War Industries Board

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The War Industries Board was a World War I era agency that helped coordinate war efforts.^[1] The Board was a complex agency, responsible for coordinating efforts in several different areas, using several different methods, including Price controls.^[2] The War Industries Board was decommissioned on January 1, 1919.^[3]

Background[edit]

The War Industries Board, which acts as a clearing house for the war industry needs of the Government by the Council of National Defense, with the approval of the President. It absorbed the work of the former General Munitions Board of the Council and also of the automotive committee and the committees on raw materials and supplies of the Advisory Commission. Of the members of the board, Mr. Bernard M. Baruch gives his attention in particular to raw materials; Mr. Robert S. Brookings gives his attention in particular to finished products; and Judge Robert S. Lovett exercises such priority control, including transportation, as is authorized to the Government. The board assists the purchasing departments of the Army and Navy, and in conjunction with the Federal Trade Commission assists the President in fixing prices of basic products, such as copper, steel, etc. In addition to the priority control which it exercises through the powers delegated to Judge Lovett by the President, it controls, with the assistance of the exports council, the buying of the Allies. For this purpose three of its members - Mr. Baruch, Mr. Brookings, and Judge Lovett - together with Mr. Herbert Hoover in food matters, constitute the Allied purchasing commission.^[4]

History[edit]

Creation and Powers of the War Industries Board[edit]

On July 28, 1917, the Council of National Defense made an announcement in regard to the War Industries Board as follows:^[5]

The Council of National Defense today decided, with the approval of the President, to create a small body to be known as the War Industries Board. The War Industries Board, in addition to other duties, will assume those formerly discharged by the General Munitions Board. The new board will be composed of seven members, working under the direction and control of the Council of National Defense through it to the President. Its members will be direct representatives of the Government and of the public interests. It will be composed of:

Mr. Frank A. Scott, Chairman

Lieutenant Colonel Palmer E. Pierce, representing the Army

Rear Admiral Frank F. Fletcher, representing the Navy

Mr. Hugh Frayne

Mr. Bernard M. Baruch

Mr. Robert S. Brookings

Mr. Robert S. Lovett

The board will act as a clearing house for the war industry needs of the Government, determine the most effective ways of meeting them and the best means and methods of increasing productions, including the creation or extension of industries demanded by the emergency, the sequence and relative urgency of the needs of the different Government services, and consider price factors; and, in the first instance, the industrial and labor aspects of problems involved, and the general questions affecting the purchase of commodities.

Of this board, Mr. Baruch will give his attention particularly to raw materials, Mr. Brookings to finished products, and Mr. Lovett to matters of priority. These three members, in association with Mr. Hoover so far as foodstuffs are involved, will constitute a commission to arrange purchases in accordance with the general policies formulated and approved.

The Council of National Defense and the Advisory Commission will continue unchanged and will discharge the duties imposed upon them by law. The committees heretofore created immediately subordinate to the Council of National Defense, namely, Labor, Transportation and Communication, Shipping, Medicine and Surgery, Women's Defense Work, Cooperation with State Councils, Research and Inventions, Engineering and Education, Commercial Economy, Administrations and Statistics, and Inland Transportation - will continue their activities under the direction and control of the council. Those whose work is related to the duties of the War Industries Board will cooperate with it. The sub-committees advising on particular industries and materials, both raw and finished, heretofore created will also continue in existence, and be available to furnish assistance to the War Industries Board.

The purpose of this action is to expedite the work of the Government, to furnish needed assistance to the Departments engaged in making war purchases, to develop clearly and definitely the important tasks indicated upon direet representatives of the Government not interested in commercial and industrial activities with which they will be called upon to deal, and to make clear that there is total disassociation of the industrial committees from the actual arrangement of purchases on behalf of the Government. It will lodge responsibility for effective action as definitely as is possible under existing law. It does not minimize or dispense with the splendid service which representatives of industries and labor have so unselfishly placed at the disposal of the Government.

In November Frank A. Scott on account of ill health resigned the chairmanship of the War Industries Board, and in his stead the President appointed Daniel Willard, who is also chairman of the Advisory Commission.

Fixing the price of Copper[edit]

The first important regulatory action of the War Industries Board was fixing the price of copper. The statement issued September 20, 1917, in regard to this action is as follows:

After investigation by the Federal Trade Commission as to the cost of producing copper, the President has approved an agreement made by the War Industries Board with the copper producers fixing a price of twenty-three and one-half cents per pound f. o. b. New York, subject to revision after four months. Three important considerations were imposed by the board: First, that the producers would not reduce the wages now being paid, notwithstanding the reduction in the price of copper, which would involve a reduction in wages under the "sliding scale" so long in effect in the copper mines; secondly, the operators shall sell to the Allies and the public copper at the same price paid by the Government, and will take the necessary measures, under the direction of the War Industries Board, for the distribution of the copper and to prevent it from falling into the hands of speculators, who would increase the price to the public; and third, the operators pledge themselves to exert every effort necessary to keep up the production of copper to the maximum of the past, so long as the war lasts.

The War Industries Board felt that the maintenance of the largest production should be assured, and that a reduction in wages should be avoided. The stipulation that the present wages shall not be reduced compels the maintenance of the highest wages ever paid in the industry, which without such stipulation would be reduced under the sliding scale with the reduction made in the price of copper. Within this year copper has sold as high as 36 cents per pound, a'nd the present market price would be higher than it is had it not been well known for some weeks that the Government would fix the price.

The principal copper producers throughout the country have evinced a most patriotic spirit and for weeks have promptly supplied every request of the Government for copper, without awaiting decision as to price, and agreeing to accept the price which the board should ultimately fix. The proper departments of the Government will be asked to take over the mines and plants of any producers who fail to conform to the arrangement and price, if any such there should be.

Fixing the price of Steel and Iron[edit]

After prolonged conferences with the manufacturers of iron and steel, the War Industries Board and the steel men on September 24, agreed on maximum prices for a number of commodities, which agreement was approved by the President.

On November 6 it was further announced that the President had approved an agreement made by the War Industries Board with the principal steel industries of the United States, fixing maximum prices, subject to revision January 1, 1918, on certain steel articles

In connection with the above, the iron and steel manufacturers have agreed to adjust the maximum prices of all iron and steel products other than those on which prices have been agreed upon, to the same general standard as those which have been announced. It is expected that this will be done promptly and consistently in line with the basic, intermediate, and finished products, for which definite maximum prices have been established.

In fixing maximum prices, it was stipulated, as in the case of copper, first, that there should be no reduction in the present rate of wages; second, that the prices above named should be made to the public and to the Allies, as well as to the Government; and third, that the steel men pledge themselves to exert every effort necessary to keep up the production to the maximum of the past, as long as the war lasts.

Measures will be taken by the War Industries Board for placing orders and supervising the output of the steel mills in such manner as to facilitate and expedite the requirements for war purposes of the Government and those nations associated with us, and to supply the needs of the public according to their public importance and in the best interest of all, as far as practicable.

The prices enumerated have been fixed by the President on the assurance of those representing the steel industry that these prices equitably adjust the relations of the steel interests to each other, and will assist them in fulfilling their obligations to give the country 100 per cent of production at not to exceed the prices heretofore announced.

With this spirit of cooperation manifested, no doubt is entertained by the War Industries Board that every effort will be made to bring the production as nearly as possible up to the extraordinary demands resulting from the war.

Discussion of Prices Fixed[edit]

Method of Operation[edit]

By the secretary of the War Industries Board, Lieutenant Bingham, I am informed that the agreements entered into with regard to copper and iron are handled in the following manner:

The Raw Materials Division of the War Industries Board has appointed a Director of Copper Supply and a Director of Steel Supply. The copper and steel interests have appointed Trade Committees who, under the supervision of the directors each in his department, allocate Government orders in the various trades and use their influence to prevent purchases being made by either department or by an individual outside of the Government at prices above those agreed to by their industry. "Should any individual or corporation sell any of the articles upon which a price has been fixed at prices above those fixed, the Trade Committee can use its influence to secure the reduction of that price to the fixed price, or if necessary can call upon the War Industries Board which, through its Priority Division, can be able to bring sufficient pressure to bear on the seller to cause him to come into line. There has been very little trouble of this kind and likewise very little material sold at the prices fixed as yet, due to the fact that all producers of copper and steel were sold ahead at old prices for a considerable period.

War and Pre-War Prices[edit]

It is to be noted that under the agreement of September 24, the prices for coke, iron, and steel varied from 43 to 70 per cent below current prices, and the prices agreed upon for the finished product under the agreements of October 11 and November 6 are similarly greatly below current prices. However, it is interesting to compare these prices with those which obtained before the war.

Connellsville coke in 1914 varied from about $1.90 to $2.50 per ton. For all the earlier part of 1915 the price was $2 a ton. Thus this price before the war was only one-third that allowed by the Government.

The price of Bessemer pig iron at Pittsburgh during 1914 and the first half of 1915, averaged a little less than $15 a ton. Therefore, the price allowed, $33 a ton, is more than twice that of the pre-war prices.

The price of steel billets at Pittsburgh during 1914 and the first half of 1915 varied from $19 to $21 a ton, with an average of about $20 a ton. The prices allowed, $47.50 and $51, are about two and a half fold those before the war.

Similar ratios obtain between pre-war prices and the prices allowed for other products.

The Legal Basis[edit]

The transactions of the War Industries Board are based upon an entirely different legal foundation from those of the Food Administration, the Fuel Administration and the Shipping Board. Each of these organizations operates under laws enacted by Congress under the war powers of that body. The War Industries Board derives its power from the Council of National Defense, and that Council has no authority whatever to compel agreement in fixing prices. The Council of National Defense Act cannot even by implication be construed to repeal the Sherman Act in regard to agreements in fixing prices. Since, however, the agreements entered into by the War Industries Board have the approval of the President, it may be held that the President in thus approving prices is acting under authority granted to him in section 120 of the National Defense law. However, the powers of the President granted by this section extend only to the control of prices for governmental purposes; whereas the agreements in regard to prices of the War Industries Board not only apply to governmental orders but apply to others. Therefore, it is clear that there is no law which even by implication can be regarded as repealing or modifying the anti-trust acts in regard to agreements by the copper, iron, and steel men to sell at uniform prices to the public.

In agreeing to fix lower prices than had prevailed, these men were doubtless moved by patriotic motives. However, the facts recited show that the prices to which they have agreed are such as to give them great profits beyond those which have obtained antecedent to the war, even when allowance is made for large deductions from these profits because of the excess war tax.

It should be remembered that the War Industries Board, in acting for the public in fixing prices, was obliged to take into account the shortage of steel and the necessity of the largest possible production. They were obliged to agree to a price which allows a profit sufficient for practically all of the furnaces and mills of the country to operate. Also in those industries in which there has been no governmental regulation or agreements regarding prices, profits have been much larger than before the war; and it was necessary to take this fact into account. A reduction in prices was accomplished which in itself was a gain.

While the arrangements regarding prices were amicably made, it should be remembered that the public pressure for fair prices for iron and steel was supported by the threat of legislation at least so far as iron was concerned. A bill had been introduced into Congress by Senator Pomerene, S2756, to regulate the production, sale, and distribution of iron ore, iron, steel, and their products, in the manner parallel to that under which food and fuel are controlled.

With the absolute necessity for the Government and the public to obtain iron and steel, copper, and other essential products at reasonable prices, it is highly probable that if the agreements had not been entered into, legislation would have followed at the coming session of Congress.

Priority in Manufacture[edit]

Another duty of the War Industries Board is that of control of priority of manufacture. This is done through the priority committee of the War Industries Board, of which Judge Robert S. Lovett is chairman. On September 21, the day that announcement was made of prices for iron and steel, the priority committee issued its first general priority order in regard to manufacture. The order was approved by the Secretary of War and the Secretary of the Navy.

The order gives instructions as to priority in orders and work for all individuals, firms, associations, and corporations engaged in the production of iron and steel and in the manufacture of products thereof.

Under these regulations all orders and work are divided into three classes:

Class A comprises war work - that is to say, orders and work urgently necessary in carrying on the war, such as arms, ammunition, ships, etc., and the materials required in their manufacture.

Class B comprises orders and work which, while not primarily designed for the prosecution of the war, yet are of public interest and essential to the national welfare, or otherwise of exceptional importance.

Class C comprises all orders and work not embraced in Class A or Class B.

All orders henceforth will be classed as Class C, unless covered by certificates of the Priorities Committee. No certificates will be issued for Class C orders.

Orders and work in Class A will take precedence over those in Class B, and both these classes will be given priority over Class C, irrespective of the date the orders were received. Class A and Class B will, in turn, be separated into subdivisions to be designated as Class A1, A2, A3, A4, etc., and Class B1, B2, B3, B4, etc., each composed of orders within the class which are regarded respectively as of greater moment and to be given precedence in accordance with the serial number.

All materials required in the manufacture of an article or in the prosecution of any work will be entitled to take the class of such article or work unless otherwise specified.

For the administration of the regulations, certificates will be issued by the Priorities Committee upon application, specifying the classification of the order of work. Certificates of a subsidiary nature will be issued upon request for the furnishing of material and articles required in manufacturing the article or prosecuting the work ordered.

War orders of the Allies as well as of the United States will be placed in Class A, in the case of those already contracted for. All orders placed prior to September 21 by the War and Navy Departments or the Emergency Fleet Corporation of the United States will be classed as subdivision Al of Class A, unless otherwise ordered. Orders already placed by the Allies for war materials will be classed as subdivision A2 of Class A, unless otherwise ordered.

See also[edit]

• Overman Act
• Nye Committee

References[edit]

External links[edit]

• Records of the War Industries Board, National Archives
• The War Industries Board: Its Development, Organization, and Functions
• History of Prices During the War, Volumes 1-9, United States War Industries Board, Planning and statistics division
• Government Organization In War Time And After - A Survey of the Federal Civil Agencies Created for the Prosecution of the War, by William Franklin Willoughby - Director of the Institute for Government Research
• Industrial America in the World War; the strategy behind the line, 1917-1918, by Grosvenor Clarkson