(Guest Post by Matthew Ladner)
For this year’s “Al” award, I nominate William S. Knudsen. Knudsen is a little known name these days, but he was not only an American success story and industrialist, but played an indispensible role in saving the world from totalitarianism.
We face our share of challenges these days, but they mostly look absurd self-made problems compared to those that previous generations stared down. In the 20th Century, totalitarianism posed an immediate existential threat to liberal democracy. One of the three greatest democracies, France, folded like a house of cards once the shooting started in the World War II. Shortly thereafter, another of the three, Great Britain, resorted to sending fishing boats to the shores of France to avoid complete annihilation of their forces.
The third great democracy, the United States, largely sat by in a self-absorbed stupor during the pre-war period, hoping not to get drawn into this conflict. Hope of course is not a plan. It is much to President Franklin Roosevelt’s credit that he began to cautiously plan for the great conflict to come in the teeth of fierce skepticism by the American public. The American military was a sad, underfunded joke at the time. Moreover, American industry was in disarray-not only due to the Great Depression but also to a series of public witch hunts against the weapon manufacturers conducted by Senator Harry Truman and others. American troops trained with cars for standing in for tanks, and many of the companies that might be capable of manufacturing real tanks had decided that it wasn’t worth the political heartburn. America’s military and supporting infrastructure, in short, was a complete mess.
As Arthur Herman lays out in his compelling history Freedom’s Forge, Bill Knudsen was the man President Roosevelt called to clean up the mess.
Knudsen was a Danish immigrant who worked his way up from the docks to become President of General Motors. Knudsen developed/perfected not one but two revolutionary improvements to the assembly line process during his automotive career, historically noteworthy in their own right-continuous mass production and flexible mass production. Under Knudsen’s leadership, GM had decentralized production into competing product lines under the notion that decentralization would lead the way to innovation. It worked, and GM stole an ascendency in the automotive industry that it would not surrender until the late 1980s.
“Big Bill” was living the American dream when he received a call from President Roosevelt.”Knudsen? I want to see you in Washington. I want you to work on some production matters,” President Roosevelt told him. With that, Knudsen resigned from General Motors to take a position paying him $1 per year. Knudsen had been a life-long Republican, and when his daughter asked why he decided to take the position in Washington, his answer was simple and direct “This country has been good to me. I want to pay it back.”
Big Bill could scarcely have imagined how difficult it would prove to pay his country back. In return for his enormous sacrifice in relinquishing his private sector position, Knudsen endured constant political and bureaucratic backstabbing. Roosevelt’s Washington sounds all too familiar in Herman’s telling-full of bright but overconfident people imagining that America would enormously benefit from enlightened central planning. Knudsen however understood from the outset that so great a task could only be accomplished with the willing, voluntary participation of American industry.
“Industry in the United States does more for the country in direct, or indirect, contributions to the public wealth than any other country on earth. And it will continue to do so if given the opportunity without restrictions,” Knudsen told a public audience. In private, he explained to President Roosevelt “The government can’t do it all. The more people we can get into this program, the more brains we can get into it, the better chance we will have to succeed.”
Knudsen fought hard to create voluntary participation of American industry through incentives rather than state coercion and control. The wisdom of this approach ultimately manifested itself in the greatest surge in industrial production in the history of mankind, but also in smaller ways. Along the way, for instance, American industrialists figured out that the Pentagon was too hidebound to reliably figure out what kind of weapons and material they wanted. Increasingly over time the manufacturers figured it out for themselves by competing to create the best products possible.
By the time Japan attacked Pearl Harbor and Hitler declared war on the United States, Bill Knudsen had a very, very unpleasant surprise waiting for them. Knudsen had primed the industrial might and creative power of American industry to go to war against the Axis powers. Japan’s military leaders and Hitler’s Nazis obviously could have scarcely imagined what they were in for, but these regimes signed their death warrants when the decided to cross swords with the United States of America.
Bill Knudsen deserves as much credit for this remarkable turnaround as anyone, perhaps more.
The attacks Knudsen endured along the way simply made his ultimate vindication all the more sweet. Senator Truman compared his contracting out to Santa Claus leaving gifts under a Christmas tree, and Roosevelt ultimately fired Knudsen in a Machiavellian move to assuage criticism without even speaking to Knudsen in advance. It didn’t matter- Knudsen’s replacement discerned the wisdom of the Big Dane’s approach and carried on his policies, much to the chagrin of the New Dealers. Knudsen accepted a commission as a three star general in the War Department to head up purchasing-the highest rank ever granted to a civilian.
The New Dealers thought they had won. They were too late. America was indeed in production now, with 25,000 prime contractors and 120,000 subcontractors making products they had never dreamed of making, and thousands more to come. And nothing the people in Washington or the Axis could do now would stem the tide…In the first year after a production order, output was bound to triple; in the second it would jump by a factor of seven; at the end of the third year the only limits on output were material and labor-whether it was trucks or artillery pieces or bombs or planes.
Knudsen believed that American industry would generate its own spontaneous order to match the needs of wartime America, so long as the government was wise enough to create the necessary incentives. Herman notes that four days before Pearl Harbor Hitler had ordered German industry to start a program of “mass production on modern principles” (aka Knudsen principles) and put Albert Speer in charge of the effort with all of the central planning powers desired by the New Dealers, and more. Speer had the ability to decide which factory would produce what, could move labor around at will, controlled wages and prices and made extensive use of slave labor.
The result- total blowout in America’s favor. Herman explains:
What Speer lacked was Knudsen’s secret weapon: America’s prodigious industrial base built around free enterprise, which was now giving its full attention to war production…The German car industry, including the Opel factories the government had seized from General Motors, sat half-idle through the entire war. And constant meddling and changes of priorities by the German military ensured that time and energy and materials were lost in a limitless bureaucratic maze.
Meanwhile, American car manufacturers were building the war material which ensured Britain’s and then the Soviet Union’s tenuous survival against the Nazi onslaught before turning the tide completely and dispatching the “Thousand Year Reich” a few short years later. Nazis needed killing, and after that, Soviets needed containing (a second struggle for freedom in which President Truman redeemed himself) in order to make the world safe for self-determination.
Fortunately Bill Knudsen had waded through nearly brain-dead American politics at great personal sacrifice in order to equip American soldiers with everything they needed to get the job done. For this great service to humanity, the Big Dane gets not only a nomination for the Al, but also a heart-felt: