As Rostas notes:
The greatest superiority of the United States is in the radio and motor car industry, and in iron and steel products where output per head is four times as great as in Britain, and in pig-iron production and machinery, where it is threefold. It is interesting to note that the United States has a superiority in each single industry covered by our sample. (Rostas, page 48)
These productivity figures are somewhat surprising taking into account that a number of leading British firms had invested in the Bedaux system (see section 3.4.1 on page 64 for more on the Bedaux system) to improve productivity (Weatherburn, 2014).
The Model T versus the Austin 7
Whilst the data presented by Rostas appears to come as a surprise, it cannot have been unknown by consumers in the 1920s and 1930s. This is illustrated by a short comparison of two automobiles, Ford’s Model T and the British made Austin 7. The first Austin 7 went on sale in the UK in 1922 for £225 and was regarded as the first affordable car for many who had never owned a motor before. With its small frame, large thin wheels, and lightweight body, the Austin 7 quickly took control of the market, becoming Britain’s answer to Ford’s Model T. Total sales 1922-1939 totalled 290,000.
In comparison, Ford’s output of Model T totalled 1,911,705 by 1925 and it sold for $260. The dollar / sterling exchange rate in 1925 was $4.83 to £1 sterling, the rate which remained until the 1949 devaluation to £2.80. If Ford could have imported the Model T directly from Detroit without import taxes, the UK price before shipping and domestic purchase taxes would have been £53.80, less than a quarter of the price of the Austin 7!
The US Productivity Program
Following the outbreak of WW II in September 1939, the United States Government, led by President Roosevelt, began to make plans to support France and England in their fight against Nazi Germany. This support increased following the appointment of Winston Churchill as prime minister of the UK in May 1940 and the fall of France the following month. Whilst the US maintained a position of neutrality, it began to mobilise its productive capacity and all branches of its military for a long war. Wasser and Dolfman (Op. Cit.) in their brief history of the contribution of the Bureau of Labor Statistics (BLS) to the Marshall Plan, noted that: ‘On June 7th, 1940, Congress passed an act authorizing BLS to make continuing studies of labor productivity and appropriated funds for establishment of a Productivity and Technological Development Division’. This division became fully operational in 1941, and its Productivity Statistics section compiled indexes of output per hour of labour and unit labour cost. Its Productivity Studies section focused on labour requirements per unit of output in specific industries and examined factors influencing output trends in these industries. BLS subsequently found that the airframe industry had achieved a 200% increase in output between Pearl Harbor (December, 1941) and 1944 by following best practices.
This need to fully mobilise the US economy at a national level was directly driven by Roosevelt’s commitment to Churchill during 1940. In order to brief Roosevelt and Secretary of State Marshall on what levels of industrial production would be needed to win WW II Churchill sent Walter Layton to Washington. Layton was a very able Cambridge economist and statistician as well as being a contemporary of Maynard Keynes at Kings College before the first world war. During WW I he was drafted to the Ministry of Munitions, which had been established in 1915 to scale up British war production following the unprecedented demands of trench warfare on the Western Front. Layton’s job, which he did until the end of the war, was to compile weekly reports of all munitions produced in the UK (as well as forecasts). After Lloyd George left to become prime minister in 1916, there was a gap until 1917 when Winston Churchill was appointed as the minister of munitions and re-joined the war cabinet. By the end of World War 1, Walter Layton was the first man in history to have constructed the complete bill of materials to win a world war. The US did not join WW I until 1917, but their munitions production was only just getting into gear, so they fought mostly with British supplies. Layton’s unique knowledge and relationships is the reason Churchill sent him to Washington.
Roosevelt’s subsequent decisions set output levels for airplanes, ships, tanks, guns, munitions, and vehicles at levels which had never been achieved by any nation and which were thought to be impossible. In parallel to this increase in war production, General Marshall set about increasing the fighting strength of the US Army, Navy, and Airforce to the levels proposed by Layton and beyond. In order to deliver these extraordinary levels of output, and simultaneously commit enormous levels of human resources to fighting in both European and Asian theatres of war, the US understood that these two objectives could not be achieved unless productivity was raised even beyond the high levels already achieved between 1900 and 1940.
The need to expand production was recognised across government and led to the creation of what was later called the US Productivity Program.
In order to mobilise the US economy for a global war, the US built upon three very solid pillars. The first was the extraordinary impact of scientific management, based on the Division of Labour together with and accurate daily performance measurement of all work activities and payments based on actual results. These methods, first implemented and documented in high volume automobile manufacturing by Ford at their Rouge River plant (Arnold & Faurote, 1918), were implemented by GM and Chrysler in the 1920s, by the aerospace industry in the 1930s (Wright, 1936) and by the whole of US industry for war production in the 1940s. The US not only supplied its own forces in Europe and Asia, but it also supplied its main allies (the UK, Canada, Australia, Soviet Union, and later China) with supplies under the ‘lend lease’ program. During the five years from 1940 to 1945 these extraordinary levels of productivity and production resulted in a doubling of US GDP.
The second pillar, developed by the US Department of Labor was the Training within Industry (TWI) program, which focused on training supervisors. This approach had also been a major part of the Hawthorne projects. The TWI curriculum was based on work in government-managed shipyards during WW I and promulgated widely during WW II (Bianchi and Giorcelli, 2020).
The TWI program was a voluntary government-sponsored program that offered free in-plant management training to US firms involved in war production between 1940 and 1945. It encompassed interventions in three main areas, called job modules or J-modules. The Job Instructions (J-I) module taught supervisors and managers how to establish standard procedures for operations; the Job Relations (J-R) module taught how to manage and motivate workers; the Job Methods (J-M) module covered how to introduce improvements to current production processes. While the initial plan of the US government was to train all the 11,575 US applicant firms in all the three J-modules, limited funding and personnel constraints made this goal unreachable. As a result, while only 7% of applicants received training in all J-modules, 48% did not receive any training at all, and the others received either one or two J-modules training.
We find three key results. First, the effects of the TWI training on firm performance were positive and lasted for at least ten years after the program implementation. For example, sales of trained firms increased by 5.3% within one year of the TWI training compared with nontrained applicants. This effect peaked at 21.7% in period eight and then decreased to 16% in period ten. The effects on productivity were large and persistent, spanning from a 4.8% increase one year after the training to a 36% increase after ten years.
In one of the many inexplicable twists and turns of the economic history of productivity measurement, at the end of WW II the US Government closed down the federal agency that delivered TWI, but the training was included in the Marshall Plan’s Productivity Program and implemented in a number of countries including Japan.
The third pillar supporting the mobilisation of the US economy for war was the extraordinary collection of sector-, firm-, plant-, and shop-level productivity data collected by Silberman’s division in BLS. (Wasser & Dolfman, Op. Cit.). This provided detailed feedback on both production and productivity for every sector of manufacturing, and it enabled BLS to provide rich reports about every industry sector to the US War Cabinet. Both the US and UK had adopted similar approaches to managing labour and production during the war, and each required a new systems management approach. Given the need to recruit, train, equip, and deploy millions of US men for war-fighting, human resource and production data was needed from every industry, and decisions had to be taken rapidly.
The same data was also needed to develop the new experimental statistics of the performance of the whole US economy by Wassily Leontief at Harvard, under BLS management. This work led to the construction of the first set of national input-output tables and later became one of the foundations of the post-war UN System of National Accounts (SNA).