Sunday, January 14, 2007
DuPont, Gunpowder, and World War I
“Old Hickory” Tennessee
By Richard E. Noble
The DuPont family is an American saga but it’s the World War I gunpowder factory established in Tennessee that has caught my interest at the moment; but before we go there let’s briefly hit on the DuPont’s.
As you have probably guessed the DuPont’s were from France. The old man was a supporter of the American Revolution and democracy but when “revolution” hit France he and the wife and kids had to blow Dodge. They landed in the Colonies and settled in Delaware.
Papa DuPont had one boy who had a pretty good job in France before the hasty departure. E. I. DuPont was working with Lavoisier, known today as the Father of Chemistry, at the national arsenal making gunpowder for the French government. Lavoisier knew his stuff and E. I. DuPont learned all the details. Thomas Jefferson was actually the one who put the bug in DuPont’s ear about a gunpowder plant. And in 1802 E. I. DuPont started to manufacture black powder in Delaware. Lavosier who had been moonlighting as a government tax collector on the side got his head chopped off.
The gunpowder business had its ups and downs - not to mention an explosion every now and then but there was one industry that helped this business along considerably - war.
The War of 1812 was good for the DuPonts and then the Mexican War in 1842 moved things right along. The Civil War was just what the Doctor ordered and the Spanish American War put the frosting on the cake.
But by the time World War I came rolling along the gunpowder business is “exploding”. Gunpowder is being used everywhere; in mining, in bridge building in railroad construction - the gold rush and the 49ers didn’t hurt anything either. Then there was the Panama Canal and Dams and whatever. By this time the DuPont gunpowder business didn’t really need World War I. But World War I needed the DuPonts.
When the European Allies had exhausted and pushed all their powder manufactures to capacity they came to the DuPonts. But the DuPonts had learned about the trials and tribulations of the warring business. War was good business but it also had its problems. There are two big problems with war; wars often start without much notice and they stop in the same manner. As a business you can’t afford to stock up for a possible future war and then stop production on a dime. Having steady business with consistent sales and a predictable growth rate is better than the boom and bust of a war economy. And by this time the DuPont civilian business was great - lots of money, good steady growth. The DuPonts were fat and happy.
So when the Allies came along and asked them to increase there plant and production by about ten to thirteen times - and do it now - the DuPonts were hesitant. The DuPonts told the Allies that they didn’t have the money to expand their facilities to about thirteen times their present capacity. Colonel Buckner, DuPont vice president, said; “We can produce the explosives you need and we think that we can produce them in time, but only if you assume the financial risks of an emergency expansion. You are asking us to build costly plants that will have value only as scrap when the war ends. You are asking us to contract, on your behalf, for raw materials that may not be needed next month, or even next week, and which may never reach the stage of finished goods. I repeat, it’s your war and the risks must be yours.”
The Allies had no choice. They started loading the DuPont’s treasury up with money. They paid a fifty percent advance on powder and agreed to pay a price per pound that would cover the cost of building new plants.
DuPont then really started rolling. Engineering and construction employees went rapidly from 800 to 45,000 and then to 100,000; 8 million pounds of explosives went in one year to 200 million pounds and by the war’s end they were producing 893 million pounds of explosives. In the four years of war nearly 7 million was destroyed in accidental explosions and 347 men lost their lives.
But in 1917 the United States wants to get in on the action. The U.S. doesn’t have a single world scale munitions plant in the country. They contact DuPont. They want the DuPonts to build a plant that can produce 900,000 pounds of powder per day. The DuPonts really, really don’t need any more business. Colonel Buckner was at it again; “The Ordnance Department of the Army has already asked to reserve for the Army our entire unsold capacity, and we feel confident that the Allied Governments will require large additional quantities of powder ... How this large amount of powder is going to be supplied to the United States and their Allied Governments we do not know, unless all the Allied Governments confer upon the subject and determine upon a plan of procedure which will involve the construction of increased capacity.”
On Oct 3, 1917 the U.S government asked the DuPont Company to submit a proposal. Five days later the proposal was in the hands of Major-General William Crozier, Army Chief of Ordnance. The estimated construction costs were for 90 million and the operating costs for a twelve month period were approximately 180 million. This was the largest project the War Department had ever considered.
The government agreed to pay for the whole works. The plant would be in Tennessee and it would be called Old Hickory. But then Pierre DuPont received a telegram from Newton D. Baker, secretary of War, “Have just had presented to me the details of the proposed contract with regards to increased capacity for powder production. The matter is large, intricate and important. Do nothing until you hear further from me. Stay all action under the order until I can acquaint myself thoroughly with all features of the matter.”
Robert S. Brookings, a member of the War Board, had been looking over the contract and had decided that the DuPonts were making too much money on the deal. The DuPonts agreed to step aside. The War Board then appointed D.C Jackling of San Francisco to handle the operation. The first thing Mr. Jackling tried to do was hire the DuPonts’ chief engineer, Harry M. Pierce. Harry said; “You can’t do it that way, Mr. Jackling. You need an organization of trained men, not just one man.” He told Jackling that they had to hire the DuPont Company and their whole shebang or do it themselves. Jackling tried here and there and was then back at DuPont Company.
The DuPont Company then said that they would and could do the job but only if the government agreed to stay out! The government agreed.
In ten months they built Old Hickory from miles of vacant fields. It was a city of 30,000 people. It contained 3,867 buildings - homes restaurants, schools etc. During the ten month building period DuPont hired over 250,000 workers. They built seven and a half miles of single track railroad; they built a 540 foot suspension bridge and the whole works cost two and a half times the maximum rate of expenditure for any year on the Panama Canal - a total of 85 million.
When the war ended tens of thousands of employees had to be let go, whole factories were immediately shut down, wages cut, and economic unrest swamped the nation. All over the world investigations were opened by governments and newspapers into Arms profiteering. The bookstores were flooded with accusations against “The Merchants of Death”. DuPont and Old Hickory were not immune. A story in a Tennessee newspaper accused the DuPont Company of as much as $100,000,000 in fraud and overcharging of the government. An investigation ensued that went on for years. DuPont was finally cleared of any profiteering.
But that was not the end of it. There were those who thought that DuPont and others had been let off the hook by the unscrupulous politics of the time. Investigations into the Munitions Industry were reopened in 1934. The committee was headed by Senator Gerald P. Nye a Republican from North Dakota. It is interesting to note historically that one of the examiners on that committee was none other than Alger Hiss of future Cold War fame. The World War I veterans were one group who were very upset after learning about the enormous profits earned by munitions companies during World War I. The emphasis of the committee was on - How to take the profits out of War. Much of the New Deal’s ardor was prompted by resentment of the corporate greed that had preceded and in part precipitated the Depression,” says Mr. Hiss.
It is interesting to note that Alger Hiss was the Senate Committee’s examiner on the Nye committee. “... it was normal practice for an aviation salesman to use actual or potential purchases of warplanes by one South American country to impress upon its neighbors their need to make matching or superior purchases so as not to be faced with an arms “gap”. Use of the fear factor proved to be an effective way of bringing about spiraling military budgets. Bribery copiously supported the implanting of fear. The resulting picture was of American business stirring up tensions in an already unstable area and corrupting friendly governments in our hemisphere. One salesman’s letter complained of a U.S. Foreign Service officer as “fomenting peace.”
In the Committees vigorous attempt to regulate the arms and munitions industries one big question kept returning; “Who will regulate the regulators?”
The Committee turned it focus to the DuPont Company and the Old Hickory plant. “This factory (Old Hickory Plant) was paid for by the government on the basis of contracts that called for payment of the costs, plus a percentage of those costs as a fee to repay the company for its efforts. Contracts of this kind provided little incentive for keeping costs low - the higher the costs, the bigger the fee. The urgency of wartime need adds to the mood of prodigality and greed that seems always to accompany such contracts. These twin specters haunt all military procurement. The monopoly position of DuPont played a large part in its ability to demand huge amounts either as costs or as compensations. The company was, to be sure, not alone in its insistence on being paid what it wanted. The government had no alternative. At times the threat was clear: Pay what we demand, or we won’t produce. The Nye Committee likened this to a strike by capital, noting that, in wartime, strikes by labor were forbidden. The issue of wartime profiteering was the one that most concerned labor as well as veterans, who felt their contributions to the war effort had been inadequately reimbursed when compared with corporate profits.”
Alger Hiss did not make any friends on this job - including the DuPont brothers and Bernard Baruch - and it may serve to explain somewhat what happened to him in later years. But he continues: “Examination of the extensive records of the board (Nye Committee) including its voluminous minutes led the committee to discern that the general public’s impression of profiteering during World War I was correct.”
Hiss also states that the acclaimed Bernard Baruch and the War Board of which he was a member had not really done much to protect the interests of the “people” in supervising the actions of the arms and munitions industries. “Not long after Baruch’s appearance, the committee issued its report on wartime profiteering, emphasizing that the imperatives of wartime demand made control of profits impossible. In other words, Baruch’s efforts were ineffective in preventing “the strike of capital”. In the committee’s parlance, the only way to take the profit out of war was to avoid war ... Not surprising, therefore, the Nye Committee switched its main interest to ways to stay out of war.
“Pursuing this tract, the committee after some months, devoted its hearings to the huge American loans made to the Allied Powers before our entry into the First World War. These loans by J. P. Morgan and other bankers had enabled the Allies to purchase from us armaments and other vital goods. In the committee’s view the loans gave the American bankers a vested interest in seeing the Allies emerge victorious and able to pay their debts, even if this required our entry into the war. And, they reasoned further, the huge, profitable trade with the Allies tilted our economy towards their side. The hearings on our economic ties to the Allies furthered the prompt passage of the Neutrality Act of 1935.”
Interestingly enough the FDR administration did take steps to curb the profits during World War II. FDR put enormous taxes onto the super wealthy and placed extreme excess war profit taxes onto the business community who would all benefit from the war.
These tactics did not prevent World War II nor did they stop greed and selfishness or profiteering but they certainly spread the wealth created from the war around a little more equitably.
These tactics during the war did not endear the rich and wealthy to the FDR administration - the DuPont’s in particular. I read one account where it is alleged that the DuPonts actually fomented attempts on Roosevelt’s life along with a domestic revolution to overthrow the U.S. government.
So much for all of those who believe that the country was “united” during World War II.
Books used in this essay include: “DuPont – One Hundred and Forty Years” William S. Dutton; “Alger Hiss – Recollections of a Life” Alger Hiss; “The Rich and the Super Rich” Ferdinand Lundberg; “Great American Fortunes” Gustavus Myers; “Merchants of Death” H.C. Englelbrecht and F.C. Hanighen.