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Two weeks before war was declared, after six weeks of intensive effort, Baruch, commissioner in charge of raw materials, had set up organizations for total war: industrial committees of leaders in the great materials groups: leather, rubber, steel, wool, nickel, oil, zinc, coal, spruce wood. Then, at a time when War Department officers had no plans, even hypothetical, for the organization and equipment of an army of any size, the Advisory Commission began calculating what an army of 1,000,000 men would need.
On July 8, 1917, the War Industries Board was set up. This was a great organizing step forward. But the mercurial press, disgusted with the complication of board and bureaus and general fumbling, thoroughly blasted the confused setup. Not until March 4, 1918 did Wilson appoint Baruch chairman of the War Industries Board, or clothe him with Presidential authority. The U.S. had been at war eleven months.
By that time the invariable wartime economic pattern had gone far. Shortages had developed, competitive bidding by Government agencies and civilians had sent all prices into an almost vertical rise (see chart, p. /<?), Federal expenses had multiplied, wartime profiteering was fantastic, inflation was pouring through the national economy, swelling it to the bursting point. And since there had never been any centralized information-gathering about the U.S., no one knew anything about industrial resources or the national production potential.
Baruch Thesis. In peace, the old Law of Supply & Demand operates, except in the strategic areas controlled by monopolies. Competition is the life of trade; price normally controls the size of demand, according to the classic "other things being equal" law—which seldom happens. But in war such things as chemicals for explosives, for which normally there is little demand, become the aim of all endeavors. When there is a peacetime shortage, the highest bidder takes all. In modern war, the Government does.
In wartime there can be no such thing as competition. There is more business than all the industry of the country can handle. Competitors must cooperate with each other to meet even minimum Government demands. The Government, not the price, controls demand. The old Law of Supply & Demand is given a holiday.
That is the Baruch thesis—and now Henderson's text, with 1941 modifications —but the U.S. never saw its full effect in World War I because the Armistice came first. Shoes were reduced to two types and to black, white, tan. Manufacture of pleasure automobiles was to cease. Housing had stopped dead. In another year the whole civil population would have been clothed in a cheap but serviceable sort of uniform. Flaps from pockets would have disappeared. At Alice Longworth's recommendation, steel had been taken out of women's corsets. There were gasless, meatless, sugarless, fuelless days. And the nation's cartoonists played day in & out with a colorful character named High Cost of Living.