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June 16, 1943

Mr. Marriner Eccles
Chairman, Board of Governors
Federal Reserve System
Tfeshington, D. C*
Dear Marriner:
I know how very busy you are but I hope you can
find time to go over this statement• It will be deeply
He have what is probably the smallest Information Staff of any government agency of our size. I
think this has been a wise policy, but one of its disadvantages is that not enough is known about our work.
You are one of a few people whom I should like
to have know a little more about the job we are trying
to do to help shorten this war*
Sincerely yours,

Executive Director

Washington, D. C,
Introductory statement by Milo Perkins, Executive Director of the
Board of Economic Warfare, before the House Appropriations Committee
on June 1, 1943
With your permission, I want to review the general background
of our operations on the economic warfare front as we take stock some
seventeen months after Pearl Harbor.
The plain fact is that Germany and Japan got a long jump on us
in the world-wide economic battle that preceded the war itself. For
years before they launched their military attacks, these countries had
been conducting a shrewd and ruthless war of economic aggression
through such measures as the building of ersatz industries and the
heavy stockpiling of strategic materials. They were building ahead
for the economic as well as the military showdown that they knew was
coming. We on the other hand, not having planned a war of aggression,
were caught relatively flat-footed.
We are catching up now, however. There is a long way to go,
but the United Nations are definitely not losing the economic, war.
Our economic strength is still rising while both Germany and Japan
are beginning to show the first signs of economic strain.
As the war is intensified—particularly as it swings further
into definite offensives—the economic side will become a bigger and a
tougher job. Steadily increasing production of weapons calls for
steadily increasing raw material supplies, including those from foreign

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sources to offset the drain on our own stockpiles and resources.
Tightening supply and shipping situations throughout the United Nations
call for greater selectivity in meeting the essential export mininrums
to the countries with whom we are doing business. Offensive strategy,
replacing the defensive phases of the war, calls for more exact information about enemy economic strengths and weaknesses—to guide blockade policy and help determine strategic objectives which will be high
on the priority list for destruction.
The Board of Economic Warfare works on the general economic
warfare front through three administrative Offices—-Imports, Exports
and Economic Warfare Analysis. Each drives toward objectives in its
own particular field of operations,

'Aie Office of Imports is responsible primarily for the job of
scouring the four corners of the world to locate strategic commodities
needed in the war effort, and then programming the necessary development and procurement operations to get them for the United States.
We in the United States have rather proudly referred to our
country as the richest raw materials nation in the world.

This was

perfectly true, and it therefore came as a shock to many of us to realize that we were far from self-sufficient in many of the basic raw
materials needed to meet our war commitments.

The rubber shortage was

quickly understood by the public because we all use tires. Shortages
in quartz crystals, various insecticides, mahogany, balsa wood and certain strategic grades of mica were equally critical, however. Dozens

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of other foreign commodities that few people ever heard of were needed
in quantity and needed quickly.
Not many weeks after Pearl Harbor, we lost the vast raw materials
resources of the Far East, Japanese invasion cut off more than 60 percent of our normal tin supplies, 95 percent of our quinine, 60 percent
of our hard fibre, and practically all of our rubber. We lost valuable
sources of various fats and oils.

Soon the Burma Road was closed, stop-

ping not only the flow of supplies into China but also stopping the flow

in reverse" of tungsten, hog bristles, tin, silk and other vital supplies

that had been coming to us out over the Road.

All this happened at

exactly the time when the speed-up in our war industries demanded more
raw materials—not less.
Many of the lost supplies could not be produced at all in the
United States; others could not be turned out in sufficient quantity.
We were face to face with the tremendous problem of finding substitute
resources in those foreign areas of the world still open to us. This
was a year ago. Today we can report that what hac1 to be done has been
done. Utilizing the services of existing Government agencies, such as
the Commodity Credit Corporation and various subsidiaries of the Reconstruction ^inance Corporation, and in close cooperation with the Department of State, we have been able to bring in adequate supplies of the
commodities which the War Production Board, designated as strategic, and
directed us to go after.
There were maddening delays, and reserves were dangerously low
at times, but the really vital needs have been met.

In some cases, com-

modities have been flownin from half around the world to meet supply

The Array Air Transport Command and the Navy Air Transport

- u -*
Service have used their returning transport planes - o bring in -tungsten
from China, mica from India, quartz crystals from Brazil, and dozens
of other highly strategic materials from' supply points which would have
been beyond immediate reach without air service to bring them to our
war plants on time. The goods have come in; war industry wheels have
kept turning.
The Office of Imports is directing more than 200 purchase programs in U0 different countries or areas. Nearly 600 individual items
are included in this list of programs.

They are grouped roughly into:

minerals and metals, foodstuffs, textiles and fibres, miscellaneous commodities.' The volume of development and procurement operations for imports will run to about a billion and a half dollars during the present
fiscal year. For next year the total will be above two billion.
As the search for raw materials grows more intense, a far greater
degree of development work will be necessary to produce the things we
must buy and bring out of other countries. It is becoming more and more
necessa^ to program the preliminary steps thoroughly so aa to be sure
of the increased production we- need. In very few cases is our import
operation a simple matter of buying what we want.

Today we must go out

and fight just as hard to develop the goods we want to buy as we used to
fight for the chance to sell goods back in the days when over-production
made selling the most aggressive challenge to every business firm.
This part of the job gets tougher as we need giore materials and
must reach' farther out into new and undeveloped fields to find them.
Circumstances have forced our men to become economic commandos, --literally penetrating new territory in the jungles of the world, to find new

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sources of balsa wood for gliders, cinchona bark for quinine, fibre substitutes to replace lost hemp and a long list of vital minerals and metals
without which technological warfare would be impossible,
A lot of side factors must be kept constantly in mind as these
import operations are carried out. Transportation problems must be met;
special area programs must be developed, with full consideration for related economies within the areasj price levels must be planned to induce
maximum production, and yet not disrupt the domestic economy of the
country involved; new producing units must be found and developed as
older sources reach maximum capacity; often special equipment must be
exported to make possible these increases in imports. The job can be
done, and it will be done, but it will take a lot more ingenuity and
drive in the year ahead of us than it took in the one behind us.
In all import operations, the interests of United States commercial
importers must always be considered.

If coffee is to be broughtin, coffee

importers handle the job, as agents of the responsible Government corporation.

If fats and oils are needed, all United States oil importers

are invited to join a special association to handle import operations.
And so it goes through the long list of imported commodities.


good business to use the skill and experience of these men now, and it1s
good business to "help them weather the storms of this war economy so
theyf 11 still be in business when the war is over.

The original duties of the Office of Exports

centered largely

around the job of export licensing to see that scarce strategic materials

.- 6 .
. ..

did not leave the United States, and that no shipments went to Axis
powers through sympathetic "blacklist" concerns in neutral countries.
The whole f-unction has now grown to include the more positive job of •
directing available exports to keep up the domestic and war economies
of friendly countries, -and to make possible the development and transportation of the materials we must import for our own war effort.
The United States -finds itself today not only the military arsenal
for the United Nations but also pretty nearly the only remaining supply
house for commercial goods needed vitally by many of our Allies•


America, which used to get a lot of its imports from-Europe, must now
look to us almost entirely.

The same thing

is true for other areas, to

a greater or less extent.
We have got to keep the basic economies of these countries going.
They are with us in the war effort, and they are turning out tremendous
quantities of strategic materials we must have which we formerly got

It is obvious that we must try to meet their most essential

In the face of this demand, vie are .more and more up against the
fact that we are forced to ration scarcities for export. We can!t spare
enough from our own stockpiles to meet the full wants, and there aren1t
ships enough to haul all the exports other nations would like to buy
even if we could spare the goods.
The answer is obvious: available goods and available shipping
space must be carefully rationed.

This adds tremendously to the export

control job. It means more careful screening all down the line, to
give a very high degree of selectivity.

The job of dividing a deficit

of goods is no easier on ths foreign front than it is at home.

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Briefly, the export job must be handled so as to get the greatest
possible strength and solidarity on the Allied economic front. Exports
must be kept from going to the wrong placesj they must go to the right
places at the right time and they must go within available supply and
shipping limitations, ^irst things must come first. If country A needs
some rolling stock to keep her basic industries in operation, she must
get that rolling stock.

If mining equipment is needed in country B, to

get out tin or mica or tungsten needed by our war industries, country B
must get that mining equipment*
Realistic steps have been taken by our Office of Exports in recent weeks to see that the limited exports we can spare hit the nail on
the head in the country to which they are sent. At the capital of each
Latin American country, representatives of our Department of State and
BEW sit down around a table with an agency representing the government
of that country. With supply and shipping cards face up, this group
makes a preliminary determination of the most vital import needs of the
country in question.

This determination becomes the first blueprint

for our export shipments, subject to later changes made necessary by
the availability of supplies and of shipping space.
For countries which are represented by purchasing commissions in
the United States, a quarterly program plan was recently put into effect
which will serve the same general purpose. Lost essential needs of each
country for both lend-lease and commercial imports will be determined
definitely in advance, and shipments will be directed within these

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Export control is an increasingly tough and exacting job as supplies become tighter. Every time a new commodity is rationed in the
United States, tighter controls are necessary in export operations. Additional moves must be made by B M to adjust export operations to the
domestic picture. In 194-2, we examined about a million and a quarter
export license applications, of which something over half were granted.
With the more exact study of transactions now required, we expect to have
to handle about two million export documents in 194-3. That's between
6,000 and 7,000 every working day and the work to be done on each application is becoming more exacting.
The scope of the export job is staggering. A total of 2,500 commodities and commodity groups are subject to export control. These
commodities flow from approximately 16,000 United States export concerns
to more than 14,0 different country destinations, and there are thousands
of individual consignees.

The control machinery must operate to see

that no shipments fall into the hands of an importer who is known to
be re-exporting to the enemy, stockpiling in warehouses, speculating
at the expense of the good name of United States private enterprise,
or who is in any other way unfriendly to the cause of the United Nations.
We must also be sure that none of the materials in short supply here
at home are used for any nonessential activity in the country of
The whole job is complicated by the need to protect United States
commercial exporters, just as far as it is physically possible to do
so in a war economy.

This is especially true of the smaller exporters*

Just as in the case of importers, we need the trained services of commercial exporters now; we shall undoubtedly need them much more to spearhead United States commercial activities abroad when the war is over. This


means that the Government export control machinery must perform a lot
of service functions in addition to merely licensing exports*

It must

help get the goods produced, moved to the seaboard, and actually shipped*
B M , as a claimant agency for commercial exports, goes before the War
Production Board to present the case for the minimum of strategic exports
considered essential in our joint Allied economy.

It has working arrange-

ments with the Office of Defense Transportation and War Shipping Administration, to assist exporters in getting the goods moved*

The exporters

themselves have organized several committees to help us with our work.
One special job carried out by the B M Export Office is the use
of requisitioning authority to break loose goods which have been frozen
at ports or in warehouses as a result of v/ar developments. More than
$73,000,000 worth of such material, ranging all the way from rubber to
trucks and airplanes, has been located through this machinery and channeled into constructive use by the United Nations. Much of it was
originally held by business firms located in countries now dominated by
the Axis.

The Office of Economic Vfarfare Analysis must gather all possible
information about the industrial economy of each of our enemies. It
must gather complete information on the economies of European neutrals
in connection with its blockade work. It needs similar information regarding other nations in the world for the use of our other two Offices
as well as for that of the Armed Services. With these facts in hand,

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its business analysts, its engineers and other technicians must then
map out the most effective economic warfare program which it is possible
to carry out.
As the United Nations go all-out on the offensive, and start pinching in on the Axis, more comprehensive and exact information is needed
about the enemy economy. Weak spots must be found, strengths must be
offset, economic strategy must be accurately anticipated.
The success of economic warfare analysis is obviously measured
primarily in proportion to the excellence of our information about the

Information—a piece here, a scrap there—comes from many sources*

Often the action based on such information is thrilling and dramatic, but
the job of collecting and piecing together these scraps into a useful
whole means tedious, painstaking effort. Among the sources available
to us are various intercepts, the files of American offices of foreign
firms like Mitsubishi of Japan, records and experience of American
engineers who have worked in foreign lands, refugees and foreign
travelers, captured enemy equipment, and even the secret sources of the

There is a close and continuing interchange of informa-

tion with the British Ministry of Economic Warfare.
Sticking to the economic side—the business and industrial aspects
—BEW gathers this material as a great backlog from which to reach the
answers for many vital war operations,

niorking very largely under the

orders of the appropriate branches of the Army and Navy, BEW analysts
prepare literally hundreds of detailed reports on all phases of the
world economic picture.

The information is of no value -unless it is

kept current and up-to-the minute.

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At the request of the Army, our men keep a running balance sheet
of enemy production. It is always necessary to know how well or how
poorly the enemy is doing in order to measure our own production requirements. To some extent, the enemy's economic picture reveals his hand.
so far as strategy is concerned. Will lack of oil compel the Nazis to
launch another desperate offensive in the Caucasus? Will the shortage
of locomotives force curtailment of tank production? Will Germany1s
need for rubber and Japan1s need for critical machine tools lead to
large scale blockade running? What are the limiting factors on submarine

These and countless other answers must be known for successful

prosecution of the war, and BEW fills in the picture on the industrial
and economic side*
Blockade measures stem from basic economic warfare analysis. The
job here is to stop the leaks through neutral countries adjacent to the
Axis, but in order to stop the leaks we must have accurate information.
When we know the enemy shortages, and the bottlenecks in his economy,
we are forewarned on what he may try to do to get supplies. Examination
of the cargo of a blockade runner, for example, is quite revealing.
For what materials is Germany willing to run the risk of blockade
running? BEW has joint representation with the British on the Blockade Committee in London, decisions are reached by mutual agreement.
An effective "blacklist" system is an essential part of blockade
work. Information gained from many sources makes it possible for the
Department of State to keep the blacklist current. When a drug house
in Latin America orders a large shipment of steel I-beams, we make an
immediate investigation. When we learn that RAF bombs have destroyed
the plant of the only German manufacturer of a certain type of needle,

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we watch the liscensing of needles to neutral countries* And so it goes
through an almost endless list of checks,
Preclusive buying, that interesting and necessarily secret operation,
which locks up materials in neutral countries to keep them from reaching
the enemy, is also dependent on reliable information, We can!t afford
to waste time or money buying up supplies which are not really vital
to the Axis, or which couldn't reach it anyway. Much of what we buy
preclusively is of great value to our own war effort, of course.
It is quite obvious that even such military action as determining
bombing objectives depends partly upon sound economic intelligence and
analysis. Working with the British Ministry of Economic Warfare and
our own military intelligence men, we are able to supply information
which is of value to the military in making final decisions, BEW does
not select the targets, and, of course, it does not make any of the
military decisions, but it is able to point out vulnerable spots from
an economic and industrial point of view, Where are the bottlenecks
in enemy production?

Is it the assembly plant, the machine shop,

the railway terminal, the power plant, or the steel mill?
Much of this activity on the economic warfare analysis front is,
of course, very secret. By agreement with the Armed Services we have
the most stringent regulations to protect the, security of information
available to us. You might as well tip off the location of your fleet
as to give hints about your economic strategy or knowledge of the
enemy position.

This Economic Warfare Analysis job is vital, it is

directed one hundred percent toward helping to win the war, and it
becomes more complicated and demanding as the war develops along positive

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offensive lines. IShen the full story can be told, it will be one of
the most fascinating chapters of the war record.
Sketchily and briefly, this is the broad front on which BEW is
trying to carry out its part in the winning of this war. It is not a
static or frozen program. Constant adjustments and changes must be made
to meet a constantly shifting war situation.
We have operated from the beginning on the theory that we should
work with and through other agencies wherever that is the most efficient
course to followj several of them receive direct allocations from our
appropriation for strictly wartime functions they are performing for us #
We are going ahead on the conviction that any economic program
which v/ill help to shorten this war by a month, a week or even a day is
worth any reasonable price. Measured in lives, and remembering the men
who died that last morning before the Armistice was signed in 1918, all
of us would agree that it is worth any price to shorten this war by a
single hour.
As you proceed with your consideration of our budget, I shall be
very happy to try to answer any questions you night have—on the record
whenever possiblej off the record if I may, when military secrecy is


Honorable i&ilo Perkins,
Executive Director,
Board of Economic Warfare,
Washington, D. C.
Dear Mr» Perkins;
As Mr* Koclea is on a brief visit to
the West, I wish to acknowledge ycmr letter to
him of June 16 enclosing the copy of ycmr
extraordinarily interesting statement before
the House Appropriations Committee on June 1*
I will see that he has it upon his
return next week, and in the meantime# let me
thank you on his behalf for sending it*
Sincerely yours,

Elliott Thurcton,
Special Assistant
to the Chaina&n.