by Gary Alexander

April 7, 2020

The market will return, as it always has after all previous crises, so let me cover more lessons of history.

In reading a book last week (“Freedom’s Forge: How American Business Produced Victory in World War II,” by Arthur Herman), I’m reminded how American families and businesses won freedom for the world. It didn’t start in 1940. The “Minutemen” of 1775 were private citizens available at a minute’s notice. At sea, our “privateers” were entrepreneurs, and our first Army was mostly funded by private investors.

Between the two World Wars, America’s military might virtually disappeared, but Robert Goddard, a private citizen, invented rocketry, several flyboys were perfecting airplane flight, and a private donor, Alfred Loomis, was funding research for both RADAR and enriching uranium. President Roosevelt later said Loomis contributed more to Allied victory than any other civilian except perhaps Winston Churchill.

As Hitler invaded France and bombed Britain in mid-1940, there were only two major democracies left, Britain and the U.S., and London was holding on by its fingernails, with the U.S. ill-prepared to help.

“Ships were scrapped or mothballed; fleet exercises were curtailed by a lack of fuel and support vessels .…From the fourth-biggest military force in the world in 1918, the United States Army shrank to #18, just ahead of tiny Holland. By 1939, the Army Air Corps, forerunner of the U.S Air Force, consisted of some 1600 planes, all fighters and trainers, and fewer than 20,000 officers and enlisted men.”
–from “Freedom’s Forge: How American Business Produced Victory in World War II,” by Arthur Herman

We face coronavirus with a deficit much like we faced Germany and Japan in 1940, so this is relevant.

At Fort Benning, Georgia, in the summer of 1939, Brigadier General George S. Patton had 325 tanks “but no reliable nuts and bolts to hold them together.” He couldn’t get these simple supplies through regular government channels, so he ordered them “at his own expense from the Sears and Roebuck catalogue.”

When President Roosevelt announced plans for making 50,000 planes a year (which he soon exceeded), Hitler scoffed, saying, “What is America but beauty queens, millionaires, stupid records and Hollywood?”

In 1940, General George C. Marshall confided to President Roosevelt that, “If five German divisions landed anywhere on the coast, they could go anywhere they wished. If you don’t do something and do it right away, I don’t know what is going to happen to this country.” Meanwhile, on the other front, Japan’s admiral Yamamoto famously said he feared the attack on Pearl Harbor had “awakened a sleeping giant.”

That’s what happened. From 1940 to 1945, American businesses retooled their factories and “produced two thirds of all Allied military equipment used in World War II. That included 86,000 tanks, 2.5 million trucks and a half million jeeps, 286,000 warplanes, 8,800 naval vessels, 5,600 merchant ships, 434 million tons of steel, 2.6 million machine guns, and 41 billion rounds of ammunition – not to mention the greatest super bomber of the war, the B-29, and the atomic bomb,” winning two wars across two oceans.

FDR drafted businessmen like William Signius Knudsen, a Danish immigrant who worked his way up from the shop floor to become president of General Motors. In 1940, FDR asked Knudsen to leave GM and accept a commission as a lieutenant general to head up industrial production for the U.S. Army.  

Navellier & Associates does not own GM in managed accounts and a sub-advised mutual fund.  Gary Alexander does not own GM in personal accounts.

On the naval side, FDR enlisted construction giant Henry Kaiser, who built the bulk of America’s ships.

Freedoms Forge Images

Many executives volunteered to work at a salary of $1 per year. Many of these “dollar-a-year men” had never been to college – they hadn’t even heard of the term “MBA.” According to Herman, their biggest foes weren’t German or Japanese soldiers, but “Washington politicians, and bureaucrats, shrill journalists, military martinets, the denizens of Big Labor as well as Big Government,” who fought daily turf wars.

Think these executives’ jobs were softer than a soldier’s lot? Not necessarily so. As Herman points out:

“Many paid a terrible price. American workers in war-related industries in 1942-43 died or were injured in numbers 20 times greater than the American servicemen killed or wounded in those same years. At General Motors alone, 189 senior executives died on the job during the war.” (Explanation: Most U.S. battle deaths were in 1944-45, since 1942-43 were mostly years of training and staging.)

The Same is True Today – We’ve Fallen Behind in Medical Supplies and Must Catch Up Fast

Just as the U.S. had fallen in military might from 1920 to 1940, America fell behind in the production of medical supplies and equipment since 2000.  We had sub-contracted our pharmaceutical production to China and had become short of emergency care hospital beds. In the last 20 years, 20 hospitals were closed in New York City, and New York state hospital beds have fallen 13% per capita since 2010.

Private donations and voluntarism have always been central to the development of the U.S. health care system. FDR initiated the March of Dimes to help cure the polio which afflicted him, and that led to the Salk vaccine. Private gifts by Johns Hopkins (an entrepreneur and abolitionist), GM executives Alfred Sloan and Charles Kettering (for the Memorial Sloan-Kettering clinic), and founding gifts by (like ‘em or not) John D. Rockefeller, Howard Hughes, and David Koch helped build leading medical research centers.

On the micro-level, our little clinic on our small island was founded by private donations in the 1970s, and my wife’s friends’ quilting circles are busy stitching facial masks for friends and family to fill the shortage of masks for private citizens so that medical workers and emergency workers get N95 masks.

On March 25, The New York Times noted this trend (“A Sewing Army, Making Masks for America”):

“They are scrounging for fabric, cutting it up, stitching it together. They are repurposing drapes, dresses, bra straps, shower curtains, even coffee filters. They are building supply chains, organizing workers, managing distribution networks. Most of all, they are sewing. All over the country, homebound Americans are crafting thousands upon thousands of face masks to help shield doctors, nurses and many others from the coronavirus… They are working in living rooms, at kitchen tables and inside shuttered storefronts. They are making masks for America, much as a previous generation manufactured ammunition and tended victory gardens during World War II.”

Corporations like “My Pillow” are currently making 10,000 surgical masks a day, and 3M is producing millions, although the company has come under criticism for selling them to “foreigners” like Canada.

I have no problem with 3M trading by contract with Canada. After all, the U.S. was armorer to the entire Allied nations in World War II, not to our own GIs. As a Canadian friend wrote me last Friday:

“President Trump’s decision to block 3M from filling its order from Canada is causing a major upset here.  The whole basis of integrated free trade is called into question if this is the direction things go. ‘America First’ rather than working together means ‘Canada First’ too, and every other nation doing the same. Apparently, the sole source of paper for the top-end respirator masks so needed by doctors and nurses comes from a paper mill in Nanaimo, BC. 3M imports that and manufactures masks to supply customers.”

We just passed a new North American trade deal, so why not honor it with our friendly neighbors? We need to seek all the facts in any situation before reacting emotionally based on biased news reporting. 

Navellier & Associates does not own MMM in managed accounts and a sub-advised mutual fund.  Gary Alexander does not own MMM in personal accounts.

In the meantime, we can all help. In some cases, younger people are volunteering to shop for shut-ins and older people. It’s time for businesses and private citizens once again to seek ways to help solve this crisis.

If I could close on a lighter note, I research historic popular music of the mid-20th century for my weekly radio programs. There are some obviously patriotic songs (like “God Bless America”), but Eddie Cantor sang this comic ode to the blackouts in New York that may resonate with today’s stay-at-home regimen:

We’re Staying Home Tonight

My baby and me

Doing the patriotic thing.

I’ve got my income-tax return to hurdle,

And she’ll be saving mileage on her girdle.

Don’t want to roam tonight,

We’re snug as can be,

Being alone is so sublime.

While I sit in my slippers, and munch a piece of fruit,

She’ll iron out the wrinkles in my Victory Suit.

We’re staying home tonight, my baby and me

Doing the patriotic thing.”

–Lyrics by Frank Loesser for the movie, “Thank Your Lucky Stars” (1943)

Check out some old black-and-white World War II movies and catch the spirit.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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