Industrial innovation and productive structures: The creation of America’s ‘Arsenal of democracy’

Abstract

This paper uses World War II as a real world laboratory to examine the historical-structural origins of America’s unique systemic capability to create new and transform existing industrial sectors. Between 1935-9 and 1944, US munitions production increased 140 times versus 7 times in Germany while national output nearly doubled.American wartime industrial policy did not correct for market failure; it designed and fostered permanent organizational changes in the productive structures of the economy that transformed the national system of industrial innovation. The War Production Board (WPB) was at the center of both macroeconomic and production policymaking. Its focus was on the measurement, coordination and transformation of production. The Office of Scientific Research and Development was at the center of the creation of an inter-organizational science and technology R&D system. Simon Kuznets, economist at the WPB, was the author of the Victory Program by which economic and military strategies were coordinated. Vannevar Bush was the organizational architect of America’s ‘triple helix’ system to create and rapidly grow advanced technology weapon systems. With hindsight, Kuznets and Bush, and the agencies they represented, combined to inter-connect the productive structures to enact a strategy to integrate mass production with technological innovation. Kuznets was awarded the third Nobel Prize in economics; Bush’s Science-The Endless Frontier, was the clarion call for what became America’s postwar science and technology infrastructure. However, like the postwar economics literature, both Kuznets and Bush failed to conceptualize their inter-relationships.