluctuations in business cycle

  • public works spending

  • taxation

  • tariffs

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