Play It Again, Uncle Sam

Nothing inspires the U.S. to deeds of technological derring-do like a national emergency. Government and industry join to beat their traditional swords into plowshares--or into synthetic rubber, aluminum, manned rockets and various products needed for survival. Many times the Government has met tremendous challenges by setting clear goals, guaranteeing markets and assigning specific projects to private companies.

This happened during World War II, when the nation was galvanized by fear that Germany would produce the first atomic bomb, and the Government-funded, $2 billion Manhattan Project unlocked the secrets of nuclear fission. In 1961 President John Kennedy, stung by Sputnik and later by Soviet Cosmonaut Yuri Gagarin's orbiting the earth, decreed that the U.S. should put a man on the moon by the end of the decade. A synergistic exchange of technology among Government, science and industry had Neil Armstrong and Edwin Aldrin walking on the moon five months ahead of the deadline.

Now OPEC, which could be considered the Sputnik of the '70s, threatens the rest of the world. The shotgun marriage of Government and industry, to develop alternative energy sources, has yet to be consummated; but history shows what can be accomplished if they join forces.

The closest parallel was another raw-materials crisis almost 40 years ago, when the Japanese invasion of Southeast Asia cut off 90% of the world's natural-rubber supply. The U.S., caught with its stockpiles down and accustomed to importing over half a million tons annually from Asia, was forced to create a synthetic-rubber industry almost from scratch.

After Pearl Harbor, the Government and private companies dithered for four months over how much synthetic rubber to manufacture and how to make it. Wild-eyed inventors were promoting schemes to produce it from Mexican guayule shrubs and Russian dandelions. The program started to get on track when the War Production Board decided to go basically with one type of synthetic, Buna-S, made from butadiene and styrene; Standard Oil of New Jersey held the U.S. patent rights for Buna-S. Production goals were set at 800,000 tons a year. Arthur Newhall, a former rubber-company executive, was appointed rubber coordinator, directing the whole program.

At first, executives of rubber companies howled in outrage, for they feared that the Government was letting Jersey Standard into their business. So Newhall spread the manufacture of butadiene and styrene among 14 oil companies, six chemical companies and one rayon firm. The raw materials were then shipped to plants operated by B.F. Goodrich, Goodyear, Firestone and U.S. Rubber, where they were mixed and turned into products. Thus, rubber companies kept control of their industry.

All the production contracts were made between the Government's Reconstruction Finance Corporation and the private corporations on a cost-plus-fixed-fee basis. The Government saw no reason why defense contractors should not be allowed to make a profit.

By mid-1944 the biggest U.S. war-supply problem had been solved. In barely two years the country went from being nearly 100% dependent on imported natural rubber to requiring it for only 14% of its needs, an amount small enough to come from stockpiles in friendly Liberia, India and Brazil. Synthetic rubber was being produced ahead of schedule at an annual rate of 836,000 tons, more than 25% above the peak prewar imports of rubber. By war's end the Government had built and owned 51 synthetic-rubber plants at a cost of $700 million. These plants were later sold to private industry, and synthetic products now account for over 75% of U.S. rubber consumption.

That experience offers lessons for today. After several false starts, the Government in World War II decided to concentrate on one method of production and poured resources into it. Top managers were recruited from private industry, there were attractive incentives to manufacture the product--and in a remarkably short time, the nation was almost completely self-sufficient.

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