World War II was the transcendent historical event of the 20th century. It brought some 100 million men, representing most of the world’s nations, under arms. Between 50 and 70 million people died. In an event of this size and scope, who would so foolish as to assign credit for victory to one particular individual?
Five-star General of the Army Dwight D. Eisenhower, that’s who. Reviewing the war in his memoirs, Eisenhower named one person as “the man who won the war for us.” That man was Andrew Jackson Higgins.
Today few remember Higgins. Reviewing his story does more than restore rightful place to a forgotten hero. Higgins’ story teaches one of the most important lessons in economics.
Andrew Higgins and the Development of the Higgins Boat
Andrew Higgins was born in Nebraska in 1889. After dropping out of high school, Higgins entered the business world. In the 1920s, he started a lumber import/export business and operated it with his own large fleet of sailing ships. To service them, he built a shipyard. A few years along, Higgins designed a shallow-draft vessel with a spoonbill-shaped bow for coastal and river use, which he named Eureka. This boat was able to run up onto and off riverbanks to unload people and cargo. Higgins proved to be a genius at boat design and eventually shipbuilding replaced lumber trade as the primary business of Higgins Industries.
The Eurekaattracted the interest of the U.S. Marine Corps for use as a landing craft. It beat a boat designed by the Navy’s Bureau of Construction and Repair in tests in 1938 and 1939. The Eureka‘s only drawback was that men and cargo had to be offloaded over the side, risking exposure to enemy fire.
Since 1937, the Japanese navy had utilized ramps on its landing craft. Higgins directed his engineer to emulate this principle. The result was the unique landing craft whose technical name was “Landing Craft, Vehicle, Personnel,” (LCVP) but which became better known as the “Higgins Boat.”
The Higgins Boat was one of the most revolutionary advances in the history of military technology. Heretofore, maritime invasion forces had to disembark at port cities – a substantial disadvantage since the opponent could predict the likely arrival location(s) and accordingly prepare bristling defenses. A large army had to travel in large troop ships which, of necessity, were deep-draft vessels. Troop ships would run aground and founder if they tried to dock at most coastal locations. Only at ports with natural deep harbors could they safely dock and unload.
The Higgins Boat allowed men and equipment to be transferred from troop ships to smaller, shallow-draft vessels that could run right onto an ordinary beach, drop their ramps, unload men and equipment and then withdraw to repeat the process. This meant that opponents now had to worry about defending the majority of a coastline, not just one or a few ports.
Amazing as it seems today, the Higgins Boat did not win immediate acceptance upon rolling off the assembly line. Its fight for survival paralleled that of the Allies in the early stage of the war itself.
The Entrepreneur vs. the Bureaucracy
In the early part of World War II, authority for designing and building the Navy’s landing craft was entrusted to the Bureau of Ships. Higgins was viewed coolly by the Bureau. What could a Nebraskan teach the Navy about shipbuilding? Besides, the department had designed and built its own model. Somehow, the Navy could always find an excuse for dismissing Higgins’ designs even when they defeated the Navy’s boats in head-to-head competition.
There was one other minor obstacle standing between Higgins and the bureaucrats at the Bureau of Ships. He hated their guts, viewed their work with contempt and said so openly. “If the ‘red tape’ and the outmoded and outlandish Civil War methods of doing business were eliminated, the work could be done in the Bureau of Ships very efficiently with about one-sixth the present personnel,” Higgins observed. Fortunately for Higgins, he managed to sell his ideas to other friendly powers, this keeping himself in business even though lacking honor in his own land. “If the power structure in place during the early months of the war had stayed in place,” said historians Burton and Anita Fulsom in their book FDR Goes to War, “Higgins would have been out of work and Americans, according to Eisenhower, would have either lost the war or had victory long delayed.”
Two unlikely saviors came to Higgins’ aid. The first of them was none other than Franklin Delano Roosevelt. The President had waged a bitter fight with Republicans in favor of his New Deal economic policies for more than two terms in office, only to watch those policies fail to restore the U.S. economy to its pre-Depression levels of income and employment. His Treasury Secretary, Henry Morganthau, Jr., confessed to his diary that administration policymakers had tried everything they could think of to revive the economy – and failed. Despite Roosevelt’s unwavering faith in the New Deal – and in himself – he sensed that he would need the support of the business community in order to win the war.
Thus, FDR changed tactics abruptly, going from excoriating businessmen as “economic royalists” to abjuring them to ramp up production of war materiel in the national interest. Suddenly, it became politically correct to view business as part of the team, pulling together to win the war. Roosevelt announced this change in philosophy even before Pearl Harbor, in a fireside chat of May 26, 1940. He was fond of describing the change as a switch from “old Dr. New Deal” to “Dr. Win the War” – a characterization that reveals as much about Roosevelt’s view of himself as Physician-In-Chief for the country as it does about his strategy.
Part of Roosevelt’s new emphasis involved the creation of the Truman Committee, headed by then-Senator Harry Truman of Missouri, to investigate government waste and mismanagement. Truman’s efforts in his home state had made him very popular, so when the Marines went to bat with his committee on Higgins’ behalf, the combination was too much for the Bureau of Ships to resist. Truman told the Bureau to produce a landing craft and test it in competition with a Higgins Boat. The test took place on May 25, 1942.
Each boat carried a thirty-ton tank through rough seas. The Navy’s craft barely avoided the loss of cargo and all hands. The Higgins Boat delivered the tank to its destination. The Committee declared Higgins’ design the winner.
Truman was scathing in his verdict on the conduct of the Bureau of Ships. “The Bureau of Ships has, for reasons known only to itself, stubbornly persisted for over five years in clinging to an unseaworthy …design of its own… Higgins Industries did actually design and build a superior [design],” only to run up against the Bureau’s “flagrant disregard for the facts, if not for the safety and success of American troops.”
The Entrepreneur vs. the Rules
Higgins’ trials and tribulations did not cease when he won government contracts to produce his landing craft (and other boats, including PT boats). He succeeded in scrounging up the capital necessary to expand his boatbuilding plant in New Orleans into a facility capable of supplying the armies of the Free World. But in 1942, fully automated manufacturing plants did not exist – Higgins next faced the problem of attracting the labor necessary to man the plant. Even in peacetime, that problem would have been daunting. In the wartime environment of wage and price controls, the chief legal inducement for attracting labor, a wage increase, was limited.
Higgins attitude to this and other problems can be appreciated from his own summation of his personal philosophy: “I don’t wait for opportunity to knock. I send out a welcoming committee to drag the old harlot in.” Higgins raised wages to the allowable maximum. Then he helped to set a precedent that persists to the present day by offering free medical care to his employees. Since this did not qualify as a wage, it was exempt from the controls and from the confiscatory wartime income-tax rates as well.
One plentiful source of labor was black workers. But this was New Orleans; segregation reared its ugly head. Higgins gritted his teeth and complied, while providing equal wages and benefits to all workers.
Shortages of metals and minerals were a throbbing headache. Higgins treated it by buying steel on the black market and stealing some items (such as bronze) that he couldn’t buy. (He later paid for stolen materials.)
Victory in Europe
Andrew Higgins went from employing 50 people in a plant worth $14,000 to hiring 20,000 employees to work seven huge plants. Over 10,000 Higgins Boats were produced, comprising most U.S. landing craft. His plants also built PT and antisubmarine boats.
Prior to landings in Sicily and North Africa in early 1943, Eisenhower moaned that “when I die, my coffin should be in the shape of a landing craft,” since they were killing him with worry. By D-Day, Higgins Boats had forced Hitler to stretch his defenses thin along the French coast. Although favoring the port of Pas-de-Calais, Hitler set up a string of defenses in Normandy as well. The Germans had concentrated nearly enough firepower to defeat the American landing at Omaha Beach, but “nearly” wasn’t enough to thwart the eventual beachhead. Meanwhile, the other four landings went relatively smoothly; the Higgins Boats had made it impossible for Hitler to keep all his bases covered. As Rommel and other high-level strategists recognized, once the landings succeeded, the war’s outcome was a foregone conclusion. Even Hitler couldn’t conceal his admiration for Higgins, calling the boat builder the “new Noah.”
On Thanksgiving, 1944, Eisenhower gave thanks for the Higgins Boats. “Let us thank God,” he intoned, “for Higgins Industries, management, and labor which has given us the landing boats with which to conduct our campaign.” And after the war, in his memoirs, Eisenhower laid it on the line: “Andrew Higgins is the man who won the war for us… If Higgins had not designed and built those LCVPs, we never could have landed over an open beach. The whole strategy of the war would have been different.”
The Thanks of a Grateful Nation
Along with many of the other entrepreneurs whose Herculean efforts supplied the American, British, Chinese and Russian armies, Andrew Higgins was rewarded after the war with an IRS investigation into the “excess profits” earned by his firms during the war. Since his death in 1952, his name has been placed on a Navy ship and an expressway in Ohio. Recently, a memorial (including a statue) has been raised to him in his hometown of Columbus, NE.
At his death, Higgins held some 30 patents.
The Economic Lessons of Andrew Higgins and American Entrepreneurship in World War II: The Value of Profit Maximization
The story of Andrew J. Higgins is perhaps the most dramatic of many similar stories of American entrepreneurship in World War II. Jack Simplot developed a process for dehydrated potatoes that enabled him to feed American soldiers around the globe. After the war, he turned his expertise to frozen foods and ended by supplying frozen French fries to the McDonald’s fast-food restaurant chain. Henry Kaiser was the preeminent wartime shipbuilder. He cut average construction time per ship by a factor exceeding ten (!). Like Higgins, he sometimes resorted to buying steel on the black market. Before the war, he built roads. After the war, he switched to steel and aluminum.
Men like Higgins, Simplot and Kaiser were entrepreneurs of demonstrable, and demonstrated, skill. Today, we relate their exploits with something resembling awe, yet it should have been no surprise that they succeeded. Their success often came on the heels of government’s failure at the tasks they undertook; this should likewise come as no surprise. The fact that government actively resisted their best efforts should dismay us, but not surprise us. After all, we have seen the same lessons repeated since the war.
Consider the test of the Higgins Boat, in which the Navy landing craft designed by the Bureau of Ships faced off against the Higgins Boat. Had the Higgins Boat lost the contract, the Allies would have lost the war or been seriously threatened with losing it. (So said Dwight Eisenhower, the man who led the Allied war effort.) The tacit premise behind government regulation of business is that – of course – government regulators will always act in the “public interest” while private businessmen act from greedy self-interest which must run athwart the general welfare. Yet in this case, government bureaucrats spent years acting in a manner directly contradictory to the public interest, albeit apparently in their own interest. (So said Harry Truman, certainly no advocate of laissez-faire capitalism.)
Should we be surprised that it was the profit-maximizer who won the war and the government bureaucrats who pursued their own interest at the risk of losing it? Certainly not. Higgins had spent his life in private business, where he could gain success and happiness only by building boats that worked. The naval bureaucrats did not have to build boats that worked in order to “succeed” in their domain; e.g., remain bureaucrats and keep their staffs and budgets intact. We know this because they succeeded in thwarting Higgins’ design for five years in spite of Higgins’ triumphs in testing against the Navy. Indeed, granting a contract to the boat that worked would have threatened their success, since their own design and model would have been replaced.
The only surprising thing about the episode is that how close America came to losing the war. Had FDR not done two things that were utterly unexpected – namely, abandon his allegiance to the New Deal and set up the Truman Committee to overrule wasteful measures undertaken by bureaucrats – we might have done just that. In that sense, it might with some justice be said that it was really FDR who won the war. And, in fact, Roosevelt made several additional decisions that were crucial in determining the war’s outcome. Naming George Marshall as Chief of Staff is one such decision. Marshall chose men like Eisenhower, Omar Bradley and George Patton for key commands, in each case jumping them over many other men with seniority and more impressive resumes.
The problem with calling FDR the guarantor of victory is that each of his good decisions only offset other decisions that were dreadfully bad. FDR wouldn’t have had to abandon the New Deal had he not adopted such a disastrous mélange of counterproductive and unworkable policies in the first place. The appointment of Marshall merely undid the damage done by the appointment of mediocre yes-men like Harold Stark and Henry Stimson, to high administrative and cabinet positions in the military bureaucracy.
The Second Lesson: Abandonment of the New Deal
FDR’s abandonment of the New Deal illustrates the second lesson to be drawn from the example of Higgins and his fellow entrepreneurs. Conventional thinking posits wartime as the time of preoccupation with “guns,” whereas in peacetime we can safely concentrate on “butter.” Butter production, so tradition tells us, is effected using markets and a price system, but guns are a different proposition entirely. Combating militarism demands that we use the methods of the militarists by turning the country into an armed camp, as did Germany and Japan.
However difficult it may have been to see through this fallacy at the time, it is obvious in retrospect. America won the war with production, by supplying not only its own needs but those of Great Britain, Russia and China as well. Those needs included not only military goods narrowly defined, but foodstuffs, clothing, medicines and all manner of civilian goods as well. It is highly significant that both Roosevelt and Churchill concurred in urging major motion picture studios to maintain the volume and quality of their products rather than sacrificing resources to the war effort. They realized that movies were part of the war effort.
Put in this light, Roosevelt’s decision to substitute “Dr. Win-the-War” for “Dr. New Deal” takes on vastly more meaning. Without even consciously realizing it, he was admitting the failure of his own policies in peacetime as well as their unsuitability for war. And war’s end brought this lesson home with stunning force. During the war, Roosevelt had abandoned New Deal staples like the WPA and the CCC. After the war, President Truman was able to retain various “permanent” features of the New Deal, like Social Security, banking and stock-market regulation and pro-union regulations. Pervasive control of the price system faded away along with the gradual obsolescence of wartime price controls.
FDR had predicted that it would take total employment of 60 million to absorb the ramped-up levels of total production reached during the war. (Before the war, total employment had been only 47 million.) Keynesian economists predicted a return to Depression, with unemployment ranging from 10-20%, after the war unless massive federal-government spending was undertaken. Instead – appalled at the unprecedented level of federal-government debt as a percentage of gross national product – the Republican Congress of 1946 cut spending and taxes. The result was an increase in civilian employment from 39 million to 55 million and total employment (including government workers) reached Roosevelt’s goal of 60 million without the New Deal-type spending he had envisaged. Unemployment was 3.6%. Annual growth in gross national product reached an all-time high of 30%.
Wartime entrepreneurship battered New Deal economic policy to its knees. 1946 delivered the coup de grace.
The Third Lesson: The Primacy of the Price System
The third and final lesson to be learned concerns the impatience of the entrepreneurs with bureaucracy, rules and laws. In particular, their resort to the black market was exactly what patriotic citizens were being implored not to do during the war. Should we be surprised that entrepreneurs won the war by ignoring the anti-market directives of the bureaucrats?
Hardly. Everybody seemed to take for granted that normal commercial attitudes and impulses should be suppressed during wartime, that the success of any collective goal requires the suppression of all individual wants. But upon reflection, this simply cannot be true.
As usual, the most cogent analysis of the problem was provided by F. A. Hayek, in a short essay called, “Pricing Versus Rationing.” He pointed out that in wartime politicians’ standard recourse is to controls on prices and rationing of “essential” war materials by queue. Any professional economist would, he declared, recognize the fatuity and futility of that modus operandi. “It deprives industry of all basis of rational calculation. It throws the burden of securing economy on a bureaucracy which is neither equipped nor adequate in number for the task. Even worse, such a system would deprive those in control of even the whole economic machine of essential guides for their plans and reduce major decisions of policy and even strategy to little more than guesswork.” This will “inevitably cause inefficiency and waste of resources.”
In other words, the best policy for allocating resources in wartime is the same as the best policy for allocating resources in peacetime; namely, use the price system to determine relative values. Where so many people go wrong is by blithely assuming that because so many military goods are now required, command and control must be used to bring them into existence by forbidding the production of other things. But among the many problems caused by this approach is that the production of any good for a military use means the foreclosure of resource use for production of some other military good. Without a price system to determine relative values, the war itself cannot be run on any kind of rational or efficient basis. This is another reason why the Allies were lucky to win – the Axis were wedded to a Fascist, command-and-control economic system that foreswore free markets even more than the Allies did.
Black markets are the outgrowth of prohibition and/or price controls. They arise because legal, licit markets are forbidden. Whether it is bootleg liquor during Prohibition, illicit drugs in contemporary America or under-the-table trading of ration coupons during wartime, a black market is a sign of a free market trying to escape confinement. Higgins, Kaiser, et al were illustrating the logic of Hayek. Rationing and price controls are just as bad in wartime as in peacetime. They were violating statutory law, but were obeying the higher wartime law of salus populi suprema lex.
The Man Who Won World War II
The man who won World War II was not a soldier. He was a businessman. He won it by applying the great economic principles of free markets. This transcendent truth was acknowledged by World War II’s greatest soldier. The power and meaning of this should persuade even those unimpressed by the logic of economic theory itself.