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In April, when the Third Army swept southeast through Bavaria, and the Allies squeezed Germany in two, they got part of their wish. The armies moved too fast for the planners in Washington. The cutbacks came in a downpour; in two weeks the Army ended a $200,000,000 ammunition program, dropped plans to build twelve tank plants, announced that Willow Run would close.
Prepare for Peace. So plans for cautious removal of controls were scrapped; if Washington was not ready for reconversion, industry was. WPB handed out priorities for new machines for civilian goods, for new plants. "Cap" Krug himself, who had once hankered for tight controls, announced: "The danger confronting us is that we will overlook the natural resilience of the economy. Temporary dislocations are inevitable. We must not be stampeded into elaborate controls."
Yet he had done some overlooking himself. On July 1 he gave the auto industry the go-ahead to make cars. Same day, Ford Motor Co. rolled its first car out of the Rouge plant. A slow trickle of cars, flatirons, vacuum sweepers began. General Motors' Moraine City plant, which had been making 6-29 propellers, pushed out its first refrigerators. WPB was still wondering how much reconversion would be permitted before V-J day when the bomb dropped on Hiroshima. Next week, the armed services sent 30,000 telegrams, canceling the bulk of war contracts. For industry, the war was finally over.
The Rough Road. So, surprisingly, was most of reconversion. And the Cassandras were proved wrong. They had predicted 8,000,000 jobless. Yet in September, when the high point of the reconversion layoffs was reached, only 1,650,000 men were out of work. There was still a manpower shortage.
Next month, industrial production hit its low for the year. The Federal Reserve Board index, which had been at its 1945 high point of 232 in February and March, hit an October low at 163. Then production began to climb, and in spite of strikes recovered to nearly 70% of the wartime high before the year's end. Nor did anything disastrous happen to the economy when federal spending plummeted. The economic barometers went down, but they were not jarred enough to fall off the wall.
Government spending had dropped as fast as anyone could reasonably expect, from $8 billion a month last May to $3 billion a month in December. There was even talk of something which the U.S. had not had in years, a balanced budget. But those who could see that in 1945 were farsighted. Yet the drop in federal spending had failed to halt the tremendous momentum of the economy. It rolled on like a great water wheel, gushing out money. It rolled into retail stores, movies, bank accounts. And much of it rolled out again to gas up the gaudiest Christmas spending spree in years. Yet, as store shelves were swept clean, there was little, as yet, in the cupboard to fill them up again.
There was no outpouring of goods. Much of the work that industry was doing was to prepare for production and refill the pipelines to consumers. Example: 298,000 refrigerators had been produced, but 150,000 of them were needed for display in showrooms. The next 298,000 will be a different story.
The year which had begun in the certainty of war ended in the confusion of paradox.