Guns, Butter, and Disruption

December 17, 1951

“We didn’t have the courage to put guns ahead of butter; to put security ahead of selfishness; to put the cause of liberty ahead of luxury.” This was the verdict reached by the Senate Preparedness subcommittee headed by Lyndon Johnson.

The evidence does not support this sweeping indictment of the American people. It is true that our defense program has gravely lagged. But the basic cause has not been public apathy. Some of the real causes were cited by the Johnson committee report itself, summarized by Newsweek in the Dec. 3 issue. Others can be found in the Newsweek report of Dec. 10 on the lag specifically in warplane production. If these detailed reasons could be reduced to a single reason it would come down to this: that while Russia since the second world war has continued without intermission to produce for another war, the U.S., in spite of the very heavy governmental expenditures for “defense” even prior to June 25, 1950, suspended major production of weapons and scrapped, converted or mothballed its war facilities.

Since the outbreak of the Korean war the Defense Department has been faced with this problem: Should it resume mass production of weapons now obsolete? Should it order mass production of present guns, tanks, and planes known to be inferior to corresponding Russian matériel? Or should it keep working indefinitely at blueprints and pilot models? Clearly some working compromise must be adopted. It is not uncommon to hear of the Defense Department submitting more than a thousand changes in design or specifications on a single item over the course of the last year. Most of these changes may be unimportant, but some may involve costly delays. Deliveries of definite quantities of an item on definite dates are possible only when a design has been frozen and a clear go-ahead signal given. There is little evidence that the defense production program has been set back in any substantial way because civilian production has been needlessly big. It is easy enough for any official with a taste for coercion and histrionics to order a cut in the allocation of steel or copper or even an entire death sentence for whole industries. But it does not follow that this will speed up defense production; it may do the exact opposite.

And the real need is Production, not Austerity or Sacrifice for its own sake. There are always those, of course, who love to wear loud-colored hair shirts in public. When President Roosevelt declared in May 1940 that there was no reason for the country to become “discomboomerated” by the defense program, the remark met a storm of criticism. But he would have been quite justified if he had said merely that no one should be needlessly discomboomerated. Needless discomboomeration means needless disruption. Yet the hair-shirt wavers demand this purely ritualistic sacrifice. Their main emphasis is not on more guns but on less butter.

The real danger is that our defense program will be snarled up not by too little government interference but by too much. The insistence on price controls is a case in point. Price controls combined with allocations have so greatly distorted the supply-and-demand picture that no one can be sure whether or not we are heading for actual overproduction of steel. Eugene G. Grace, chairman of the Bethlehem Steel Corp., says we are. Government controllers are inclined to scoff at this. But the demand for steel today is not determined by free prices in free markets. As The Wall Street Journal illustrates it, a man who wants 10,000 tons of steel may get ration “tickets” for only 1,000, while a man who can use only 1,000 may manage to get “tickets” for 1,500, and may take that much as insurance.

Manufacturers with whom I have talked think we would be much farther ahead if firms with war contracts got priority tickets for the metals they needed and all other “allocations” were left to the traditional method of a free economy—the play of supply and demand and free prices.