Personal Stories

Growth of the Fed and the Military-Industrial Complex

<a href="photo credit: Orin Zebest via photopin

Written Spring 2014

In what ways did World War II contribute to the growth of the federal government?  How did it foster what historians now call the military-industrial complex?  Consider this:  Prior to the United States entry into World War II to fight the Axis powers, Americans were not on their feet.  The United States was still reeling from the Great Depression of 1929.  Unemployment, bank and home foreclosures, business failures and many Americans did not have enough money to put food on the table.  In fact, the GDP (gross domestic product) fell by half between 1929 and 1932.  Charities and churches were overwhelmed by the true influx of people in need.

President Hoover’s limited government belief did nothing to help the American people.  It was not until the election of 1932, when the American people had some glimmer of hope that the United States would turn the economy back around into positive conditions.  That hope was Franklin D. Roosevelt.  Roosevelt, a former assistant secretary to the Navy and Governor of New York, had instituted several successful programs in the state he served.  In fairness, both President Hoover and President elect Roosevelt’s plans were similar.  Save capitalism, help the citizens of the United States and social values, but Roosevelt had charm that enveloped the masses.  He won to victory in 1932.

President Roosevelt inspired many initiatives, but the New Deal released by Roosevelt and his “Brains Trust” of professors from leading universities paved the way for a new American tomorrow.  (Henretta, 2012) Sweeping changes in banking regulations, assistance in agriculture to farmers such as the AAA (Agricultural Adjustment Act), and low interest loans to manufacturing companies to start producing again (National Industrial Recovery Act, NIRA).  Along with unemployment relief, the Civil Works Administration, the Public Works Administration, the Civilian Conservation Corps, and the Federal Housing Administration, these entities and programs were created to assist American back to the road to recovery.  A retirement system was created for those who paid into the system of American, and protected those of the disabled and the blind.  Social Security was instituted in 1935.  Finally, to ensure that a depression such as the one in 1929 never occurred again, the Securities and Exchange Commission was created in 1934 to regulate stocks.  Furthermore, the Banking Act of 1935 appointed a new Board of Governors for the Federal Reserve System, instead of the private banking institution to watch interest rates.  (Henretta, 2012)

All of these programs and entitlements were of great assistance to those in need in the United States, but it wasn’t enough.  Roosevelt still suffered recessions and unemployment still hovered at fourteen percent.  Enter World War II.  Conflicts between Japan, Italy, and Germany, versus the rest of the world and with the attack of Pearl Harbor on December 7, 1941, the United States entered the war shortly thereafter the attack and the government machine began.  However, before the entry of the United States to war, President Roosevelt was already making plans.  He created the National Defense Advisory Commission in 1940, which first deal was with Great Britain to trade WWI destroyers for rights to build military bases near the Atlantic.  Congress approved the expenditure and the draft was instituted.  (Henretta, 2012)

“Defense mobilization” closed the chapter of the Great Depression in the United States.  The GDP doubled, American businesses became profitable and farms grew.  3.8 million workers were hired by the United States government as defense contracts.  Civilians were instructed by the Office of War Information to converse on certain raw materials and support patriotism.  Roosevelt convinced the largest corporations in America to become of the war effort by building planes, tanks, ships and Jeeps.  Corporations were given tax write-offs and incentives in order to participate in the War effort.  In 1945, 70 percent of the nation’s output came from corporations.  California became the winner in this production.  Population grew over 50% during the war and one-tenth of federal dollars funneled through the Golden state.  This core would become the military-industrial complex.  (Henretta, 2012)

The military-industrial complex became key after World War II as tensions grew between the Soviet Union and the United States.  The cold war began in 1945 right after World War II and did not end until 1991.  Nuclear weapons became the name of the game, especially after the United States bombed Nagasaki and Hiroshima to end World War II.  Corporations built rockets, bombs, planes, and electronic devices.   Tragically, President Dwight D. Eisenhower warned our  the nation in his exit speech of one of the greatest threats to mankind.  This would be the same military-industrial complex which are corporate contractors and lobbyists waging a perpetual war.  His final thoughts were “an immense military establishment and large arms industry has emerged as a hidden force in US politics and Americans must not fail to comprehend its grave implications.” (Turley, 2014)  Those words were spoken over 50 years ago, and still ring true today.


Henretta, J. A. (2012). America: A Concise History, Volume Two: Since 1865. Boston: St.Martin’s.

Turley, J. (2014, January 11). Big money behind war: the military-industrialized complex. Retrieved from Aljazeera: