Democracy and War Profiteering

They say to “never let a crisis go to waste,” but does that include war? Embodied in characters like “Daddy Warbucks” from the musical Annie, war profiteering has been an integral part of American history since the Civil War. In this episode, Mary, Gary, and Eryn discuss the history of war profiteering and its implications today. What is the difference between supporting a war effort and profiting from it? What challenges does this age-old business pose to democracy?

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Transcript

Mary (00:01)
Welcome back to a brand new season of Fabric of History from the Bill of Rights Institute. If you're new here, welcome. We can't wait to explore more controversial, inspirational, and hilarious moments of history with you this year, from how the Cold War propelled espionage to an unheard-of level to why the backdrop of Gilded Age New York City was a perfect setup for corrupt politician Boss Tweed and what exactly, early American pubs had to do with free speech and more. Join me Mary, me Gary, and me Eryn every two weeks this spring.

Intro/Outro (00:39)
From the Bill of Rights Institute, Fabric of History weaves together US history, founding principles, and what all of this means to us today. Join us as we pull back the curtains of the past to see what's inside.

Haley (00:55)
They say to never let a crisis go to waste. But does that include war? Embodied in characters like Daddy Warbucks from the musical Annie, war profiteering has been an integral part of American history since the Civil War. Join us this week as Mary, Gary, and Eryn discuss the history of war profiteering and its implications today. Are there any methods to combat this age-old business?

Mary (01:24)
Today's conversation is something I admit I never really thought much about. And Gary and Eryn really had to do some convincing to get me on board. And the tipping point for me was Gary's repeated references to the character Daddy Warbucks in the play Annie. Like any child of the 80s, I'm a big fan of Annie, and I actually sing Annie songs to my young son. But I never thought about Daddy Warbucks's name before beyond its sheer amazingness. But Gary, you're right. It really begs the question, what did he do to get that name? And then further, at what point does supporting a war really cross the line into profiting from war? And that is one of those meaty questions that we are all about here at BRI.

Eryn (02:20)
Mary, I'm with you there. I remember watching Annie as a child and didn't think about again, like you said, how he made his money in the background of his wealth.

Gary (02:33)
Yeah, there's great power in pop culture references that are rooted in history. And it's just an example. And I think it's a stepping stone to the bigger idea of war profiteering and at the time it's created, the story has a lot to do with what's going on in the world, what's in people's memory. And so, yes, I think the way that pop culture can surface a concept like war profiteering that is part of studying history is significant.

Eryn (03:02)
Well, and also, it's funny is talking about pop culture, we are surrounded by a lot of pop culture references to war profiteering, but never really took the time to kind of dive into it and discern what it really means.

Gary (03:18)
Well, then buckle up, everybody. That's what podcasts are for let's dive into it.

Mary (03:22)
War profiteering is one of those things that seems really straightforward on the surface, even the words themselves. Right. Profiting from a war is basically what it sounds like. But the more you dive into this, the more complex it becomes.

Gary (03:39)
Yeah, absolutely. It raises the question of a profit implies some kind of economic system. And it also seems to imply that it's when talking about it, that's individuals and organizations. Right. Governments who are declaring the wars or have armies that go into the wars, they to some degree produce, of course. But then there has in history been a need to reach out or to engage with private individuals and private organizations to boost the effort, just even focusing on just the pure building materials, the weaponry, the vehicles, all the things that go into that. So now it expands outward in terms of when talking about war, do we specifically mean, like during the course of the war, does it mean prior to a war, there are certain industries that are set up? Well, like you are already manufacturing weapons or you're already manufacturing steel products or whatever, and then at what point things are war profiteering?

Eryn (04:43)
When does it become war profiteering? Right? But it's probably existed for as long as we've had wars in some capacity. Right. But it really picks up during the Civil War, and that's when it becomes more at the front of people's minds and has like a negative connotation. They even called the people that were making money off of war profits during the Civil War. Some of them were called shoddy millionaires. And I found this really great quote, and it's a pretty strong message. So it was given to the US House Committee on Government Contracts in March 1863, right in the middle of the Civil War. And they said, worse than traitors in arms are the men pretending loyalty to the flag who feast and fatten on the misfortunes of the nation, while Patriot blood is crimsoning the plains of the south and bodies of their countrymen are moldering in the dust. It just gives us such a strong image of these people who are pretending loyalty to the flag and have contracts with the government to produce things for the military are just feasting and fattening off the misfortunes of the nation. And what does that look like? What was happening during the Civil War that gave them the name shoddy millionaires? That produces a pretty vivid, quote, an image.

Gary (06:12)
So in looking back on history, is our focus here or our conversation about war profiteering altered or enhanced, or does it have something to do with industrialization?

Mary (06:28)
I think. Well, two things I have to say. First that I never knew the word shoddy came from the Civil War, and I think that's super interesting. It's just sort of these scraps glued together to make shoes, and it's shoddy, it's crappy. So now I'm going to use that word. So there's that. Secondly, I think to your question, Gary, I think as Eryn said, war profiteering has been around for a long time. But it's really with the Civil War that I think it jumps up a notch. And I think that is because of industrialization. I mean, the Americans of a war, even in a global context is a turning point war because it is a total war. There is a war of attrition and it is an industrial war. So with industrialization and mass production, there are just much more opportunities. Everything is bigger. Everything is on a much bigger scale. So the opportunities for profits, the opportunity for death and destruction, just are things that no one really understood before. And I think a lot of people think of World War I as being that turning point. But even the military command in Europe and this is something that was discussed by scholars, especially France. They didn't study the American Civil War. They didn't understand that this is what war is going to be like now. There are trenches and it's really like who can hang in there and last the longest. And if they had understood that, maybe things would be different. I don't know, perhaps that's another podcast, but just industrialization, as I said before, it's bigger. You need more things. You've got way more people fighting. Everybody is involved in the war effort in some way because they have to be. So the opportunity to make a profit is going to be taken to the next level.

Eryn (08:14)
I was just going to say, like, even you were just talking connecting Shoddy Millionaires to industrialization. And Gary, back to your point was an industrialization and the name Shoddy Millionaires and how this came to be and why they were making such terrible quality uniforms and shoes was because the government put out this contract for the uniforms for the army. But there was a huge fabric shortage at the time. And so a lot of companies were like, are you really going to be able to manufacture at this level this many uniforms? And Brooks Brothers came forward and said, yeah, we can do it, sign this contract. They couldn't do it because of the fabric shortage. So they started using this is a very scientific term, fake fabric, shoddy. Yeah, exactly like Mary was saying, making shoes out of cardboard, which did not last very long in rain and mud. And so it's an interesting confluence of like, you have this industrialization, but then you also have this fabric shortage. But I think it was all definitely working together in terms of who is making a profit. How. So that's just my opinion. I think it kind of all coalesced together.

Gary (09:46)
So just to break it down, wars are happening throughout history. At the Civil War, there is a change which sounds like volume. It sounds like there are so many people fighting in this and so many people involved in this that a pre-existing army sort of that has all the materials it needs just isn't the case. So now an opportunity comes in for individuals and organizations to supply these materials. And it sounds like somewhat quickly in many cases or in the case you just talked about that in order to meet the demand, the materials were of lower quality. So it sounds like then that even though they were of lower quality, there still was money to be made for supplying these things. And I think your point. Well, both of your point about the inevitability of war is an interesting one that one learned from the Civil War. Okay. These things are big. Now you can't put the toothpaste back in the tube, which also probably is around the right time period. And I don't think the first time we've used that analogy of this. So knowing that at some point another war is going to happen, Mary, you mentioned World War I. There's time in between to say, well, we've learned that two things have changed. One, we live in an industrialized world, and two, to prepare for another war, there is the need to create and develop materials for a war. What do you think the impacts of that are?

Mary (11:25)
That's a big question, Gary. Gary is the big question guy.

Gary (11:29)
It's a conversation. It's fun.

Mary (11:31)
Why don't we take a quick break and then we can come back and think about World War I?

Mary (11:45)
We started our conversation, really, with the Civil War. And if we move forward in time to World War I, like you said, Gary, you can't put the toothpaste back in the bottle. Industrialization. I think it really changes everything. I mean, we call it the Industrial Revolution, and there was some industrialization with the Civil War, but industrialization is an even bigger part of the story by the time we get to the First World War. And industrialization is even listed as one of the causes of the First World War. So you have the opportunity now for even greater. There's an even greater. And you have the whole world at war. It's not just a Civil War anymore. So there's more people, more weapons are needed, more money needs to be lent out. Everything is sort of mushrooming and getting bigger and bigger.

Gary (12:34)
Right. And with this size, then comes a demand for not only materials. Right. The materials in reaction to a war, the soldiers need things and not just weapons. I mean, they need food and clothing and transportation, and they need all of this material. I'm going to call it objects things that you need. But beyond that now it almost becomes Proactive. Right. To say, like, well, if we know a war is coming, there needs to be structure. And these structures have to be huge. And those structures have to include not just the physical materials, but also banking systems and agreements and things like this. As you're saying, it's so big that individual governments have to reach out to individuals and organizations who can provide. That right. The government itself does produce a large amount of things, but they need just for sheer size to contract out to others. So, I mean, the word profit, just breaking right, that down is a service of good is being produced. And to do that, there's increased money. But it raises an interesting question of cause and effect because as you said in history when studying at this industrialization seen as a cause.

Gary (13:58)
But I'd like to dig in more in terms of how much of a cause and in what way is it a cause for war to happen? And I would wager that one interpretation is that this competition you mentioned being a world war with, World War I. There's no competition among other countries. Right. And so it's seen as defensive or that's probably the wrong word when talking about war. It's seen as promoting your country to say we are strong, we have the material, we have the systems, we can afford this, and in a way that can delay or diminish the chance of a war happening. Or on the flip side, it could increase the chances of a war happening, that this rapid industrialization of war material was seen at this time period as a threat, and to some way that it calls into question the cause and effect of wars and war materials and in some ways profiteering.

Mary (14:59)
Well, I think your chicken and egg analogy is especially apt if we're talking about the lead-up to World War I, because I think if you are a history teacher, maybe you will recognize the main causes of World War I militarism, alliances, imperialism, nationalism. But this militarism, this build-up of the army is a huge factor in the world marching towards this First World War in 1914. It's almost as if when we talk about the powder keg of Europe, everybody was just sort of itching to use all of these battleships that they're building up. And I have more battleships than you do. And if you have all these ships, the implication is you're going to use them. So Germany and Britain are sort of the biggest culprits in this. They're building up their navies tremendously. They're not at war with each other. But if you're building up your Navy so much, why are you doing that? Is the question. So this is where it gets messy and there isn't an easy question, which is it can make you uncomfortable. I think certainly it would make me uncomfortable sometimes like if you're standing in front of students or just having a conversation and you want there to be a clear cut, this is right or this is wrong or this is good or this is bad and can't really do that in a way here.

Gary (16:24)
Yeah. Honestly, I think that's the delight of history, though, right, because it's those interesting areas that you could explore, the almost messiness of the whole thing, one of the aspects of that. And you just said it and I think about the history classrooms or studying history. And if you just be interested in history, is the 'they,' when you said they are doing something, it's really interesting because in this conversation now, among the 'they,' when we say like a nation is doing something, you've got the government, you've got the members of the nation, you've got the soldiers. But now in the day, especially when talking about building navies and things like this are individuals and organizations are actually building these things. These are companies that are building these things, or at least banking and supplying these things. So the they that are building up entwined in that are those that we are calling war profiteers. And I think that is fascinating because it creates sort of a spectrum of I think you use the word uncomfortable. Right. A spectrum of comfort level, a spectrum of on the one side for your nation, you want to protect troops and you want to protect your way of life.

Gary (17:43)
And so to do that, whatever way it happens, wars occur. And so to do that, you need materials, you need banking. But then there's this spectrum that leads onto but at what point then are those that are creating these materials and doing the banking, making profit to a point that is somewhat uncomfortable. And I say that because around this time in the lead up to World War I, now when one studies history, you come across the phrase merchants of death, and that's that chicken and egg thing. And you see this going back to pop culture. You see this in some movies where you've got these villains who are the ones who are just like having these factories and putting things out, and they almost want the war to happen because they know they can profit from it. Now, these are characters in films and whatnot. But this historical perspective on does building, does rapid industrialization of these military forces, does that lead to World War I? And you mentioned itching. Right. Was there an effect that was in people's interest to build and to make profit and to have money go into your pockets because a war is going to happen?

Mary (19:05)
Well, as we've seen, even just thinking about American history really kind of starting with the Civil War, war doesn't go away and it doesn't get smaller. It's only getting bigger. And I love that image you use, Gary, about the toothpaste and trying to put it back in the bottle with this industrialization and this World War, you have all these big questions about profiting from war and merchants from death, and we're going to have a Second World War within a generation of the First World War, and it's going to be even bigger. And all of these questions are going to come back again. At what point does this become a problem? Is it a problem? Do we need to be concerned about war profiteering in a democracy?

Eryn (19:53)
Well, it's interesting the profits even like not even halfway through World War II had already doubled the profits of World War I for these businesses. They made about 28 billion in net profits in the First World War and mid World War II was already 56 billion. And so it's very interesting that between maybe like what, 20 years that we're doubling the profits that these businesses are making off of a war. What's I think also interesting you're talking about mentality is that after World War One, there was like this huge anti-business attitude because of war profiteers. And then the businesses didn't want that happening again. They wanted a world that was friendly towards these enterprises. And so you have companies like General Motors who are willing to kind of take some economic hits for the war effort because they're looking at the long-term picture. And that goes back to what you're saying, Gary, earlier, about you're not just making money during the war, but what happens after the war ends.

Gary (21:08)
Yeah, exactly. I think in studying history, it's either delightful or frustrating when it is complex because if we're talking about World War II, there are different shades. Right. So if your question was something about what about the effect on democracy or at what point how much is too much? I think there's complexity. Right. There's the question of legally. There's the question of socially. There's the question of, like, morally there are benefits. Right. To create a war. There's a lot of technological advances that happen because of individuals and organizations creating radar, personal computers. M&M's. These are things that become sort of beneficial in a way because they come out of a need that happens, that has been supplied. And if profits are made, profits are made. At the same time, back to the legal question. I mean, there's a difference between illegally profiting off of war and just utilizing the way that laws and taxes and things happen. Now, it gets problematic when you question the choices that are made and what that means on taxpayers who aren't. Perhaps. But at the same time, there's the benefits that happen for the taxpayers because of involvement in wars.

Gary (22:36)
The social part of it is interesting. Again, we can celebrate in some ways when successes happen, when again, things are developed or when money is made. But there's almost an icky factor to how that money was made. I think the moral part is interesting. We want to explore, though, right. Because the term war profiteering raises questions, I think about business ethics, and I think there's obvious within ethics making money from war efforts. And then there's perhaps unethical parts of that. And I think that's the frustratingly, delightful part of studying history and the complexity of that's. What causes the ick factor. Right. That area of when things become too much, what the intent is, what benefits can be. I wonder if we can think of more specific examples of profiteers, whether or not they are individuals or organizations that kind of illustrate this.

Mary (23:40)
A good example of someone who sort of encapsulates this complexity of making a profit from war. And there being a spectrum of is it good or is it bad? Is JP Morgan, who and this is an individual that appears in some of our BRI materials. And he makes a fortune in the American Civil War, and I would say doing some arguably shady thing like reselling obsolete guns back to the government and speculating in gold. But he amasses the fortune. And then the institution he sets up his banking firm, is going to come back during the world wars to help finance the war. And then we're talking about World War II, where we're fighting these Axis powers of evil, Hitler, and so forth. Could we have done that without the finances to see that war through? So there's such messiness to this question that we talked about being uncomfortable before. It seems like a straightforward thing. Like I said in the beginning, you're profiting from a war, but it's not straightforward. And that's where the meatiness and the complexity is. And where do you draw this line? And these are questions that I always liked talking with my students about and there are questions I like talking to you guys about because there isn't an easy answer.

Gary (25:10)
Absolutely. It's a perfect example of whether or not you're using a real human case study like JP Morgan or even the way we started with a fictional character that I think is a stand-in for people that really is kind of the delight of becoming a historian. And again, wherever you're at, whether or not you're a student in the classroom or a teacher or a history enthusiast or just anyone who just likes to read about this, the deceptively simple question of asking what is war profiteering? There are different lenses to look at it to even understand what it is in terms of what it means for economics, what it means for really patriotism in the case of wars, what it really means for supporting fellow citizens and their livelihood and lifestyle. And I think in starting with a very simple question of what really is the definition inspired by the image of, like, what is the backstory to Daddy Warbucks? You know what I mean? Again, a fictional character, but there's enough of a complexity there that he has a backstory that he somehow got that money. And it's actually all laid out there. As a matter of fact, in 2007, he was ranked as one of the wealthiest fictional characters because there's enough of a complexity to our understanding of this.

Gary (26:36)
And so I think what I'm getting at is to embrace the delight of looking at history by saying it's not making it simpler, but actually making it more complex. But that's the fun. I think the fun is saying this becomes just many more ways of looking at things. And to do so you need to look through history, you need to look at individuals and events. I think that's the fun of the job.

Eryn (27:00)
Well, I think about part of our Life Liberty, Pursuit of Happiness digital resource, and one of the focuses in there is about how in history it's made up of human beings who make decisions for better, for worse. And those decisions have impacts, right and all human beings, business, war, whatever making decisions and it's not black and white, right? It never is and it's complicated just as we are. Even if we're not actively pursuing these things, there is never an easy answer.

Mary (27:44)
We have attempted well, I wouldn't even say to give our answers. We have tried to share our thoughts on this topic and we'd be curious to hear if you have any thoughts on this seemingly simple, yet not so simple topic. We would love to hear from you. You can reach us at comments@fabricofhistory.org. If you enjoyed listening to us, please subscribe and leave us a review. We love that feedback and we really would love to hear from you. So until next time, everybody keep asking questions.

Intro/Outro (28:23)
The Bill of Rights Institute engages, educates, and empowers individuals with a passion for the freedom and opportunity that exists in a free society. Check out our educational resources and programs on our website mybri.org. Any questions or suggestions for future episodes? We'd love to hear from you. Just email us at comments@fabricofhistory.org and don't forget to visit us on Facebook, Twitter, or Instagram to stay connected and informed about future episodes. Thank you for listening.