From FDR's playbook, how about a reset with business?

  • Article by: STEPHEN L. CARTER , Bloomberg View
  • Updated: November 23, 2012 - 6:31 PM
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Here's my advice for President Obama as he embarks on his second term: Follow the example of one of your heroes, Franklin Delano Roosevelt. Not the Roosevelt of the first two terms, but the Roosevelt of the next two. The Roosevelt who won the war.

Everyone agrees that the economy is recovering from the recession far too slowly. Everyone wants U.S. businesses to start hiring again. The Obama administration knows it needs to mend fences with business. Maybe it should study how Roosevelt pulled it off.

When it entered World War II in 1941, the United States was the world's mightiest industrial power, but lagged behind the major belligerents in military strength. Yet in 1942 -- the first year of war production -- U.S. factories produced more aircraft, tanks and artillery than all the Axis powers combined. That same year, the U.S. outproduced Japanese naval yards by an astonishing 16 to 1.

To accomplish this remarkable feat, Roosevelt had to recognize that the business community that he had antagonized and alienated during his first two terms in office held the key to the nation's survival. As the historian Richard Overy explains in his book "Why the Allies Won," Roosevelt's response was basically to turn over war production to his political opponents.

The administration tried not to micromanage, he writes: "Corporate bosses had as much, if not more, experience of the kind of planning and coordination needed in a wartime economy than did government officials, whose only real experience was the ill-starred New Deal."

One of the most famous stories of the war involves the B-24 bomber, the U.S. wartime mainstay. Henry Ford was invited to bid on a parts contract. He refused. He would rather build the entire plane, he said, from start to finish, using the assembly-line method that his company had pioneered.

Even the military was initially skeptical. How could the mass-production techniques that turned out automobiles be adapted to the construction of planes, tanks and ships? A car, after all, had about 15,000 parts; a B-24 bomber had 1.5 million. The tried and true method of building one plane at a time, rather than using an assembly line, appealed more to both the generals and the civilians in charge of production.

But Ford insisted that he could build a plant that would produce a bomber an hour. Nobody thought such a thing was possible. Nevertheless, in the end, the administration gave him his head. The result was the Willow Run plant, one of the great success stories of wartime production. Running full-tilt, the factory almost met the goal that once seemed so laughable: A finished bomber came off the line every 63 minutes.

It's not just that Ford was correct. It's that he was motivated by the desire to maximize profit, which provided the necessary incentive to innovate.

As the war went on, notes Arthur Herman in his book "Freedom's Forge: How American Business Produced Victory in World War II," the business community successfully resisted efforts to place a single czar in charge of the production of war materiel. It preferred the extant system, which left "defense production in the hands of business, not the government." Obviously, some of this was self-interest, but not all of it. According to Herman, the system remained untouched "largely because everyone could see how well it worked."

The point isn't that business is necessarily better or smarter than government. It's that government isn't necessarily better or smarter than business. That's why genuine conversation and the exchange of ideas matter so much.

Unfortunately, the Obama administration, during its first term, got off very much on the wrong foot. Bob Woodward, in his book "The Price of Politics," tells the story of a telephone call in which Sam Palmisano, at that time the chief executive officer of IBM, warned then Chief of Staff Rahm Emanuel that the health care bill might cost the company $700 million over 10 years, leading to 20,000 lost jobs. Emanuel, in Woodward's telling, responded with profanity-laden disbelief.

But why? An increase in the cost of employees tends to lead to fewer employees. This isn't advanced economics. It's simple arithmetic. Sometimes the tradeoffs are worth it, and being honest about them is helpful. Environmental regulation hit the Coal Belt hard, but led to cleaner air. Business doesn't always have to get its way. But it needs to be an integral part of a serious and reflective conversation.

The politics of such conversations are touchy. So far, to judge from the accounts in Woodward's book, the Obama administration has handled hem poorly.

That isn't to say it is easy to handle them well. In his book "Knowledge and Coordination," the economist Daniel Klein points out some factors inhibiting the necessary exchange. "If the conversation is friendly and cooperative, commentators clamor against the influence of lobbyists and special interests. If the conversation is fearsome and demanding," he writes, "some complain that business withheld information or misled officials."

We might add to Klein's summary by paraphrasing the legal scholar Alexander Bickel: If the conversation is one-sided, it isn't a conversation at all; it's a monologue. This has nothing to do with whether one thinks the administration's agenda is antibusiness. The president can have abundant goodwill toward the private sector and still recognize that there are more good ideas than his experts and allies have come up with.

Nor is the point whether the administration has friends in the business community -- obviously it has many. It's whether Obama is willing to reach out to those with whom relations are more strained. Outreach doesn't mean a speech, or a roomful of press, but an actual private conversation from which both sides might learn, followed by the possibility of stepping away from ideological certainties and allowing businesses to lead rather than follow.

In both Herman's and Overy's telling, that's what Roosevelt and his people did. Getting the economy unstuck isn't the same as winning the war against fascism, but that doesn't mean we can't use the same methods. Once the United States joined the war, Roosevelt accepted the premise that business executives knew more about their fields than even the best-intentioned regulators. The hostility of many executives toward his policies didn't change this underlying truth.

From this beginning, political antagonists built together the mightiest industrial power the world has ever known. If the United States is to maintain its primacy, it could do worse than starting out the same way.

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Stephen L. Carter is a professor of law at Yale University. He is author of "The Violence of Peace: America's Wars in the Age of Obama," and the novel "The Impeachment of Abraham Lincoln." The opinions expressed are his own.

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