JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
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ILMIY METODIK JURNAL
Samarqand Davlat Tibbiyot
Universiteti, Ijtimoiy va gumanitar
fanlar kafedrasi, Tarix fanlari doktori
(PhD), Tursunova Gavhar taqrizi
ostida
Abdug’aniev Bekzod Abduvali o’g’li
Samarkand State Medical University,
Teacher of Social and Humanitarian
Sciences Department
Email:
abduganievbekzod2409@gmail.com
ORCID ID: 0009-0002-8597-3356
ECONOMIC AND INDUSTRIAL MOBILIZATION OF THE UNITED STATES
DURING WORLD WAR II: POLICIES, CHALLENGES, AND OUTCOMES
Abstract:
World War II required the most extensive resource mobilization in U.S. history.
Unlike the Civil War, which demanded massive manpower deployment, World War II
necessitated an unprecedented industrial expansion. While American casualties were lower than
those of many other nations, the country paid a significant economic and social price. This study
explores the economic policies, fiscal measures, and government interventions that shaped the
U.S. war economy. It examines taxation strategies, including the excess profits tax, the role of
monetary policy, and the establishment of federal agencies to regulate production, wages, and
prices. The paper also analyzes the impact of war financing, inflation control, and the transition
from the Great Depression to a wartime economy. By comparing policies from World War I and
the New Deal, this study highlights the mechanisms that contributed to the successful
mobilization of American industry and labor.
Keywords:
World War II, U.S. War Economy, Industrial Mobilization, War Financing, Excess
Profits Tax, New Deal, Federal Agencies, Price Controls, Roosevelt Administration, Monetary
Policy
Introduction
World War II required the most extensive resource mobilization in U.S. history, surpassing even
the Civil War in terms of industrial and economic expansion. Unlike previous conflicts, the war
effort demanded unprecedented government intervention, financial restructuring, and industrial
reorganization. This study examines the economic policies, fiscal measures, and regulatory
actions that shaped the U.S. war economy. The research focuses on taxation strategies, the role
of federal agencies, price controls, and monetary policies. Additionally, the paper highlights the
transition from the Great Depression to a wartime economy and the long-term impact of these
policies on post-war economic stability.
Methods
: Historical analysis, Chronological.
Results and Discussion
: The mobilization of the U.S. economy for World War II involved
significant financial, industrial, and administrative measures. Industrial expansion was driven by
federal investment in war production, leading to rapid increases in military hardware,
shipbuilding, and aviation. The Roosevelt administration established key federal agencies, such
as the War Production Board and the Office of Price Administration, to regulate production,
wages, and inflation. The Selective Service System enabled large-scale manpower mobilization,
while economic policies ensured resource allocation for the war effort. War financing relied on a
combination of taxation and borrowing. The Revenue Act of 1942 introduced higher income tax
JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
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rates and an excess profits tax to prevent war profiteering. War bonds became a primary tool for
raising funds, encouraging public participation in the financial burden of the war. Despite these
measures, inflationary pressures persisted, prompting government-imposed wage and price
controls to stabilize the economy. The transition from the Great Depression to a wartime
economy was largely successful, with unemployment rates dropping to historic lows by 1941.
However, post-war economic challenges emerged, including inflation control, the reintegration
of soldiers into the workforce, and managing wartime debt. The study also compares these
policies to those of World War I and the New Deal, analyzing their effectiveness in sustaining
long-term economic growth.
We must be the great arsenal of democracy. This is a crisis as serious as war itself for us. We
must approach our task with the same determination, urgency, patriotism, and spirit of sacrifice
as in wartime.
President Franklin Roosevelt, Radio Address, December 29, 1940.
The conduct of World War II required the largest resource mobilization in the history of the
United States. The Civil War had demanded a massive mobilization of manpower—resulting in
more casualties overall (when combining both Union and Confederate losses)—but World War
II required an unprecedented mobilization of industry. Although American losses were smaller
than those of many other nations, they were still painful for the United States. Approximately
292,000 Americans were killed in combat or as a result of battlefield injuries, while another
114,000 died from disease and other causes, bringing total losses to 406,000. Additionally,
around 672,000 Americans suffered non-fatal injuries. Considering that the U.S. population has
doubled since 1945, such losses today would be equivalent to over 800,000 deaths and 1.4
million non-fatal injuries. Undoubtedly, this was an extremely high price for victory. World War
II was the result of the imperialistic ambitions of Germany, Japan, and Italy. In each of these
nations, military leaders believed that becoming a first-rate global power was a fundamental
national objective—one that could only be achieved through empire-building. Hitler sought to
restore Germany’s central position in Europe by uniting the German people, avenging the
humiliation of November 1918 and the Treaty of Versailles by defeating France, and creating
"Lebensraum" (living space) for the German people by conquering the Soviet Union and
eliminating communism. Japanese military leaders, including Prime Minister Hideki Tojo, aimed
to transform Japan into a dominant power in Asia through territorial expansion. Mussolini also
had imperial ambitions, though his initial focus was primarily on Africa, where he sought to
build an empire by conquering technologically less advanced nations. For some within these
countries, territorial expansion and achieving great power status were goals in themselves. They
were willing to make material sacrifices for the glory and prestige of a powerful state. For
government officials, expansion meant the opportunity to administer new territories. For
ordinary citizens, conquest was often justified by the promise of material benefits. Hitler, for
instance, pledged to seize Eastern territories and expel or eliminate their populations to provide
land for the German people. In simple terms, territorial conquest was meant to enrich Germans,
particularly German farmers who were expected to replace the displaced Eastern European
peasants. During the 1930s, Germany developed parts of its industrial base. By securing control
over raw material suppliers and strengthening ties established during the Spanish Civil War,
Germany forged a close relationship with Spain’s fascist dictator Francisco Franco. Furthermore,
Germany made significant advances in producing synthetic rubber, synthetic fuel, and other
"ersatz" materials. As a result, Germany entered World War II better prepared to withstand a
British naval blockade than it had been in World War I. However, synthetic materials—such as
artificial fuel and rubber—were expensive to produce, and Germany still faced serious resource
JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
ISSN: 2181-4341, IMPACT FACTOR ( RESEARCH BIB ) – 7,245, SJIF – 5,431
ILMIY METODIK JURNAL
shortages during the war. Japan’s situation was similar. Following the Meiji reforms, Japan’s
industrial sector developed, making it heavily reliant on raw material imports. However, due to
rapid export growth, Japan had not previously struggled to secure these resources. Yet, its wars
in China during the 1930s dramatically increased demand for raw materials, creating supply
problems that had not existed before. "World War II ended the Great Depression." This widely
held belief contains significant truth, but it sometimes leads to a misleading conclusion—that the
attack on Pearl Harbor marked the end of the Depression. However, according to the National
Bureau of Economic Research (NBER), the economic recovery had already begun in June 1938,
well before the Pearl Harbor attack, bringing the U.S. out of the Depression. Unemployment had
been steadily declining, particularly in 1940 and 1941. By December 7, 1941, when Japan
attacked Pearl Harbor, the U.S. economy was already close to full employment. There were still
pockets of joblessness and economic distress, allowing wartime mobilization to further boost
employment. However, the idea that the Great Depression had persisted without interruption
until Pearl Harbor is incorrect. For many American industries, including automobile and
consumer goods manufacturing, 1941 was a highly successful year. By June 1941,
unemployment had nearly returned to pre-Depression levels. When war erupted in Europe, three
key factors contributed to ending the Great Depression:
1. Increased military spending – Once war broke out in Europe, the U.S. increased its defense
budget, particularly for the navy. While the public was hesitant to support a large standing army,
they were willing to invest in shipbuilding to protect American shores and commercial fleets.
2. Rising private investment – Expectations of substantial profits encouraged businesses to
invest. Many corporate leaders anticipated that U.S. neutrality in World War II would be as
lucrative as it had been during World War I. This belief spurred investments in factories and
equipment, contributing to economic recovery.
3. Expansionary monetary policy – Many Europeans sought to secure their assets in the U.S.,
leading to an influx of gold. The Federal Reserve could have offset this by selling government
bonds to absorb the excess money supply, but it chose not to. As a result, between September
1939 (when war began in Europe) and December 1941 (when Pearl Harbor was attacked), the
U.S. money supply grew at an annual rate of approximately 11%.
As in World War I, moral considerations played a key role in justifying excess profits taxes. In a
May 26, 1940, radio address, President Roosevelt openly expressed his disdain for wartime
profiteering. Business leaders, as in World War I, focused less on whether such a tax should exist
and more on its specific structure. Debates centered around whether the excess profits tax should
be based on a profit margin threshold (e.g., limited to 8%) or whether it should be linked to
prewar earnings. Additionally, discussions arose over whether the tax should apply to all
businesses or only corporations. These issues were widely debated as the U.S. government
sought to finance the war while preventing excessive wartime profits.Even the National
Association of Manufacturers once supported a single 90% tax rate on excess profits. The key
aspect of the excess profits tax was that, compared to raising corporate tax rates, it immediately
eliminated accusations of war profiteering. Furthermore, if the Republicans returned to power, as
they had after World War I, this tax could be repealed after the war. As in World War I, the
excess profits tax played a crucial role in financing World War II. This tax generated
significantly more revenue than customs duties, alcohol and tobacco taxes, and inheritance and
gift taxes. Adjusted for inflation and compared to the "normal" revenues of 1940, the excess
profits tax accounted for approximately 25% of total tax revenues. This was a remarkable
outcome. Despite extensive preparations to increase taxes, the gap between federal government
expenditures and revenues rapidly widened. Even at the beginning of the war, the budget was
already in deficit: in 1939 and 1940, there was a small but persistent shortfall between spending
and revenue. This shortfall led to serious debates. Republicans consistently criticized the
Roosevelt administration for excessive spending. While political factors played a role, concerns
JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
ISSN: 2181-4341, IMPACT FACTOR ( RESEARCH BIB ) – 7,245, SJIF – 5,431
ILMIY METODIK JURNAL
about rising debt burdening future generations were genuine and widely shared. The Roosevelt
administration had to respond to these criticisms. The argument that "the debt belongs to us, so it
is not a burden" was partially true but mostly satisfied only those who already supported the
administration. However, once the U.S. entered the war, concerns about the deficit nearly
disappeared: any level of debt was considered preferable to losing the war. As a result, the U.S.
Treasury issued a variety of securities to raise as much financial support as possible.
Approximately 50% of new debt consisted of traditional long-term bonds. About 30% comprised
short-term securities—Treasury bills and notes. A significant portion, around 20%, was in the
form of U.S. savings bonds, small-denomination bonds intended for ordinary Americans to
contribute to war costs. Given the strong inflationary pressures created by expansionary
monetary and fiscal policies, it is not surprising that prices began to rise even before Pearl
Harbor. Afterward, the U.S. adopted wage, price, and production controls to curb inflation and
allocate resources effectively. Such controls had been used during World War I and were also
implemented by other warring nations. Additionally, their theoretical legitimacy had increased.
The U.S. success in World War I seemed to confirm the effectiveness of wartime control
mechanisms. In fact, some individuals who had actively participated in the price control system
during World War I later became its strongest advocates. For example, economist Frank W.
Taussig (1919) served on the Price Fixing Committee of the War Industries Board, while
financier Bernard Baruch (1936) led the War Industries Board. Baruch's advocacy for wartime
price control and allocation systems during the 1920s and 1930s helped lay the groundwork for
their application in World War II. Furthermore, confidence in free markets and price
mechanisms had significantly declined during the Great Depression. There was also a
widespread but mistaken belief that the German and Japanese economies were efficiently
planned and controlled. Consequently, many believed that if the U.S. adopted a similar system, it
could achieve the same level of efficiency and secure victory due to its superior resources.
However, if the U.S. had chosen a different approach to managing the economy, it might have
been even more effective. At the same time, the possibility of failure could not be ruled out. Thus,
out of caution, the U.S. decided to replicate the economic control system of its enemies. The
Phony War
ended in May and June 1940 with Germany’s successful invasions of Belgium and
France. Following these events, the Roosevelt administration began establishing numerous
federal agencies to oversee the war economy. In doing so, it drew inspiration from both the
New
Deal
and the experiences of World War I. Unlike in World War I, this time the U.S. acted before
officially entering the war.
Key Agencies Established in 1940:
April 11: Before Germany’s invasion of France and Belgium, the Office of Price
Administration and Civilian Supply was created to control inflation and regulate civilian needs.
May 25: The Office of Emergency Management was established to provide the president
with advice and information.
May 28: The Petroleum Coordinator for National Defense was created to oversee oil
production and distribution.
June 28: The Rubber Reserve Company was formed to purchase natural, synthetic, and
reclaimed rubber. The Metals Reserve Company was also established to buy metals and
subsidize their production.
August 29: The Defense Plant Corporation was created to finance war industries.
September 16: The Selective Service System was established to implement military
conscription.
Key Agencies Established in 1941:
August 28: Roosevelt reorganized the control system, creating two key agencies:
JOURNAL OF IQRO – ЖУРНАЛ ИҚРО – IQRO JURNALI – volume 14, issue 02, 2025
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The Office of Price Administration to regulate prices.
The Supply Priorities and Allocation Board to establish production priorities. In August 1939,
Roosevelt had created the War Resources Board. Its main task was to analyze available resources
and develop a mobilization plan in case of war. Edward Stettinius from the U.S. Steel
Corporation was appointed as chairman. The board consisted exclusively of businessmen,
leading to criticism from liberal circles, the agricultural sector, and labor organizations, which
also sought representation. This composition signaled Roosevelt’s intention to rely on business
leaders during the war. Thus, Roosevelt, once a social reformer during the
New Deal
era,
gradually shifted toward a philosophy of "winning the war at any cost." The board secretly
prepared a report for the president, concluding that America already possessed sufficient
industrial capacity to win any military conflict. It found no need to expand steel or aluminum
production. The report also recommended that, if the U.S. entered the war, mobilization should
be entrusted to a bureaucratic organization with absolute authority, as suggested by Bernard
Baruch. In November 1939, the board was disbanded, its members were thanked for their service,
and the report was archived for public release only after the war ended.
Conclusion
World War II fundamentally reshaped the U.S. economy, demonstrating the power of industrial
mobilization and government intervention in times of crisis. The success of war financing,
taxation, and production strategies contributed to both military victory and economic expansion.
While the war effort effectively ended the Great Depression, it also introduced new economic
challenges that shaped post-war fiscal policies. This study concludes that the policies
implemented during World War II played a crucial role in transforming the U.S. into a global
economic leader in the post-war era.
References:
1. Baruch, B. (1936). Baruch: The Public Years. Holt, Rinehart and Winston.
2. Federal Reserve System. (1943). War and Inflation: Economic Policies of the United States.
U.S. Government Printing Office.
3. Kennedy, D. M. (1999). Freedom from Fear: The American People in Depression and War,
1929–1945. Oxford University Press.
4. National Bureau of Economic Research. (1941). The Role of Government in Wartime
Economics. NBER Reports.
5. Rockoff, H. (2012). America’s Economic Way of War: War and the U.S. Economy from the
Spanish-American War to the Persian Gulf War. Cambridge University Press.
6. Roosevelt, F. D. (1940, December 29). Radio Address: The Great Arsenal of Democracy.
U.S. Government Archives.
