How to fight Coronavirus using 5 WWII experience

As the globe confronts the coronavirus pandemic, one urgent problem is the shortage of key pieces of equipment, including high-quality masks, test kits and—perhaps most important of all—ventilators. It seems hundreds of thousands of lives might be saved, if only manufacturers could quickly ramp up the production of such equipment, perhaps by a factor of 100 or 1,000, within a few weeks.

The United States has done something similar, on a nationwide scale, once before—eight decades ago during the emergency of World War II. At that time, there was a desperate need to radically accelerate the output of items such as ships, tanks and bombers. With decisive government action, including taking a little bit of control from corporations, this effort was hugely successful.

Might there be lessons to be learned now, from that history? Here are five takeaways from the World War II industrial mobilization to help inspire creative thinking by business leaders and policymakers today.

1. If the government wants machines fast, it better promise to buy them

During World War II, manufacturers of key items were guaranteed that national government agencies would purchase all of their output, even if the equipment ultimately wasn't needed. That was a response to the experience of World War I, during which some contractors had been left holding unwanted goods when the conflict ended suddenly in November 1918. During World War II, the technique of guaranteed sales was used to good effect in the machine tools industry. This was the essential sector that supplied the drills, lathes, grinders and other equipment that all sorts of manufacturers needed to turn pieces of metal into finished products. To encourage maximum production of machine tools, the Tools Division of the War Production Board, an emergency civilian coordinating agency, created what it called the pool-order mechanism, guaranteeing purchases of maximum output. As the official history of the Tools Division put it soon after the war, this device “encouraged output at a rate manufacturers could not have afforded otherwise.” The lesson for 2020 is that if we want more ventilators as soon as possible, the national government needs to guarantee it will purchase them.

1. Raising corporate taxes can be a good thing

U.S. authorities successfully contained the problem of profiteering—and, perhaps more important, the problem of public outrage at perceived illegitimate profit-taking in time of crisis—with a multidimensional array of controls. These included direct caps on prices, special war taxes and very high marginal income tax rates on war manufacturers, and congressionally mandated “renegotiation” (clawbacks) of corporate profits deemed by the War and Navy Departments to be excessive. These measures did not prevent all profiteering, nor public complaints about it, but they did improve on the record of World War I. The high taxes paid for nearly half of the war effort (with most of the rest financed by war bonds), keeping deficits in check. Thanks in part to the price and profit controls, public morale—and the legitimacy of private- and public-sector authorities—remained high enough for Americans to sustain an energetic, multiyear mobilization. In 2020, targeted taxes and controls could similarly limit hoarding and profiteering, boosting public morale. And if emergency stimulus measures are so big as to trigger inflation, sharply progressive taxes could be an equitable way to tame a rise in prices, while holding down deficits.

To be sure, none of these techniques from 80 years ago might be perfectly applicable to our situation in 2020. Perhaps most important, it is likely that the current mobilization needs to go even faster. During World War II, the giant war plants used to ramp up production took months to build. Today, it would appear that we have not months, but weeks. A quicker mobilization would likely test the limits of some of the technologies that have developed over the past decades, including quick modular construction, computer modeling, 3-D printing and robotics. Nonetheless, despite the different timetable, some of the techniques outlined above, including various forms of public assumption of risk, might remain relevant for today’s policymakers.

Of course, today’s crisis makes it clear that there has been systematic underinvestment, over the past several decades, in planning, in-house government labs and plants, surge capacity and public health. One reason for this is that American leaders failed to learn properly from the record of World War II. That failure came not only from forgetfulness or oversight, but also from a deliberate effort to obscure the importance of public investment, public regulation and public coordination by those who preferred a story of World War II in which the only heroes on the homefront were for-profit companies. Today, we need to relearn the real lessons from that war. By using new, creative solutions inspired by a fuller understanding of the real history, we will be better armed to combat the biggest challenges of the 21st century

1. In a pinch, create homegrown alternatives
   The record of World War II shows it is possible, if not easy, to produce emergency alternatives closer to home when global supply chains are disrupted. Many of the combatant nations in World War II did this more than the United States, which was fortunate to have vast natural resources and the world’s largest national economy. But even the U.S. was forced into an all-out emergency scramble to replace imports with new domestic sources, most importantly in the case of rubber. Here American authorities failed to anticipate an enormous problem for the war effort that occurred when Japan’s victories in early 1942 cut off imports of natural rubber from Indonesia. This threatened to cripple the production of items like military trucks and aircraft, which needed rubber for their tires. However, a massive, rapid effort, using GOCO plants and the expertise of oil, chemical and tire companies, allowed the United States to rapidly build from scratch a big new synthetic rubber industry. Today, as the disruption of global supply chains is making it harder to procure a variety of key components for the coronavirus fight, it makes sense for policymakers and business leaders to engage in some quick planning and cooperation, to find and finance domestic substitutes.

1. Production can be scaled up fast when companies cooperate
   During World War II, expert manufacturers shared designs and techniques with other firms, so that key items could be produced on multiple production lines, simultaneously. This was done on a grand scale in the U.S. aircraft industry. For example, Pratt & Whitney, the top aircraft engine manufacturer, shared drawings and knowledge with Ford Motor Co. and General Motors, the giant automakers, so that they could mass-produce engines, under licensing agreements with nominal fees. Similarly, Boeing worked with competitors, including Lockheed and Vega, so the Boeing-designed B-17 bomber could be made at its rivals’ plants in California, as well as in the company’s home facility in Seattle. These arrangements were encouraged and facilitated by the U.S. Army Air Forces, which, like other military organizations, served as a top manager and coordinator of the war economy. Today, public authorities and business leaders might use a similar approach, by arranging to have the best versions of key items like tests, ventilators, medications and vaccines made by multiple companies, using temporary deals that would bypass delays that might come from concerns about proprietary technology and competitive advantage.

1. The government can build and own new factories, and let companies run them
   World War II saw the emergency construction of manufacturing plants, the vast majority of which were paid for and owned by U.S. government agencies but operated by companies in the private sector. Indeed, the main mechanism for the biggest expansions of industrial capacity in World War II was the government-owned, contractor-operated (GOCO) plant. The famed Kaiser shipyards, which turned out big merchant vessels in a matter of days, were GOCO facilities, as were most of the big new bomber plants run by the top airframe manufacturers, including Douglas, Martin and North American. The atomic bomb project, like the conventional explosives program, was based on GOCO plants, run by some of the country’s leading corporate manufacturers, including DuPont and Eastman Kodak. By eliminating risk to private producers and their bankers, this model of government financing and ownership proved much more effective than other schemes used during World War II, including tax incentives and government promises to buy privately financed plants over a five-year period. Today, the GOCO model could be useful in cases where new production lines—for respirators, vaccines or other items we realize are now essential—need to be built fast, without waiting to see whether private capital will fund them.