AssemblingAmerica's Private Arsenal for Democracy, 1920-1961 Allen Kaufman • ProfissorofStrategic Management UniversityofNe•v Hampshire and VialtingPro•ssor, MIT Definseand Arms Control Studies Program WhenI firstread the Hagleycall for thisconference, I doubted that my currentwork on military-industryrelations would be of muchinterest to the conferenceorganizers. They askedfor proposalsto engendera dialogue betweengender, race, and classstudies scholars and businesshistorians. My proposalhardly ventured outside the usualbusiness-government vemacular of markets,competition, technology, strategy, bureaucratic politics, and war. Businesshistorians have done rather well mixingand matchingthe concepts associatedwith these words. So, when I received an e-mail invitation to participatein thisconference, I presumed some red guard hacker was spreading misinformationto sabotageHagley's efforts at bridgingthe gapbetween the haves(historians who studythe bosses)and the have nots (historianswho studythe masses).However, when a similarinvitation arrived weeks hter by snailmail, I relaxed,knowing that Hagley's e-mail was secure. Now, I wonderedwhat unfamiliartools I broughtto the studyof businesshistory and, more particularly,to business-governmentrelations. I evenfound myself in an e-mailconversation with a conferenceorganizer, who pointedto mywork's synthetic quality - i.e.,to my abilityto stringout markets, technology,strategy, etc. into .a sentence.However, when I satdown to write the paper,I haddifficulty using this trope. Synthesis succumbs to disciplinary difference.So, I turnedto theintroduction of my recentcoauthored work on corporatemanagement and the regulatorystate [Kaufman,Zacharias, and Karson,1995]. Although this book - Whichis part of the Oxford University Pressseries on businessethics - coversfamiliar themes in businesshistory, we askeda questioninspired by intellectualhistory: how did the modern corporation- whichfrom its inceptionseemed so 'inimicalto liberty- find a legitimateplace in thepost-World War II polity? Let me put theserather terse sentences into a familiarhistoriographic form.Business historians who examinedthe interactions between corporations andthe govemmenthave drawn heavily on Chandler'sThe Visibk Hand: The ManagerialRevolution in AmeffcanBusiness [1977]. Following his lead, they t I am indebtedto HarveySapolsky and Eugene Gholz for theirencouragement and criticalguidance in writingthis paper. BUSINESS AND ECONOMIC HISTORY, Volumetwenty-six, no. 1, Fall 1997. Copyright¸1997 by theBusiness History Conference. ISSN 0894-6825. 252 AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 253 customarilystart with the fm•nor a groupof firmsand treat their interactions with governmentin purelyinstrumental temas. They ask f•rst how government regulationsrestraha corporate strategies, and secondhow managersrespond politicallyand economically to offset these constraints. In tellingtheir stories, thesehistorians account for the politicalenvironment much in the way a corporatesocial issues manager would ascertain the forces affecting a particular issue.Although these studies have contributed enormously to our under- standingof the dynamicsbetween business and government, in the maha they haveneglected the fieldof managerialcollective action and resolutely have refusedto discussnomaative issues [Vietot, 1994]. Another group of historians,working in the corporateliberalism tradition,begins with the notionof collectiveaction and nomas.Although writersin this traditiondisagree on manyissues, most contentiouslyover whetherthe largef•rm hasdetracted from democracy,they sharea strong commitmentto understandingthe interactionsbetween interests and nomas, marketsand the ruleof law [Hawley,1966; Sklar, 1988]. In tellingour tale, we let liberty'stenuous structure - namely,the tensionbetween public and private authorities, between control and autonomy, betweeninterest and procedure - provideour narrativethemes. These themes raisedadditional questions: how did the regulatorystate apparenfiy reconcile the moderncorporation's authoritarian order with liberty;in the struggleto fashionthe regulatorystate, how did managersovercome competitive discord to actcollectively; and how did they fashion a professionalcreed that portrayed themas liberty's modern stewards? Thesesame concerns inform my currentresearch on the mih'tary.After World War II, how did the politythat onceviewed the officercorps and its industrialsuppliers as illiberalthreats to democraticrule comfortablydelegate to theseofficers large discretionary powers, particularly over scientificand economicdevelopment? What structuresdid Congressput in place that checkedthe officercorps' newly gained power? In articulatinga professional doctrine,how did procurementofficers reconcile the military's command/control procedureswith liberty'sdemand for autonomousbehavior? And, how did the mih'tarygain the cooperationof so many civilians,particularly scientists, engineersand managers, in its postwar campaign to continuouslyrevolutionize mih'taryweapon systems? Historicalanswers to thesequestions have a convenientstarting point - the nation'sconstitutional debates, where propertied white malesnegotiated temasof association.2 These record the politicalvalues that, in largepart, definedthe initialrules regulating the military'srelationship to Congressand industry.A skeletalofficer corps, public arsenals, and contracts emerge as the basicconcepts by which America's liberal polity constrained the military and its industrialcontractors from promoting wasteful, bellicose policies. 2 My summaryof the Constitution'sliberal biases relies on Pangle[1988]. Pangle's interpretationneeds the historicaltempering found in Wood [1991]. 254 / AI'J,EN KAUFMAN By the earlytwentieth century, aviation - and its air powerprophets - allowedCongress to considerthe marketas an alternativeto publicarsenals. Unlikeother military weapons, aviation promised mass commerdal markets. Air officerswillingly divested their ak arsenalsto sustainCongressional and industrysupport for an independentak force.However, these markets did not materializein sufficientscale, fither during the interwar years or duringthe cold war'sformative years, to sustaina war-makingaircraft industry. Air officers foundthat, by virtueof theirmonopsony, they still exerted control over the industry.They acknowledgedthis regulatorypower when, at World War II's conclusion,they secretlystamped the akcraftindustry a privatearsenal. But, this acknowledgmentdid not invalidatethe traditionaldivide between public andprivate authority. The militarygained industrial and scientific support by contractingfor a "privatearsenal." In sodoing, the militaryavoided criticisms thatit soughtto replacea liberalorder with a garrisonstate. The GovernmentA•senal System The call for a more perfectunion had largelyarisen from the Con- federafion'sobstacles to unifiedmilitary action and the commercialrivakies the Confederationfostered [Hamilton, Madison, and Jay, The Federalist, pp. 1-53; andKohn, 1991,pp. 61-94].Alexander Hamilton's writings offer insights into the earlymilitary establishment. He recommendedthat a peacetimearmy be keptunder the Confederafion'scontrol. Like other Continental Army officers, Hamiltonhad found the statemilitia poorly trained and unreliable in battle.His reportcalled for a regulararmy of approximately3,000. To supplementit, the reportwould have the nationalgovernment establish a largerelite reserve whichwould volunteer for fight yearsand be subjectto trainingtwenty-six daysa year.This force,paid and supplied by the nationalgovernment, would come into active service should war break out. State militia would be an additionalforce that could be mobilizedin emergencies.In addition, the report calledfor an extensivearsenal system to supplyarms and preserve ordnance skills,particularly in the manufactureand use of artillery[Hamilton in Lodge, vol.6, 1886,pp. 71-79]. Justificationsfor publicarsenals went beyond market scarcity. Hamilton foundan additionalfault in privatearms suppliers' opportunist propensity: "as the calculationsof [privateordnance] contractors have reference primarily to theirown profit, they are apt to endeavorto imposeon thetroops articles of inferiorquality[,]...not [to deliver]as early as the servicesrequired, or notin sufficientquantity..." Avarice might be a usefulpassion for spontaneously organizingthe economy,but Hamilton,like his intellectualbenefactor, Adam Smith,warned government against capitalist claims that policies beneficial to their interestsnaturally promoted the generalwelfare. Thus, Hamilton cautionedthe government to establisharmories "to providefor thedeficiendes of thecontractors..." [Lodge, vol. 6, 1886,pp. 108-109]. Hamilton'swariness, though, did not let him concludethat the governmentshould rely solely on military armories;he advocateda AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 255 procurementsystem that combinedprivate and public manufactures. When Congressasked him, as Secretary of the Treasury,to reporton the bestmeans "to renderthe UnitedStates independent on foreignnations for militaryand otheressential supplies[,]" [Lodge, vol. 3, p. 294]he respondedwith his much cited"Report on Manufactures."To his mind,a nationaldefense industry wouldnaturally come about once the UnitedStates had a vibrantcommercial manufacturingsector. However, United Statesnascent manufacturers could hardlycompete against rival Englishor Europeanfirms. To overcomethis comparativedisadvantage, Hamilton made a controversialrecommendation: let