262 ChaPter^5
year men,” meaning they received a symbolic salary of one dollar for their
work. But the profits that their companies [and thus they] would gain as a
result of their decisions would be massive. To begin, they created a system of
“costs plus” contracting, in which the government would pay for all research
and manufacturing and give businesses a percentage profit on products they
made, and would cover overruns, the “plus,” if their initial projections on costs
were short. FDR also guaranteed low-rate loans to industries to re-tool their
machines for war equipment and to subsidize the construction of new facto-
ries.
To run the economic side of the war, the government created various
agencies, a National Defense Advisory Commission, the Office of Production
Management, the Office of War Mobilization, and, importantly, the War
Production Board. Teams of government and private industry representatives
managed all the agencies, with the principal aims of making the “stuff” need-
ed for war—tanks, planes, ships, guns, bullets, shells, uniforms, medical sup-
plies—and making big profits at home. As the figures on production cited
above show, the system worked exceptionally well. More importantly, this
model would continue permanently after the war was over, creating the most
vast economic power the U.S., or the world, had ever seen.
The government also sponsored R&D, or Research and Development, for
wartime industries [and agriculture to a lesser extent]. The Germans had
assembled a team of scientists involved in developing new weapons and types
of war material, such as synthetic fuels, so FDR, to keep up, established the
Office of Scientific Research and Development [OSRD] in June 1941, con-
trolled by civilians and managed by an engineer, Vannevar Bush. The OSRD
developed weapons and new technologies and also conducted medical
research into the mass production of penicillin and other “sulpha drugs,” anti-
biotics that were essential to battlefield medicine. It invented new pesticides
and insecticides and drugs to treat malaria and syphilis. As a result, it was able
to reduce by half the number of deaths from infection and other battlefield
diseases from the Great War. With almost 1000 employees, the agency pro-
duced over 30,000 reports, handled 2500 contracts, and was valued at over
$500 million.
These agencies helped create immense wealth. The per capita income of
Americans rose from $370 in 1940 to almost $1100 by 1945, a 3-fold increase.
Personal income, due to wartime profits and the spike in employment, rose