State governments bidding against each other for life-saving medical equipment. Regular people buying up hand sanitizer and selling it at a premium. On all levels, the specter of profiteering surrounds us, as COVID-19 sweeps the world. But how did earlier generations address the problem during national emergencies?
Historian Mark R. Wilson tells the story of how the federal government sought to get prices under control during the early years of World War II.
Flash back to the months right after Pearl Harbor, when the nation was getting ready for war. It’s literally a matter of life and death, but some corporations and contractors are overcharging for desperately needed equipment.
A little-known Democratic senator from Missouri rides the public anger, consequently emerging as a national leader. “Their greed knows no limit,” said Harry Truman in February 1942 in talking about military contractors accused of gouging the government at such a critical time.
The public agreed. A Gallup Poll noted that 69 percent of Americans wanted the government to exert controls on the profits earned by contractors during the war.
But the issue didn’t emerge first during World War II. Profiteering was part of an ugly legacy left over from World War I. Exposés chronicled the windfall profits made by military contractors, enriching a few at the expense of hundreds of thousands of servicemen who risked death in Europe. This, in turn, fed a critique of capitalism between the wars, as socialists argued that profiteering was a symptom of unbridled capitalist exploitation.
By April 1942, Truman and others in Congress managed to craft a piece of legislation called the Renegotiation Act, soon signed by President Franklin D. Roosevelt, to rein in the contractors. The practice of renegotiation allowed government committees to oversee contracts and take back payments deemed excessive.
The mainstream press reaction was mixed. “How big a profit are you prepared to defend now when casualties are mounting and your neighbors’ sons are being killed?” asked Fortune, usually a stalwart defender of capitalism.
Other journalists disagreed, seeing the government as reneging on mutually agreed-upon contracts. Newsweek likened it to “Mrs. Murphy buying a dozen eggs for 60 cents on a Monday” and on Tuesday, believing she had been overcharged, taking a nickel out of the cash register.
Some companies were hit hard by the legislation. But Wilson writes that most defense contractors were actually willing to accept renegotiation as the war raged. The boards were composed largely of Pentagon officials and businessmen, many with expertise in the military-industrial relationship. A Senate committee led by Truman backed the boards.
While some smaller businesses had a hard time, big contractors, such as General Motors, were willing to take some economic hits for the war effort because they were looking at the long-term picture. Executives sought a postwar world that would be friendly to capitalistic enterprises, not a return to the anti-business attitudes from after World War I.
For Wilson, the political battle over alleged war profiteering was a defining issue of the time. Both sides, he said, crafted their arguments as “nothing less than a fight over whether the U.S. economy would remain free or become shackled by totalitarianism.”
For his part, Senator Harry Truman rode his newfound prominence to a place on the vice-presidential ticket in 1944. He became president, of course, when FDR died the next year.