The Weakness of Strong Theories: The U.S. State's Dominance of the World War II Investment Process

Abstract

Before World War 11, the U.S. state played a negligible role in the investment process. But the state dominated the investment process during World War 11, and at war's end it owned 40 percent of the nation's capital assets. This structural transformation offers an ideal opportunityfor refining theories of the state. The state's investment policies were influenced by its warmaking agenda and by interagency infighting over the ends and means of state policy. I attempt to reconcile the state's ascendance to international prominence with the confusion and disunity among the agencies that supplied industrialfinancing. I adapt leading theories of the state business dominance theory, structuralist Marxism, and state-centered theory to the middle range by identifying the institutional contexts in which the outcomes asserted by each theory are likely. Business dominance theory offers insights into state subsidy ofprivatefinancing -an institutional arena in which economic elites were dominant. Structuralist Marxism sheds light on the lending practices of the emergency civilian agency that financed and owned a number offactories. Because the state depended on monopoly sector firms during the war, many of the state's investments represented a capital infusion rather than a threat to private control of the postwar investment process. State-centered theory offers insights when considering the military's direct investments. The militaryfinanced and retained ownership of important factories in the nascent military-industrial complex.