Second Time Round

Engineer Gano Dunn, author of one optimistic report on the adequacy of U.S. steel capacity for war needs (TIME, March 10), gave Franklin Roosevelt his second guess last week. Nub: next year the U.S. will produce 6.4 million tons of steel less than it needs.

Dunn's first report was a godsend to Franklin Roosevelt, who needed good news at the time. Skipping its many ifs, he broadcast its cheerful conclusion: that in 1941 we would have a 10.1-million-ton surplus, in 1942 a 2.1-million-ton surplus, after all military, export, and normal civilian needs. That was before Lend-Lease.

Last week's report made such bad reading that even habitually sanguine Franklin Roosevelt could think of no comment beyond predicting general priorities on steel. Next day priorities came. OPM's Stettinius announced that he and OPACS's Leon Henderson would allocate 75% of steel production (the share not now going to defense and Britain) among competing civilian needs. Graceful living was clearly due for another shock.

Despite the 6.4-million-ton shortage already in sight, Mr. Dunn's second report took a stand against wholesale expansion even firmer than his first. Stacy May, head statistician for OPM, had predicted a 1942 demand of 120.4 million tons, almost 30 million tons above present capacity. Mr. Dunn regarded this figure as inflated, notably on the side of civilian needs.* He therefore shaved it to 102 million tons, for a starter. Then he averaged it with American Iron & Steel Institute's lower estimate (92.6 million tons), with the frank admission that either figure might be right. This watering-down gave him 97.5 million tons of expected demand. His estimate of "reliable" capacity was 91.3 million tons. That was not enough to meet even the A.I.S.'s estimate of demand.

Dunn's real argument against a 30-million-ton expansion: that it would rock the economy on its heels. He mentioned, in passing, that even a ten-million-ton horizontal expansion would not only cost $1,250,000,000 but would take at least two years and 4,160,000 tons of additional steel (including coal and iron mine development, hauling equipment, etc., as well as furnaces and rolling & finishing equipment). But the real drain, he said, would be on the labor supply.

Mr. Dunn had A.I.S. statisticians estimate, for the first time, the labor required to produce, deliver and consume the 101.9 and 120.4 million tons of steel that Stacy May called for in 1941 and 1942. They found that 7,591,500 employes were involved in making and using 1940's 68 million tons of steel--including steelworkers, miners, fabricators, transportation and construction workers, etc. On this basis, their figures reached the astonishing conclusion that, for a 50% increase in steel production in 1941, 4,271,000 (56%) more than the 7,591,500 men so engaged in 1940 would be required; and for a 77% increase in 1942, 6,047,200 more (80% over 1940). The 1942 increase amounts to more than one-sixth of all nonagricultural, non-military employment in 1940. For Mr. Dunn such increases come under the heading of crackpot. The expansionists reply that a way must be found to expand and produce at the same time, even if it means much tougher consumer rationing.

Gano Dunn's report did not even hazard a guess at steel needs for 1943 or later. It took the view that Britain (which had to suspend imports of finished steel for two months this spring for lack of ships) would continue to need only 381,000 tons per month from the U.S. It made no mention of another basic argument for greatly increased capacity: the progressive deterioration of older, overstrained mills.

Gano Dunn's figures were as of April 30. Since then the railroads have drastically increased their estimates of car needs, and equipment builders are howling that they can't get steel. Since then a looming power shortage has caused public powerites to ask for more generators. Since then diversion of tankers to the 2,000,000-ton shipping pool has enforced huge orders for pipelines; the aircraft program has once more been enlarged; a further increase in shipbuilding is projected. Since then Crete has fallen. Puzzled laymen wondered whether Mr. Dunn's next quarterly report would include still gloomier revisions than Lend-Lease enforced upon this one.

* One reason he revised it downward was that it did not allow for civilian rationing, such as the preliminary 20% cut in auto production already imposed. But "civilian" needs include many essential auxiliary defense products such as trucks, oil and railroad equipment, defense housing.

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