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Miracle Man

The "Miracle Man" Comes to Fontana
1942 headline[11]

In 1946, after two years of criss-crossing all the old forty-eight states ("my ideal day was to spend all morning with the First National Bank and the afternoon with the CIO"), John Gunther published Inside USA —his vast (979-page), Whitmanesque snapshot of the domestic political scene on the threshold of the postwar era.[12] For Gunther, the most popular


journalist of his generation, World War Two was comparable to the Revolution or the Civil War as a watershed of American character. From the standpoint of an onrushing "American Century," he was concerned to distinguish the progressive from the reactionary, the visionary from the backward-looking. Although later journalists, albeit only by team effort, eventually duplicated the scale of his canvas (that is, the entire US political universe), none has ever matched the astuteness or piquancy of his characterizations of an entire generation of public figures. Unsurprisingly, in the gutter bottom of national political life, Gunther identified the representatives of Mississippi, the Hague machine of New Jersey, and other avatars of domestic fascism. Conversely, at the very pinnacle of his new American pantheon, rising above even Governors Warren and Stassen (perennial Gunther favorites), was "the most important industrialist in the United States . . . the builder of Richmond and Fontana," Henry J. Kaiser.[13]

Forty-five years later, with the mighty Kaiser empire now dismantled, Gunther's panegyric to Kaiser (he was given an entire chapter to himself) requires some explanation.[14] In essence, Gunther, like many contemporary observers, saw Kaiser as the exemplary incarnation of the Rooseveltian synthesis of free enterprise and enlightened state intervention. Kaiser of the 1930s and 1940s is heroically entrepreneurial—Gunther compares him to nineteenth-century empire-builders like the Central Pacific's "Big Four"—yet, unlike the old-fashioned "railroad corsairs," Kaiser "has great social consciousness and conscience." A lifelong registered Republican, he avidly supports the New Deal. "As to labor Kaiser's friendly relations are well known. He wants to be able to calculate his costs to the last inch, and he never budges without a labor contract."[15] Although his early background was as a small-town salesman, lacking any formal training in engineering or manufacturing, Kaiser by the mid 1940s had become the great problem-solving magician of the war economy: mass-producing Liberty ships in four days and achieving other productivist feats worthy of Edison or Ford. Even better than Ford himself (who represented an earlier era of authoritarian engineer-capitalism), Kaiser personified the spirit of the war-generated high-productivity, high-wage economy that later economic historians would refer to as "Fordism." But "Kaiserism" would have been a more apt name for the postwar social contract between labor and management:

Production in the last analysis depends on the will of labor to produce . . . you can't have healthy and viable industry without, first, a healthy labor movement, and second, social insurance, community health, hospitalization


plans, and decent housing. "To break a union is to break yourself." The "Kaiser Credo "[16]

Kaiser was also a hero of the West. Denounced by Wall Street as the "economic Antichrist" and "coddled New Deal pet," he was welcomed west of the Rockies as a self-made frontier capitalist who, against incredible odds, had triumphed over William Jennings Bryan's "cross of gold."[17] To Western economic nationalists, like A. G. Mezerik, Kaiser was a "new kind of industrialist," an incarnation of the "trust-busting Second New Deal" and a pioneer of the "independent industrialization of the West."[18] In fact, Kaiser, accumulating a small fortune in the corrupt street-paving business during the auto-crazy 1920s, was transformed into an industrial giant during the 1930s by virtue of strategic (and sometimes secretive) business and political alliances. In the late 1920s, Kaiser became a favorite of the legendary Amadeo Giannini, founder of the Bank of Italy (later Bank of America) and the West's major independent financier.[19] With Giannini backing, Kaiser assumed de facto leadership over the coalition of construction companies building Hoover Dam and became the Six Companies' Washington lobbyist. In the capital Kaiser hired consummate New Deal "fixer" Tommy Corcoran to represent his interests in the White House, while cultivating his own special relationship to powerful Interior Secretary Harold Ickes.[20]

Most important, Kaiser, together with Giannini and other local allies, was able to recognize the extraordinary "window of opportunity" for Western economic development opened up by the political crisis of the "First" New Deal in 1935-36. To be fair, it was actually Herbert Hoover, the first president from California, who had launched the industrialization of the Pacific Slope by authorizing construction of both the Hoover Dam and the Golden Gate Bridge. But the big chance for Western (and Southern) businessmen came in the interregnum between the Banking Act of 1935 and the beginning of Lendlease, when relations between the White House and Wall Street reached their twentieth-century nadir. As Eastern finance capital (including many key supporters of FDR in 1933) turned against the New Deal, Kaiser and Giannini, together with Texas oil independents and Mormon bankers (led by Six Companies partner and new Federal Reserve chairman Mariner Eccles), politically and financially shored up the Roosevelt Administration, preventing the insurgent labor movement from dominating the national Democratic Party.[21] In his epic Age of Roosevelt , Arthur Schlesinger describes the convergence of interests that supported the "Second" ("anti-trust") New Deal of the late 1930s:


It included representatives of the "new money" of the South and West, like Jesse Jones, Henry J. Kaiser and A. E Giannini, who . . . were in revolt against the rentier mentality of New York and wanted government to force down interest rates and even supply capital for local development. It included representatives of new industries, like communications and electronics [including Hollywood]. . .. It included representatives of business particularly dependent on consumer demand, like Sears Roebuck. And it included speculators like Joseph E Kennedy, who invested in both new regions and new industries.[22]

The modern "Sunbelt" was largely born out of the political rewards of this Second New Deal coalition. Billions of dollars in federal aid (representing net tax transfers from the rest of the country) laid down an industrial infrastructure in California, Washington, and Texas. And nearly $110 million in major construction contracts—including the Bay Bridge, the naval base on Mare Island, and Bonneville, Grand Coulee, and Shasta dams—fueled the breakneck expansion of the Kaiser Company. Long before Pearl Harbor, Kaiser was already discussing with Giannini and a select group of Western industrialists (Donald Douglas, Stephen Bechtel, and John McCone) strategies for maximizing the role of local capital in a war economy. Recognizing that a Pacific war would make unprecedented demands on the under-industrialized California economy, Kaiser proposed to adapt Detroit's assembly-line methods to revolutionize the construction of merchant shipping. Although critics initially scoffed at the idea that a mere "sand and gravel man" could master the art of shipbuilding, Kaiser, with the support of his high-level New Deal connections, became the biggest shipbuilder in American history. In four years his giant Richmond, Portland, and Vancouver (Washington) yards launched a third of the American merchant navy (80 per cent of "Liberty Ships") as well as fifty "baby flat-top" aircraft carriers: nearly 1,500 vessels in all.[23]

In Richmond, where 747 ships were build, Kaiser was able to create a social and technological template for postwar capitalism. To simplify welding, huge deckhouses were assembled upside-down and then hoisted into place, helping reduce the traditional six-month shipbuilding cycle to a week. In the absence of a skilled labor force, Kaiser "trained something like three hundred thousand welders [at Richmond alone] out of soda jerks and housewives."[24] But his real genius was the systematic attention he focused on maintaining labor at high productivity with minimum time lost to sickness or turnover—the nightmares of other military contractors. Back in 1938, while trying to meet deadlines on the Grand Coulee, Kaiser experimented with transforming indirect medical costs into a direct, calculable


industrial input by subscribing his workers to the pre-paid health plan pioneered by Dr. Sidney Garfield. This Permanente Health Plan—to be the most enduring part of the Kaiser legacy—was adapted with union collaboration to the massive Richmond workforce, together with active company intervention to construct war housing, organize recreation, and rationalize overloaded public transport (Kaiser imported cars from the old Sixth Avenue El in New York).[25]

But Kaiser's Richmond shipyards had a critical bottleneck: a persistent shortage of steel plate. An industrial colony of the East, the West Coast had always imported steel at high markups ($6-$20 per ton); now, in the midst of a superheated war economy, the Eastern mills could not supply, nor could the railroads transport, enough of this high-cost steel to meet the demands of Pacific shipyards. Although US Steel's Benjamin Fairless claimed that "abstract economic justice no more demands that the Pacific Coast have a great steel industry than that New York grow its own oranges,"[26] the war shortage prompted the corporation to propose a new integrated (ore to steel) mill on a Utah coalfield. Arguing, however, that the postwar Western market would not justify the extra capacity added by the mill, US Steel demanded that the Defense Production Corporation pay the cost of construction.

Kaiser countered with his own, characteristically audacious proposal to borrow the money from the government to build on his own account a tidewater steel complex in the Los Angeles area, using Boulder (Hoover) Dam power. From the outset this was treated by all sides as a Western declaration of independence from Big Steel, provoking rage in Pittsburgh in equal measure to the enthusiasm it generated in California. In any event, Washington tried to satisfy all sides by allowing US Steel to operate the government-built mill in Geneva, Utah, while loaning $110 million to Kaiser via the Reconstruction Finance Corporation.[27] The War Department, however, whether acting from post-Pearl Harbor hysteria or secretly lobbied by Big Steel (as Mezerik believed), insisted that the Kaiser facility had to be located at least fifty miles inland, "away from possible Japanese air attack."[28] This locational constraint was widely thought to preclude postwar conversion of the facility to competitive production. Rule-of-thumb wisdom held that an integrated complex could operate at a profit only if dependence on rail transport was confined to one "leg" of its logistical "tripod" of iron ore, coking coal, and steel product. A Southern California tidewater plant was accorded but a slim chance of survival in the postwar market; an inland location, dependent upon coal and iron rail shipments from hundreds of miles away, was considered an economic impossibility.[29]


But Kaiser believed that "problems were only opportunities with their work clothes on" and refused to be daunted. He calculated that radical economies in steel-making and mining technology, together with the vast promise of the postwar California market (drastically underestimated by Big Steel), would allow him to convert profitably to peacetime production. Accepting the War Department's disadvantageous conditions, he sent his engineers in search of a suitable inland location. They quickly fixed their sights on Fontana.

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