Alexander J. Field—
The U.S. economy experienced powerful negative supply shocks during World War II that drove down potential output and adversely affected productivity. One of the earliest and most consequential was the loss of 90 percent of the country’s natural rubber supply after the Japanese overran Singapore in February 1942. The United States had accumulated what was, compared with its annual consumption, only a small stockpile of natural rubber, and there were no substitutes for pneumatic tires, effectively no domestic sources of latex, and very limited opportunities for importing the raw material from Latin America or Africa. Japan’s advance into Southeast Asia, particularly the Dutch East Indies, eliminated its prewar dependence on the United States for 80 percent of its oil. In a stunning reversal, the Japanese achievement in the Pacific now posed an existential threat to the U.S. economy and its military capabilities. In response, the federal government, working with oil and chemical firms, developed a domestic industry that produced an imperfect substitute.
Redressing the loss of Southeast Asian rubber imports was more important than the Manhattan Project in making Allied victory possible. Without the atomic bomb, the country would eventually have prevailed over Japan, as it had already done throughout the Pacific, although at the cost of greater loss of American and arguably Japanese lives.12 Without rubber, the country would almost certainly have lost the war. The U.S. synthetic rubber industry was built almost entirely from scratch beginning in 1942, and, unlike the bulk of facilities financed by the Defense Plant Corporation, most of it remained government-owned although contractor-operated until 1955. And it was expensive. The new plants alone cost nearly $700 million, easily a third of the total cost of the atomic bomb program.
A commemorative pamphlet celebrating the designation of the U.S. Synthetic Rubber Program as a “National Historic Chemical Landmark” described it as “an industrial and scientific miracle.”3 The word miracle is used with great frequency in treatments of U.S. industrial mobilization during the Second World War. We would be better served if the term were banned from the lexicon from which descriptors of U.S. World War II production efforts are drawn. “Stripped of the mythology that has grown up around it,” wrote one of its most knowledgeable chroniclers, the synthetic rubber program “was a scandalous, a complete, a nearly catastrophic foul up.”4
The initiative was hampered both by flawed design and by prewar denialism that the United States would or should become involved in the war, which led to delays in facilities construction. The program could have been conducted differently. It could have used different processes, relied on a different mix of feedstocks, and rolled out on a different timetable. A smaller program might have been adequate if coupled with other actions to mitigate the risk and ultimate reality of cutoff, including the acquisition of a larger stockpile of natural rubber before the Japanese attacked, or the embarkation earlier on an agricultural program to develop alternative domestic sources of latex such as guayule.
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A useful way to think about foreign trade in this instance is that allowing exports to be swapped for imports provided the United States with a valuable “machine” for transforming grain and petroleum into crude rubber. The fall of Singapore destroyed almost all the transformative power of that machine for the duration of the war. This can hardly be considered a positive shock for the U.S. economy, any more than the events of December 7, 1941, represented a boost to the capabilities of the U.S. Navy. In its stead, the country had to spend $673 million to build fifty-one government-owned plants to produce an imperfect substitute for most of that rubber. As a means of transforming petroleum and grain into rubber, the synthetic rubber program was an expensive replacement for foreign trade. Even had the butadiene program been planned and executed well, the cutoff of natural rubber would have taken a toll in terms of the manufacturing sector’s productivity.
And in the event, it was plagued with problems. The interaction of repeated plant construction delays with the heavy initial and continuing emphasis on the petroleum pathway resulted in a program that built large amounts of production capacity unnecessary for meeting immediate military requirements and. . . operated under patent and technical interchange agreements that eliminated almost all incentives for innovation. The program failed to deliver output when it might have been most needed (in 1943) and produced more than could be used in 1944.
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If participants in the U.S. economy could have chosen between the actual course of events and the option of continued access to Southeast Asian supplies of rubber, as had been enjoyed during the First World War, there is no doubt which the tire makers would have preferred. The oil and chemical companies might have been somewhat more ambivalent, but they had their hands full with demands for aviation gasoline, explosives, and a host of other products, and they probably would have been more than content. From a national standpoint, in terms of its effect on production and productivity, it is exceedingly difficult to paint the consequences of the cutoff in supply of this critical raw material in a positive light.
To the two main shocks (on the costs of inputs and of fabrication) we can add the effects of gasoline rationing and the nationwide thirty-five-mile-per-hour speed limit. Both were the direct consequence of the rubber shortage. These restrictions created additional obstacles to getting to and from work in a labor market in which the physical location of jobs and the overall composition of output were experiencing radical changes. They also threatened the smooth movement of goods in what remained of the task of distributing civilian products and some intermediate goods to support the production of war materiel. To be sure, the economy learned to deal with these challenges, but, again, in considering the effects of the conquest of Singapore, we should not confuse the beneficial effects of that learning, which, considered by itself, represented improved efficiency, with the more significant and detrimental shocks that induced it.
1. Wilson, Mark R. 2011. “Making ‘Goop’ Out of Lemons: The Permanente Metals Corporation, Magnesium Incendiary Bombs, and the Struggle for Profits during World War II.” Enterprise and Society 12 (March): 10–45.
2. Vander Meulen, Jacob. 1995. Building the B-29. Washington, D.C.: Smithsonian Institution Press, 8.
3. American Chemical Society. 1996. “The Houdry Process: From the Catalytic Conver- sion of Crude Petroleum to High-Octane Gasoline.” https://www.acs.org/content/dam/acsorg/education/whatischemistry/landmarks/houdry/the-houdry-process-catalytic-conversion-commemorative booklet .pdf. 1.
From The Economic Consequences of U.S. Mobilization for the Second World War by Alexander J. Field. Published by Yale University Press in 2022. Reproduced with permission.
Alexander J. Field is the Michel and Mary Orradre Professor of Economics at Santa Clara University. He is the author of A Great Leap Forward: 1930s Depression and U.S. Economic Growth and served as executive director of the Economic History Association from 2004 to 2012.