Sixty-Eight Years Ago Today FDR's Administration Seized Control of Montgomery Ward's Plants

A blog about business and economics.
Dec. 27 2012 9:15 AM

Sixty-Eight Years Ago Today FDR's Administration Seized Control of Montgomery Ward's Plants

Tim Carney noted this morning on twitter that on December 27, 1944 the Franklin Roosevelt administration seized control of Montgomery Ward as part of a wartime labor peace measure. I note this both because it's an interesting yarn and also because it highlights an aspect of the egalitarian political economy of the three postwar decades that I think people forget:

In an effort to avert strikes in critical war-support industries, Roosevelt created the National War Labor Board in 1942. The board negotiated settlements between management and workers to avoid shut-downs in production that might cripple the war effort. During the war, the well-known retailer and manufacturer Montgomery Ward had supplied the Allies with everything from tractors to auto parts to workmen's clothing--items deemed as important to the war effort as bullets and ships. However, Montgomery Ward Chairman Sewell Avery refused to comply with the terms of three different collective bargaining agreements with the United Retail, Wholesale and Department Store Union hammered out between 1943 and 1944. In April 1944, after Sewell refused a second board order, Roosevelt called out the Army National Guard to seize the company's main plant in Chicago. Sewell himself had to be carried out of his office by National Guard troops. By December of that year, Roosevelt was fed up with Sewell's obstinacy and disrespect for the government's authority. (The uber-capitalist Sewell's favorite insult was to call someone a "New Dealer"--a direct reference to Roosevelt's Depression-era policies.) On December 27, Roosevelt ordered the secretary of war to seize Montgomery Ward's plants and facilities in New YorkMichiganCaliforniaIllinois,Colorado and Oregon.

This episode stands out precisely because the US government didn't nationalize much industry during the war, preferring instead to rely on privately owned capital. But it underscores the extent to which over and above anything that happened during the New Deal era, the country spend the years 1939-1945 operating what was for all intents and purposes a planned economy.

Unemployment and output gaps were obviously intolerable during wartime. But running an economy at full-tilt for years would risk inflation. So comprehensive wage and price controls were put into place. To avoid shortages and ensure that adequate primary commodities were available for military use, there was widespread rationing. As a further anti-inflation measure, the war was substantially financed by exterting large-scale social pressure on  households to invest in unprofitable war bonds. One of my grandfathers spent the war as a naval aviator in the Pacific theater, another spent the war primarily concerned with orchestrating a nationwide price control and rationing scheme for shoes and boots. We needed the civilian workforce to be adequately shod, without unduly curtailing American factories' ability to make military boots for American and Allied soldiers and without producing windfall profits for the owners of shoe factories. Planning on this scale couldn't work without reaching inside of firms and futzing with their internal labor relations. The Roosevelt administration as both a matter of ideology and wartime expediency, preferred collective bargaining agreements that featured limited wage dispersal and sector-wide compensation patterns.

This centrally planned economy didn't last for very long, but I think it's plausible and correct to view the next few decades of American economic life as largely reflecting its legacy. In terms of political economy, the trend toward social democracy was almost immediately rolled back by the 1947 Taft-Hartley Act. But the unions, collective bargaining agreements, and compensation patterns launched during the war were still set in place and constituted a new baseline that shaped the American economy for a generation.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



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