US Percentage of Industrial Output

The United States, even mired in the depression in the period 1936 to 1938, manufactured almost one-third of the world’s products (32.2 percent). The United States outproduced Germany about three times (10.7 percent) and Japan almost ten times (3.5 percent). Taking the United States prewar productivity in terms of production per man-hour as the standard and giving it a value of 100, the following chart indicates the relative productivity ranking of World War II foes. One must not forget, however, that the United States was “almost alone in increasing rather than diminishing consumer output during the war.” To reiterate the point, all belligerents fiercely produced munitions during the war, not just the United States. America possessed advantages that none of the other warring states had. Its output, while noteworthy, was what a prewar analyst might have expected given the size of the country, its educated population, the status of its technology, the abundance of its raw materials, the quality of its transportation network. In short:, America’s munitions production in World War II was no “miracle.” (1)

(1) Gropman, Alan L. “Mobilizing U.S. Industry In World War II: Myth And Reality.” Institute for National Strategic Studies, National Defense University, 1996, Washington, DC, Page 135, https://www.files.ethz.ch/isn/23588/mcnair50.pdf

Industrial culture

The Allied nations and the Axis nations saw the upcoming war very differently and their industrial mobilization reflected their visions. Germany foresaw a series of short wars or political takeovers of states in one-on-one actions. During the 1930s Germany more so than any other European nation mobilized their military and industry for war. German self-sufficiency was a key principle in their war preparations which included construction of synthetic fuel and rubber plants, prioritizing military over civilian economic policy, and stockpiling raw materials.

Japan foresaw a quick expansion into the Pacific nations followed by a negotiated peace. Both Germany’s and Japan’s visions required industrial and military mobilizations but not that of total war. The Soviet Union, the United Kingdom, and the United States all foresaw a long war and mobilized their industries and military accordingly. The Soviet Union’s centrally planned economy utilized mass production techniques within their five-year plans. The United Kingdom and the United States capitalistic approach were capable of mass production in order to achieve their profitability goals.

Although both Japan and Germany both planned and implemented a war economy earlier than the Allied nations, they never achieved the industrial mobilization levels of their foes. Germany saw a short war(s) therefore total industrial mobilization not needed. “By September 1941 Hitler was so confident that he had succeeded in Russia that he ordered large scale cutbacks in war production.” (2)  Additionally, the Allied nations mobilized nontraditional labor especially women to their munitions and war materiel factories. For example, German domestic servants dropped from 1.5 to 1.3 million or 20%, whereas British dropped from 1.2 to 0.7 million or 58%.  German factories for most of the war ran single shifts whereas Allied factories went to 24-hour production days.

(2) D’Olier, Franklin, Chairman, Alexander, Henry C. Vice-Chairman, “The United States Strategic Bombing Survey Summary Report (European War)”, September 30, 1945, Page 2

Industrial policy

The Allied nations cooperation through the Big Three Conferences, Combined Boards, and Lend-Lease identifying industrial and raw material gaps and priorities. Both Great Britain and the Soviet Union transition from identifying raw materials for all war materiel manufacturing needs to obtaining completed weapons platforms and focusing on expanding production capabilities where they had greater expertise.

Japan, Germany, and Italy acted mostly without prior consultation with their Axis partners. Italy did not know that Germany would invade the Soviet Union. Japan’s bombing of Pearl Harbor came as a surprise to her Axis partners. The Axis nations did not coordinate much in the areas of weapon development or raw material sharing.

Relative Productivity Ranking Of World War II Foes Data

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Source: Gropman, Alan L. “Mobilizing U.S. Industry In World War II: Myth And Reality.” Institute for National Strategic Studies, National Defense University, 1996, Washington, DC, Page 135, https://www.files.ethz.ch/isn/23588/mcnair50.pdf

Other Economic Indices Data Links

Indices of American Manufacturing Output (1939 = 100)

German vs. USSR Volume of Industrial Production, 1940

Allies to Axis GDP Ratios 1938-1945

Real National Product of UK, US, USSR, and Germany, 1937-45

US Federal Spending and Military Spending During WW2

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UK National Income and Expenditure 1938-1945 Data

Source: Hancock, W.K. and Gowing, M.M. “British War Economy.” United Kingdom Civil Series, London, 1949, Page 347, https://www.ibiblio.org/hyperwar/UN/UK/UK-Civil-WarEcon/UK-Civil-WarEcon-Stats-3.html

Other Government Spending Costs Data Links

New Construction Activity In The United States 1939-1945 Data

The Costs of The Manhattan Project

US Congressional War Department Allocations – 1939

Combat Munitions Production, Allies versus Axis, 1935-44

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Germany’s Real National Product

However, it is the German Real National Product that is most interesting. From 1939 through 1942 Germany’s Real National Product flat lines. Germany’s prewar economic planning was implemented and followed. Including the following:

• Germany implemented economic recovery policies to end high unemployment mainly through public work programs beginning in the early 1930s.
• The Four Year plan was implemented in 1936 orienting the German economy towards rearmament and preparing for war. Between 1936 and 1939, two thirds of industrial development came from war preparation.
• Autarky, the policy of self-sufficiency, to remove dependence on imports and trade was initiated. Germany recognized the potential of future British blockades.
• The first stages of Lebensraum, or living space for the German people, was achieved as Germany controlled Poland as well the USSR’s breadbasket, Ukraine and Byelorussia.
• German occupied territories from France to Norway were providing raw materials and finished goods at German dictated prices.
• Germany’s labor force had very little bargaining power as the state effectively banned labor unions and dictated pay and other labor benefits.

Autarky

Germany’s Autarky policy leading up to World War II was a key component of the Nazi regime’s economic strategy. The policy aimed to achieve economic self-sufficiency in order to reduce the country’s dependence on imported resources and to prepare for a potential war.

The Autarky policy was implemented through several measures, including the Four Year Plan, which was introduced in 1936. The plan aimed to increase domestic production of key resources such as coal, iron, and oil, and to develop alternative sources of raw materials. The government also encouraged the use of synthetic substitutes for materials that were in short supply, such as rubber.

The Autarky policy also involved measures to reduce imports and increase exports. The government-imposed tariffs and trade barriers to protect domestic industries, and encouraged the development of new industries that could produce goods that were previously imported. The government also sought to increase exports to generate revenue and reduce the country’s trade deficit.

However, despite these efforts, Germany was never able to achieve true economic self-sufficiency. The country remained heavily dependent on imported resources throughout the war, and the Autarky policy was ultimately unable to provide the resources and materials needed to sustain the country’s war effort.

Occupied Territories – France

Germany initially planned for a swift and limited war that would not require a full mobilization of its economy. As a result, the integration and mobilization of French industry did not feature prominently in Germany’s economic plans at the time. However, the situation changed when the Blitzkrieg stalled in the harsh Russian winter, forcing Germany to mobilize not only its own economy but also that of the territories it had occupied for the war effort.

After achieving victory over the Netherlands, Belgium, and France, the Reichskreditkassen was established on May 3, 1940, which was introduced an occupation currency. The exchange rate between the franc and the occupation currency was set at 20 to 1, representing a significant overvaluation of the Reichsmark. This overvaluation made French goods relatively inexpensive for Germany.

Results

Yet Germany did not get the economic results they expected. With Operation Barbarossa the Soviet Union’s economy nosedives but the German economy only has an imperceptible tick upwards.

Although the regime made some progress in preparing for war and revitalizing the economy during the period of 1933 to 1939, its economic achievements were not without constraints. The Four Year Plan was only partially realized, and the goal of achieving self-sufficiency through the policy of autarky was not fully attained as there were shortages of raw materials and labor from 1938 onwards.

Real National Product of UK, US, USSR, and Germany, 1937-45 Data

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Source Harrison, Mark. “Resource mobilization for World War II: the U.S.A., U.K., U.S.S.R., and Germany, 1938‐1945.” Published in the Economic History Review, 41:2 (1988), pp. 185

Other Economic Data

Relative Productivity Ranking Of World War II Foes

Indices of American Manufacturing Output (1939 = 100)

German vs. USSR Volume of Industrial Production, 1940

Allies to Axis GDP Ratios 1938-1945

US Federal Spending and Military Spending During WW2

The Economics of the Second World War: Seventy-Five Years On

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Military Spending

militarySpending Pre WWII

According to Table 7 in Tassava, Christopher’s article “The American Economy during World War II” published in EH.Net Encyclopedia, military spending in the United States was relatively low in the 1930s. In 1930, the country spent $410 million on defense, which represented 1.3% of the federal budget. By 1940, military spending had increased to $1.2 billion, which represented 2.5% of the federal budget. However, these levels of spending were still modest compared to the massive military buildup that would take place during World War II and in the post-war years.

1930s Economic and Political Priorities

In fact, the economic and political priorities of the United States in the 1930s were shaped by the Great Depression and the need to address domestic issues such as economic recovery, social welfare, and regulation of the financial sector rather than a strong military. The country was not yet fully engaged in international affairs, and the threat of global communism was not yet a major concern.

One of the main economic priorities of the United States in the 1930s was to address the economic crisis and stimulate economic growth. The government implemented a range of policies aimed at boosting employment and consumer spending, such as the New Deal programs introduced by President Franklin D. Roosevelt. These programs included public works projects, job training programs, and agricultural subsidies, among others. The government also implemented measures to regulate the financial sector and protect consumers, such as the establishment of the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC).

Another economic priority of the United States in the 1930s was to address poverty and inequality. The government implemented a range of social welfare programs aimed at providing support to the most vulnerable segments of society, such as the elderly, disabled, and unemployed. These programs included Social Security, the National Youth Administration, and the Civilian Conservation Corps, among others.

Military Spending Post WWII

In contrast, military spending in the post-World War II era was significantly higher. In 1945, the United States spent $10.5 billion on defense, which represented 41% of the federal budget. This level of spending reflected the massive military mobilization that had taken place during the war and the country’s concerns about Soviet expansionism in the post-war period.

In the years that followed, military spending remained high as the United States entered the Cold War and engaged in the Korean War. By 1950, military spending had risen to $14.4 billion, which represented 15% of the federal budget. This increase was driven by the outbreak of the Korean War, which led to a significant increase in military operations and the deployment of troops to the Korean Peninsula.

The difference in military spending between the 1930s and the post-World War II era had significant economic and political implications. In the 1930s, the country was still recovering from the Great Depression and focused on domestic priorities such as economic recovery and social welfare programs. Military spending was seen as a luxury that the country could not afford. In contrast, in the post-war years, the United States saw military spending as essential to its national security and global leadership. Military spending became a major driver of economic growth and innovation, creating jobs and stimulating demand for goods and services.

However, the high levels of military spending also had negative consequences. Inflation and budget deficits were major concerns, and the focus on military spending came at the expense of other important priorities such as education, healthcare, and social welfare programs.

Conclusion

In conclusion, the difference in military spending between the 1930s and the post-World War II era was significant, reflecting the changing economic and political priorities of the country. While military spending in the post-war years created jobs and stimulated economic growth, it also had negative consequences such as inflation and budget deficits. Understanding the history of military spending in the United States can help inform debates about the appropriate level of military spending and its impact on the economy and society.

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US Federal Spending, Military Spending Post WW2 Data

Source: Tassava, Christopher. “The American Economy during World War II”. EH.Net Encyclopedia, edited by Robert Whaples. February 10, 2008. URL http://eh.net/encyclopedia/the-american-economy-during-world-war-ii/

1945 GDP figure from “Nominal GDP: Louis Johnston and Samuel H. Williamson, “The Annual Real and Nominal GDP for the United States, 1789 — Present,” Economic History Services, March 2004, available at http://www.eh.net/hmit/gdp/ (accessed 27 July 2005). 1946-1950 GDP figures calculated using Bureau of Labor Statistics, “CPI Inflation Calculator,” available at http://data.bls.gov/cgi-bin/cpicalc.pl. Federal and defense spending figures from Government Printing Office, “Budget of the United States Government: Historical Tables Fiscal Year 2005,” Table 6.1—Composition of Outlays: 1940—2009 and Table 3.1—Outlays by Superfunction and Function: 1940—2009.

Other Economic Indices Data Links

Relative Productivity Ranking Of World War II Foes

Indices of American Manufacturing Output (1939 = 100)

German vs. USSR Volume of Industrial Production, 1940

Allies to Axis GDP Ratios 1938-1945

Real National Product of UK, US, USSR, and Germany, 1937-45

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The Six Measures

The six measurements shown above offer a broadscale picture of the United States industrial response to the war effort. Aircraft production increased to 2805 percent of 1939 levels, munitions by 2033 percent, shipbuilding by 1710 percent, aluminum by 474 percent, rubber by 206 percent, and steel by 197 percent. These numbers reflected most aspects of the US industrial capability during the war.

Rubber Tells the Story

Rubber of these six measures is the most mundane item. However, its story pertaining to the US’ industrial response covers the gamut of how the US response. None of the major belligerents were self-sufficient in rubber and only the Japanese had a steady supply after its conquest of Malaya and the Netherlands Indies. The US lost 90 percent of its prewar natural rubber supply source.

The Rubber Reserve Company

Prior to the US entry into WWII strategic material vulnerabilities were identified and rubber was one of them. At President Franklin D. Roosevelt’s direction, the Rubber Reserve Company (RRC) was established. The RRC set objectives for stockpiling rubber, allocating rubber reserves, conserving the use of rubber in tires by setting speed limits, and collecting scrap rubber for reclamation. The US entry into WWII saw a 1,000,000-ton rubber stockpile with a consumption rate of 600,000 tons per year. 

Synthetic History

Rubber synthesizing became an industrial focal point upon Britain imposing export restrictions on natural rubber from British Malaya in 1922. Germany, the US, and the Soviet Union all initiated synthetic rubber research. Germany’s I. G. Farben developed the first breakthrough called Buna, (“bu” for butadiene and “na” for natrium, the chemical symbol for sodium). I.G. Faben further discovered in 1929 that Buna S (butadiene and styrene polymerized in an emulsion), when compounded with carbon black, was significantly more durable than natural rubber. (1) The US would base their synthetic rubber research on Buna S.

(1) American Chemical Society National Historic Chemical Landmarks. U.S. Synthetic Rubber Program. http://www.acs.org/content/acs/en/education/whatischemistry/landmarks/syntheticrubber.html (accessed March 3, 2023).

The RRC coordinated the government, academia, and corporate research and development into a synthetic rubber. The four cooperating corporations agreed to share patent and technical information under the RRC umbrella. In March 1942 their collective efforts resulted in GR-S (Government Rubber-Styrene).  In 1942 a total manufacturing output of 2,241 tons of GR-S synthetic rubber was produced. By 1945, the US manufacturing output increased to 920,000 tons per year of synthetic rubber, 85 percent of which was GR-S rubber.

Indices of American Manufacturing Output (1939 = 100) Data

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Source:

Milward, Alan S. “War, Economy, and Society, 1939-1945.” Berkeley: University of California Press, 1979, https://eh.net/encyclopedia/the-american-economy-during-world-war-ii/
Tassava, Christopher. “The American Economy during World War II”. EH.Net Encyclopedia, edited by Robert Whaples. February 10, 2008

https://eh.net/encyclopedia/the-american-economy-during-world-war-ii/

See Table 2

Other Economic Indices Data Links

Relative Productivity Ranking Of World War II Foes

German vs. USSR Volume of Industrial Production, 1940

Allies to Axis GDP Ratios 1938-1945

Real National Product of UK, US, USSR, and Germany, 1937-45

US Federal Spending and Military Spending During WW2

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