Financial History 25th Anniversary Special Edition (104, Fall 2012) | Page 45

BY MICHAEL A. MARTORELLI  

BOOK REVIEW

Freedom’s Forge: How American
Business Produced Victory in WWII
their desire to avoid such unpredictable
but inevitable failures on the part of other
institutions.
McKinley is highly critical of the seatof-the-pants and undocumented analyses
done in support of those bailouts. His
extensive footnotes describe subsequent
Congressional criticism of those analyses,
and the suggestion by both regulators and
legislators that some banks had earned
the infamous sobriquet “too big to fail”
(TBTF) by 1984.
In discussing the events of 2008 and
2009, McKinley makes extensive use of
the contemporaneous writings of journalists, the investigative reports of public and
private organizations and the material
in the first wave of crisis-related books
written by participants and observers. He
uncovers few new facts, and notes that
even his Freedom of Information Act
(FOIA) lawsuits were generally unsuccessful in bringing more transparency to the
government’s deliberations.
Yet, by recounting the attempts to
cope with the problems of Bear Stearns,
Lehman, AIG, et al. in close juxtaposition
with the prior discussions of an earlier
era’s concerns about the TBTF problem,
McKinley adds considerable strength
to his core argument about regulators’
inability to learn from history.
His final chapter reinforces the book’s
key message: the crises have been different, but the policy decisions made in their
wake have been depressingly similar, and
unable to prevent future problems. It’s a
compelling argument. 
Michael A. Martorelli, CFA is a Director
at Fairmount Partners in West Conshohocken, Pennsylvania, and an adjunct
professor of finance at Drexel University
in Philadelphia. He recently earned an
MA in History from American Military
University.

By Arthur Herman
Random House, 2012
432 pages, $28.00

The vast body of literature describing how the
Allied armies and navies vanquished the Axis powers in
World War II includes few
works focusing on the systems of production that manufactured the planes, tanks,
ships, rifles and thousands of
other pieces of armament and
equipment necessary to support that task. Arthur Herman fills this void with Freedom’s Forge: How American
Business Produced Victory in
World War II, a masterful
look at American industry’s
performance before and during the years that war raged
across the globe.
He particularly highlights
the accomplishments of William Knudsen and Henry
Kaiser, two businessmen
who refused to let isolationist
Congressmen, meddlesome
bureaucrats and intransigent
union bosses prevent them
from helping make America
the “Arsenal of Democracy.”
The American economy was neither
vibrant not prostrate in May 1940 when
President Franklin D. Roosevelt took his
first tangible steps to prepare the country
for war. As Assistant Secretary of the Navy
in 1918, FDR had watched just one man
(Bernard Baruch) transform that era’s
War Production Board from an entangled
bureaucracy to an efficient organizer of
industry’s productive efforts.
He ascertained from advisors that General Motors executive William Knudsen
was the one man capable of performing a similar function in preparation for
another world war. Herman explains how
the President made Knudsen not a powerful production czar with clear authority,

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