Coupons and Counterfeits:

            During the second world war, many different kinds of battles raged. Less well known than Stalingrad or Midway, but in its way just as fierce, was the battle over economic control in the United States.  Well-meaning technocrats seeking efficient allocation of scarce resources during the wartime crisis worked hard to impose a rational system of controls on the domestic economy.  Intentions proved a poor predictor of results.  Instead of simply an efficient war machine, rationing and price controls resulted in a widespread black market, and the well-meaning technocrats found themselves up against widespread public discontent.  This black market was not caused by bureaucratic mistakes alone—though there were mistakes aplenty—but by widespread public distrust of economic control.

            The American public’s distrust of economic regulation was so great as to make an effective economic control system unworkable.  This conclusion emerges from examination of several topics.  A background on the circumstances of rationing and prices controls prepares the way for two case studies in economic control: the gasoline and meat industries.  The industries and the regulatory systems imposed on them are discussed in relation to the development of black markets in those industries.  Next, evidence about how widespread these black markets were and the types of people who participated in them reveals the widespread discontent with economic controls.  Finally, examination of the print media, Congress, a lawyers’ organization, and government agencies reinforces the conclusion that an effective, overarching system of economic controls was untenable during World War II.

            In order to discuss the black markets, it is necessary to examine the development of price controls.  The concept of wartime price control was brought to the public’s attention by Wall Street financier Bernard Baruch.  In a March 1941 Harvard Business Review article entitled “Priorities: The Synchronizing Force”,[3] Baruch argued for controls and proposed a rationing schedule classifying expenditures from emergency Class AA priorities to routine Class D priorities.  Having served as chairman of the War Industries Board during shortage-plagued World War I,[4]  Baruch believed that the growing demands of total war required extremely tight management of the economy and the prioritized allocation of goods—rationing—by a central agency.  This rationing could not work alone, however.  As Baruch explained, rationing was “a means of short circuiting the laws of supply and demand” which, if left to itself, would result in inflation.  On these grounds, Baruch argued for widespread price controls: “there are numerous reasons why the attempt to fix individual prices would be unwise and why the method of clamping the ceiling down on the whole structure would be both easier and more equitable.”[5] 

Those “numerous reasons” for setting broad price controls included the following three.  First, freezing only selected goods would introduce human judgement in determining which goods were fixed, which Baruch viewed as inferior to freezing all goods at their current price levels.  The reason Baruch preferred setting broader price controls was because it did not involve human planning in trying to understand the intricacies of the market, but simply accepted those price levels as an appropriate ceiling.  Here Baruch revealed anti-control sentiments, for even in discussing how to implement price controls, he preferred a system that avoided giving too much discretionary price-setting power to any human agent.  Second, Baruch argued that many prices were dependent on the level of other prices—for instance, automobile costs depended on the cost of steel, and steel depended on the costs of iron and coal.  Thus, it made little sense to set the price of automobiles while not regulating the price of all its components.  Taken to extremes, this logic encouraged across-the-board price controls.  Thirdly, Baruch thought only setting a few prices would not be sufficient to guard against wartime inflation—only wide price controls would achieve this.[6]

            Though Baruch’s article outlined the shape that economic control would ultimately take during World War II, early attempts at controls were less stringent and enacted by a fairly confusing bureaucratic infrastructure. The early Price Stabilization Division of the President’s specially appointed Defense Commission attempted to keep prices down through publicity campaigns. The effort proved ineffective, and fears of general inflation spread throughout the government following passage of the Lend-Lease in March of 1941. In April, Roosevelt established the Office of Price Administration and Civilian Supply (OPACS).  Although OPACS had formal power to set maximum prices, it was not much more effective at keeping prices low than the Price Stabilization Division, as it lacked the power to enforce its regulations beyond the informal methods of letter-writing and warnings.  In the summer of 1941, OPACS’ power was transferred briefly to the Office of Production Management (OPM), a bureaucracy which had previously controlled only military allocation.  As it became apparent that economic control in the civilian world was quite different in operation from military economic control, the Office of Price Administration (OPA) gained the authority for civilian rationing and price control in January 27, 1942 under Directive No. 1 of the War Production Board.[7] 

            Under the directive, the War Production Board (WPB) would continue to specify which commodities were “scarce” and the amount of those scarce goods allocated to civilians.  During the earliest stages of rationing, the WPB’s list of scarce commodities included tires, automobiles, gasoline, sugar and typewriters.  Though the WPB determined which goods were to be rationed and how much was to be available to civilians, the OPA enjoyed relative autonomy in developing the “machinery and rules of rationing” for those scarce goods and was charged with dealing “directly with retail outlets and individual consumers.”[8]  The difficult task of actually building an OPA bureaucracy which could perform this role remained.      

            The first head of the OPA—known by the title “Price Administrator”—was Leon Henderson, who built the organization into a sizeable bureaucracy during 1942.  Henderson was successful in both attracting a talented group of deputies and in getting legislation passed which built up the OPA’s civil and criminal legal sanctions.  The maximum penalties for violating OPA regulations were a year’s imprisonment and a $5,000 fine.  Under Henderson, the authority and size of the OPA had grown considerably.  By the end of 1942, however, public complaints and an increasing workload were taking their toll on the Price Administrator, whose health was beginning to fail. Under Henderson’s successor, Prentiss M. Brown, controls became tighter, especially on food.  Within six months, Brown was replaced as administrator by advertising guru Chester Bowles, who confronted Brown’s legacy of public discontent.[9]  Two areas in which public dissatisfaction reached particularly high levels were the gasoline and meat industries.

            Of the two industries, gasoline was regulated first. Initial attempts at gasoline regulation near the beginning of the war were somewhat naïve and ineffective, and consumer noncompliance foiled these plans.  Similar disobedience persisted in the form of a black market even after the imposition of stricter gasoline controls and a complex rationing system.  This black market remained of considerable size until the development of technical improvements in coupon printing and a regulatory system which took advantage of “bottlenecks” in the structure of the gasoline industry.  In regulating meat, which did not begin until 1943, officials had the benefit of lessons taken from gasoline regulation.  Nonetheless, the black market in meat—an industry which had much less of a “bottleneck” structure than gasoline—grew even wider than the black market in gasoline and was never effectively curtailed.

            The first gasoline allocation schemes appeared in mid-1941.  Among the earliest was an American Automobile Association (AAA) proposal for a voluntary decrease in gasoline consumption through a publicity campaign.  The president of the AAA argued that government regulation should be a last resort, revealing his organization’s anti-regulatory stance.[10]  As gasoline consumption did not decrease, the particularly gas-guzzling eastern seaboard received a 7 P.M. curfew on gasoline sales.[11]  This gasoline curfew also failed to significantly reduce gasoline consumption. Along with this was the development in early 1942 of the “Quick 100-octane” program,[12] initiated in the aftermath of Pearl Harbor, to rapidly increase the supply of high-octane aviation fuel available for the growing air force. Quick 100-octane seemed likely to increase gasoline scarcity for civilians. Thus it was little surprise that within a week of the curfew’s announcement an oil company official leaked to the press that gasoline rationing cards were already being printed.[13]

            The gasoline rationing system implemented by the OPA was known as the “Flowback System.”  Under Flowback, gasoline distributors were divided into three tiers: primary distributor, intermediate distributor, and retailer.  Consumers were required to purchase gasoline with ration coupons.  A retailer could only replenish his gasoline stock by sending his collected coupons “upstream” to the intermediate distributor, who in turn received his supply only through transferring coupons to the primary distributor.  Rather than actually trade the gummed sheets that spent coupons were placed on, the distributors deposited ration points in “ration bank accounts” and generally made transactions by writing checks drawing on these accounts. To the OPA, the beauty of this system was that it seemed self-enforcing.  That is, a distributor on any level who cheated the system by selling more gasoline to a consumer than the consumer had ration points would decrease the supply of gasoline they could request from the next tier of the Flowback System, thus penalizing themselves.[14] 

            Despite the care with which the Flowback System was devised, it was not long before it too began to fail, much like the less robust economic control schemes experimented with in 1941.  The first issue was the “border problem.”  For gasoline rationing purposes, the OPA followed the decision of Petroleum Industry War Council,[15] a group drawn from the ranks oil company executives, and divided the United States into five regions.[16] Gasoline rationing regulations varied slightly from region to region, and very rapidly people living on the border of a state or region where coupons were worth more than in their home region discovered that by crossing border lines they could increase their personal supply of gasoline.  Furthermore, clever arbitrageur retailers might sell at one region’s rate while redeeming his coupons at an intermediate distributor across the border, receiving “extra” gasoline which he could then distribute without requiring coupons from the consumer.[17]  The most acute instance of the border problem occurred in District I (the eastern seaboard) after formal gasoline rationing was introduced there in May of 1942. Since the District II and District III states were not yet rationed, for a short time the OPA declared 93 border counties in District I exempt from gasoline rationing as cross-district arbitrage had made rationing ineffective in those counties.[18]

            The border problem, however, was only the beginning of the OPA’s trouble with citizens circumventing their regulations.  Within six to nine months of gasoline’s rationing, a black market in gasoline developed, as the easily replicated rationing coupons were widely counterfeited.[19]  Although a small amount of “drip” or bootleg gasoline was traded, counterfeiting was a far more significant problem.  Counterfeiting undermined Flowback in two ways.  First, consumers could buy packages of counterfeit coupons and redeem them for a larger amount of gasoline than was allotted to them by their local rationing board.  Second, and more significantly, retailers also could buy counterfeit coupons.  Then, they would sell customers a few extra gallons at a price slightly above the OPA-mandated price, and place the appropriate number of ration coupons on their gummed sheet for redemption to their supplier. On the OPA balance sheet, gasoline flowing “down” the Flowback channel still balanced the coupons flowing “up”.  Flowback accounting did not tell the whole story, however.  Consumers not using counterfeit stamps encountered unexpected shortages, while those who were willing to pay a higher price received extra gasoline as extra money lined retailer pockets.[20]

            Most counterfeit coupons were sold to retailers, and often involved organized crime.  The OPA eventually allocated from 25 to 37 percent of their manpower to enforcing gasoline restrictions, and their most successful operations show that counterfeiting was carried out on a fairly large scale.  One bust of two members of Detroit’s Purple Gang turned up 26,000 counterfeit coupons sewn into each person’s coat-linings. Another bust in New York City prevented the distribution of approximately 5 million coupons, worth an estimated $3.5 million.[21]  But although the black market in gasoline did involve organized criminal elements, black markets were the targets of organized criminals only because of a widespread dissatisfaction amongst the gasoline-buying public.  It was consumers’ willingness to buy black market gasoline that encouraged widespread counterfeiting.

            Although meat was less scarce and perhaps less essential to the war effort than gasoline, its price was carefully controlled by the OPA. The reason is that one of the OPA’s main duties was to “hold the line” against inflation.  Since food made up 40 percent of the Consumer Price Index, the index by which inflation was measured, keeping food prices down was a major component of stopping inflation.  Meat, an expensive good with a high price elasticity of demand,[22] was the focus of the OPA effort to control the food industry.[23]  Not surprisingly considering their goal of keeping meat prices down, the OPA was more concerned with controlling meat’s price than with its allocation. However, the OPA did institute rationing in meat as well to allay fears that the low price of meat would result in increased sales and rampant shortages.

            The meat rationing system was much like the gasoline system in that the War Production Board[24] allocated a certain amount of meat to the war effort, leaving the remainder to the OPA.  The War Production Board controlled livestock and meats until meat-packers shipped them, at which point the meat not allocated to the war effort was under OPA control for rationing. Though sound in theory, meat rationing was more difficult than gasoline rationing because of the lack of a good “bottleneck” such as the small number of refineries in the gasoline industry.  Without a bottleneck, the OPA could never exert its authority over the industry to regulate effectively the amount of meat flowing into the economy at any one time.[25]

            Also like gasoline, a black market in meat developed during its period of control, which began in March of 1943.  There were four major techniques employed by the black marketeers in the meat industry.  The first kind was entirely bootleg slaughtering in which all federal regulation was bypassed.  This technique involved slaughtering animals in unlicensed slaughterhouses or even in fields, and then shipping their carcasses through unregulated channels.  The second black market technique was the “tie-in sale”, in which a meat packer would offer a retail butcher as much meat as he could buy at a ceiling price, provided the butcher bought a certain amount of unpopular items such as kidneys which would be unlikely to sell.  The kidneys were just a way of padding the price of the meat.  Thus, the meat was actually sold at a higher price than the ceiling, though on paper the transaction was valid.  Sometimes suppliers even “tied-in” spoiled food with their meat, an even more overt black market method.  The third technique involved trimming less fat from meat than was required by law and then selling it by weight.  Both meat-packers and retail butchers could engage in this practice.  Fourthly, there was “up-grade”, where a seller would increase the price of low-grade meat above its ceiling price by incorrectly grading it as a higher grade of meat.  This technique was particularly troublesome for the OPA due to ambiguities within the meat-grading process.[26]

            The extent of the black markets in meat and gasoline is difficult to determine. The size of the black market is similarly difficult to asses as successful black market operations by their very nature went undetected and perhaps unrecorded.  This did not stop many people from trying to estimate the size of the gasoline black market.  Their estimates varied widely. Still, it is possible to approximate the black market’s size based on estimates or the results of raids on counterfeiting operations.  An October 1943 raid, for instance, turned up 10 million gallons of gasoline in counterfeit coupons.[27]  In a congressional subcommittee hearing, Representative Clarence J. Brown of Ohio agreed with OPA Enforcement Department official Shad M. Polier that 15 to 50 percent of gasoline C coupons—the standard ration coupons available to civilians—were counterfeit.[28] In early 1944, the volume of trade in black market gasoline was as high as 2.5 million gallons a day.[29] In his postwar memoirs, OPA Enforcement Department Director Thomas I. Emerson—later to become a professor at Yale Law School—recalled that the Regional Verification Centers often discovered hundreds of thousands of counterfeits. Between November and December 1944 Emerson counted 3 million counterfeit coupons.[30]  Indeed, from 1942 to 1945, the OPA expended 25 to 37 percent of its manpower on gasoline regulation enforcement.[31]  It seems clear, then,  that the black market in gasoline was of a significant size for much of the war.  But by 1945, following improvements in printing ration coupons that were difficult to counterfeit and the implementation of Regional Verification Centers,[32] the black market in gasoline shrank from a lion to a kitten.  In February 1945, the count of counterfeit gasoline coupons was as low as 333,000.[33]

            As large as the black market in gasoline was at its height, the black market in meat was even more extensive.  Furthermore, it remained large until the cessation of price controls.  Bowles himself admitted in 1944 that the black market in food was a $1.2 billion industry, of which meat was the largest component.[34]  Surveys of New York City residents showed that a large majority of citizens admitted to participating in the black market for meat, and a full quarter claimed that they didn’t even worry about ration points or price ceilings when shopping.[35]  In a Senate hearing on the meat industry, Wilbur La Roe, a lawyer representing the National Independent Meat Packers Association, claimed that a full 90 percent of meat industry operations in the San Antonio region were on the black market.[36]  While this is almost a sure exaggeration, that such a figure could be claimed in a Senate hearing without even a challenge from a senator suggests that the black market in meat was substantial enough to make such claims seem plausible.  While it is true that none of the above observers were unbiased, it is also important to note that none of them claimed that the black market in meat was anything but enormous.  That Bowles, who had every personal interest in illustrating his own success through showing the black market to be receding, would make as large an estimate as he did is strong evidence indeed that the meat black market was extremely widespread.

            Just as the gasoline and meat industries were not uniformly distributed throughout the country, neither was black market activity present at equal levels everywhere.  The black market in gasoline was somewhat correlated with regional production.  The highly competitive 1930s had led to advances in pipeline transport and the creation of large numbers of new refineries in local market areas,[37] which made gasoline availability relatively  uniform by region.  The exceptions seemed to be District I (the eastern seaboard)  and the Pacific Northwest.  Although Harold Ickes, Petroleum Coordinator for National Defense,  promised gas shortages for all parts of the country in a 1943 radio address,[38] shortages were always the most severe in District I.  This was at least partly due to concern for high transportation costs from sources of fuel in the Southeast and Gulf Coast.[39]  However, the constant shortages in District I also suggest a somewhat greater black market in that region, as shortages were unlikely without counterfeiting under Flowback. Since OPA officials thought the black market was most prolific in industrial areas,[40] the fact that District I was highly industrialized is a further reason why it had a more severe black market than other regions.  Still, OPA officials held that the black market in gasoline was a nationwide issue.[41]

             While region had some effect on the gasoline black market, it was less significant with relation to meat.  There were certain extreme cases, such as the president of the San Antonio-based Mission Provision Company’s claim that 90% of beef operations in his area were black market related.[42]  However, such claims were not indicative of a greater meat black market in the southwest than in other regions.  Furthermore, that the largest meat-packers were located in the Midwest did not greatly affect the distribution of black market operations in meat-packing.  This was because although the OPA had the resources to monitor the 250 largest packers, who produced as much as 2 million pounds of meat a year and were primarily located in the Midwest, it could not regulate smaller local plants which were dispersed nationwide and some years produced as much meat as the large packers.[43] Industrial concentration, the urban-rural distinction, or concentrations of wealth also had little effect on the black markets’ distribution.[44]  In addition, OPA enforcement officials did not mention any “problem regions” with respect to meat rationing.  Even more so than gasoline, the meat black market was a truly national issue.

            The size and extent of black markets was matched by the diversity of participants in black market activity. In the gasoline industry, various types of citizens, primarily the proprietors of small-time filling stations as well as some petty criminals, participated actively in the black market.  This black market system in gasoline was supported by the willingness of consumers to knowingly engage in black market transactions by paying prices higher than the OPA ceiling.  In the congressional hearing on the black market in gasoline, Polier first attempted to paint the black market as due to professional criminals in the “coupon racket.”  On further questioning, however, he revealed that filling station proprietors and operators were essential to the structure of the black market in gasoline: “Sam or Joe or Moe will sell you that extra 5 or 10 gallons at 10 cents a gallon extra.  What the average motorist does not realize is that Joe or Sam has not got any extra gasoline, but…is simply tearing off some of these phony coupons here and pasting them on a sheet.”[45]  Polier’s testimony implied that coupon racketeers and savvy filling station proprietors were the ones exploiting the OPA gasoline system, and that the “average motorist” was ignorant and innocent of all of this.

This idea is suspect.  Polier may have been trying to avoid painting the black market in gasoline as one engaged in by “average motorists” to stop the committee members from perceiving a wide base of constituent opposition to the OPA.  But the black market in gasoline was hardly unknown to consumers.  One of Polier’s superiors, OPA Director of the Automotive Supply Rationing Division Charles F. Phillips, made this evident in his statement before the same committee: “The black market is spectacular. It gets headlines. It is news.”[46]  Hardly the statement of one who thought the black market was some sort of secret to the public.  In his memoirs, Emerson also contradicts Polier.  Rather than placing the black market only on the shoulders of coupon racketeers and profiteering filling station owners and operators, Emerson includes the consumer.  According to him, a major basis of the black market was that the “average motorists” mentioned above “remained unconvinced” about the need for gasoline rationing.[47]  Bowles agreed with this view, putting considerable effort into changing public opinion.  His public relations campaign included making weekly radio broadcasts and submitting to frequent newspaper interviews in an effort to change public opinion on black markets.[48]  So although the key participants in the gasoline black market might have been counterfeiters or filling station profiteers, Bowles thought the “average motorist” was an important participant as well.  For the most part it seems unlikely that the majority of consumers of gasoline were actually duped.  Instead, they knowingly engaged in black market purchases of gasoline.

The black market in meat encompassed an even wider group of citizens than gasoline: large meat-packers, farmers, butchers, restaurant owners and housewives.  These people carried out black market transactions on several levels, from the large-scale meat-packing industry to small-scale retail butchers to the individual consumer. The considerable depth of this black market is seen in the following exchange between Senator Elmer Thomas of Oklahoma (Chairman) and La Roe at the Senate hearing on the meat black market:

THE CHAIRMAN. If what you say is correct, does that not mean that the farmers, or the sellers of the cattle, first violate the law; second, the purchasers or buyers of the cattle from the farmers or their agents, violate the law; then the slaughterers who kill the animals and process them violate the law; and eventually, the consumers who pay the black market prices violate the law? Doesn’t that take in about all of our people?

MR. LA ROE. It takes people in at every level…it makes me sick at heart to see so much dishonesty at every level.[49]

Unlike the gasoline industry, where both the supply of gasoline and the supply of counterfeit coupons was maintained by a fairly small group, nearly anyone could initiate black market sales in meat by their own will, without the requirement that a coupon racketeer had acquired coupons from a counterfeiter and provided the filling station with the bogus coupons.  In the meat industry, the black market could start at the farm-level, where bootleg “fly-by-night” slaughtering might take might take place.  Or, it might take the form of a large meat packer taking the initiative, perhaps organizing a large tie-in sale to an intermediate or consumer retailer or up-grading lower quality meat before selling.  Finally, the simplest and most difficult to detect black market transaction could occur between a corner butcher and a consumer, whether through a tie-in sale, trimming less fat than usual, or even just charging over the OPA-mandated ceiling. 

In a February 1944 article entitled “I Shopped the Black Market”, Patricia Lochridge showed how easily “a pocketful of money and no ration books” bought a wide variety of goods, especially meat.  Lochridge did not attribute the widespread black market she witnessed to the meat industry, profiteering butchers, or organized crime.  Instead, she noted the heterogeneous nature of the black market in meat—the “poor old lady”, “madam”, the banker or even the minister all happily sought black market goods.[50] Far from being the sole domain of men, women were major participants in the black market for meat, as housewives were generally quite savvy in finding strategies to undermine rationing regulations.[51]  Both black markets—especially that in meat—were comprised of a diverse group of participants and reflected consumer desire to circumvent OPA controls.

            The very existence of a widespread black market reveals discontent with the controls and an acceptance of the black market.  However, this understanding of public opinion is implicit and is no substitute for the various explicit reactions to the existence of black markets that people and organizations actually expressed.  These reactions serve as a lens on the popular perception of the OPA and the idea of economic control in general.  This perception is revealed in the reactions of the media, congress, the OPA itself, and the Justice Department to the reality of black markets.

            The media reaction towards black markets and controls was split.  The Woman’s Home Companion, which published Lochridge’s exposé on black market goods, exemplified the most pro-control position, taking numerous angles against black markets.  Lochridge, for instance, equated the purchase of black market meat with doing “business with Hitler” and expressed “shock” at the prevalence of black markets.[52]  Beyond Lochridge’s hyperbole, the Companion printed a message directly from Bowles exhorting readers to fight the desire to place “appetite above patriotism.”[53]  Furthermore, the magazine ran another anti-black market article in the same issue which warned users against the risk of acquiring diseases from salmonella to typhoid from consuming unregulated black market meat, from livestock “furtively killed on the dirty floor of someone’s barn.”[54]  Although the theory that black market meat might have a higher risk of disease associated with it seems plausible, it apparently was not the case with black market meat during the war, as magazines and newspapers of the time did not seem to document a significant increase in these types of diseases.  Of course, it was no requirement of the meat black market that livestock be slaughtered “on a dirty floor.”  The Companion was full of such embellishments, including the image of a pig in the sidebar of Lochridge’s article, caricaturing the selfishness of black market participants.

            While it may have been among the most excessive in its support of controls and opposition of black markets, the Woman’s Home Companion was by no means the only member of the print media which took a pro-controls stance.  Often the New York Times was supportive of the OPA, as in February of 1944 when the Times printed an entire Bowles speech.  What makes the inclusion of this speech striking is that the speech was given at a forum on black markets at the New York Times Hall sponsored by the Times.[55]  Here the paper was taking an extremely activist, anti-black market stance.  In a 1943 PM editorial, Max Lerner criticized Lou Maxon’s denouncement of the OPA.  Maxon, an OPA official who resigned under pressure, wrote, “The professorial mind is one of the most dangerous of factors in our Government today.”  Lerner was concerned that Maxon’s diatribe had struck a deep chord with too many people, and argued that the role of intellectuals in the OPA—and in government in general—was a crucial one.[56]  But Lerner’s defense of the OPA and “the poor professor” did more than just reveal his reaction—that he felt a need to argue this position implies that parts of the public perceived the OPA negatively as bookish and impractical.

            The media was not entirely pro-controls, however.  Criticism of the OPA and support of black markets was sometimes seen in the media’s selection of stories or use of cartoons.  The New York Times articles concerning the OPA during 1943 were critical as often as they praised.  Times articles emphasized the opinion among businessmen that the OPA was a bureaucratic hassle,[57] as well as blaming a meat shortage which occurred in June—despite an abundance of livestock—on OPA bungling.[58]  While the New York Times certainly did not go out of its way to find anti-OPA articles in the same way that the Woman’s Home Companion stretched to create pro-OPA copy, it was at least not pro-OPA enough to suppress negative articles concerning the organization.  Anti-OPA cartoons, such as G.K. Berryman’s 1945 “The Wizard of OPA”,[59] caricatured Bowles as a circus performer juggling “prices,” “costs” and “shortages.”  The only one clapping at this act, however, is a diminutive President Truman lurking backstage.  The rest of the audience, however, is pelting Bowles with a barrage of rotting vegetables.  This cartoon shows the cartoonist’s belief that large numbers of people were dissatisfied with controls.  Perhaps Bowles was having difficulty juggling the fourth ball of “the public.”

            Unlike the split reaction in the media, many of the congressman involved in black market hearings seemed to oppose the OPA.  In the hearing on the gasoline black market—ostensibly held to examine the black market itself—tension between congressman and OPA officials repeatedly surfaced. Congressman Brown of Ohio interrupted Polier’s testimony to criticize the OPA for doing a shoddy job in printing coupons, saying “The thing that I have in my mind is how or why you people expect the filling station operator to be an expert on paper and printing, and to know whether coupons are legal or counterfeit, when you people yourselves do not know half the time.”[60]  Brown ignored Polier’s explanation that it was the filling station operators themselves who were buying the counterfeit coupons, and instead chose to criticize the OPA for printing coupons which were easy to counterfeit.  Throughout the hearing, Brown and others would make such challenges against the OPA, revealing that many congressmen saw attacking the OPA as a potential way to win political points with constituents tired of controls.

            Roughly a year after the meat hearing, a subcommittee of the Senate Agriculture and Forestry Committee held an investigative hearing on the black market in meat in which criticism of the OPA reached higher levels.  Senator Burton K. Wheeler of Montana’s stinging attack on OPA star witness Emerson made the hearing front page news in the New York Times.  “You don’t know what’s going on,” said Wheeler of Emerson and the OPA. “You’ve got a lot of amateurs who are not even beginning to cope with this thing.”[61]  Such name-calling was the height of Senate-OPA tensions.  Again, rather than attack the black market and support the OPA, senators chose to pounce on the agency, again suggesting discontent among their constituencies.  Senator Wheeler was not alone.  Senator Theodore G. Bilbo of Mississippi went even further in his opposition of the OPA: “[I don’t] want you to indict about 100,000,000 people in this country.”[62]  Instead of merely criticizing OPA effectiveness, Bilbo attacked the very goal of stopping black markets as unreasonable. Apparently Bilbo believed the black market in meat was wide enough that trying to stop it was absurd.  Later in the hearing, Senator George D. Aiken of Vermont summed up his opinion on the issue, stating: “A lot of the black market prices that are paid are not illegal prices, but that is so because someone is smart enough to find his way around the regulations…[The American people] are pretty resourceful.”[63]  It seems that in Aiken’s mind, evading OPA regulations was “resourceful” rather than illegal.  To him, OPA mandates in the meat industry had little credibility.  And examining the statements above, it seems that by 1945, many of his fellow Senators agreed.  The committee’s consensus was that the OPA had poorly handled meat control.

            The strong criticism of the OPA seen in Congress was no anomaly. Other groups held similar stances.  The American Bar Association (ABA) was a vocal critic of the OPA, voting in February of 1944 to lobby Congress for laws restricting OPA autonomy and forcing the organization to follow a uniform administrative procedure for dealing with violators.  Although this proposed law was meant to extend to all non-war agencies, it was targeted chiefly at the OPA’s “tribunals” and “kangaroo courts.”  ABA President Joseph Henderson characterized OPA officials as “uncontrolled bureaucrats who are disregarding the rights of citizens and regimenting their lives.”[64]  That a group of 200 lawyers would so strongly oppose the OPA, a highly legalistic organization comprised largely of lawyers, further illustrates that dissatisfaction with controls extended far beyond the criminal underworld.  Not only were black markets widespread, sympathy for those accused of black market transactions existed.

            In this environment, the perception of the regulators themselves towards black markets evolved over time.  In the earliest, pre-OPA days of control, Defense Petroleum Coordinator Harold L. Ickes had a 7 PM curfew on gasoline sales imposed on the east coast, hinting that further controls were possible.  In a New York Times article, Ickes doubted a gasoline black market would emerge.  He quipped, “You can’t make gasoline in a bathtub.”[65]  Wittiness proved to be a poor predictor of what would actually happen, and by late 1942 the reality of gasoline black market in counterfeit coupons was clear.  OPA officials such as Emerson then tried to rationalize the existence of black markets: “While the public supported controls abstractly, enough people condoned violations and were willing to buy black market meat themselves to set a general tone of disapprobation rather than support.”[66]  Such rationalizations masked the fact that the “general tone of disapprobation” described many people’s actual opinion.  Emerson described the gasoline and meat black markets as the “two major headaches” facing the enforcement department.  In his memoirs, Bowles characterizes the gasoline black market as “by far the greatest challenge.”[67]  The challenge Bowles goes on to describe in his memoirs is one of geographic problems and technical difficulties.  In this instance, Bowles makes no mention of the challenge of overcoming negative public opinion.  With at best shaky support from the public at large, the OPA and its predecessors first scoffed at the idea of black markets, and then saw them as a challenging obstacle to be overcome, by technical means.  All the while, the organization retained a positive, if somewhat naïve, attitude about the public’s perception of black markets.

            The OPA perspective towards the black market as a technical problem rather than a symptom of wide dissatisfaction with economic controls was perhaps due to its pro-OPA bias: the organization would have a hard time seeing its mission as inherently flawed. The perception of the OPA by another bureaucracy, the Justice Department, offers an interesting perspective on economic controls, for it is a perspective outside the OPA yet within the executive branch of government.  Justice dealt with the OPA constantly, as it was responsible for actually investigating and deciding whether or not to impose criminal sanctions upon black marketeers named by the OPA.  Thus, Justice had a great deal of discretionary freedom in dealing with cases referred by the OPA.[68]  While Justice never went so far as to officially denounce the OPA, an anti-OPA stance was clearly present in the department’s handling of OPA cases.  In his memoirs, Emerson recalls that the Justice Department was reluctant to enforce what it felt was an overly harsh criminal sanction against black market participants.  For considerable periods of time, Justice refused to cooperate with the OPA on enforcement issues. According to Emerson, in one case Prentiss Brown realized that Attorney General Francis Biddle had decided not to prosecute black marketers in food because he felt “OPA regulations were unfair and invalid.”  Brown failed to convince President Roosevelt to censure Justice, and in the end, the OPA “had to live with the Department of Justice’s inaction.”[69]  At best the Justice Department had an uneasy relationship with the OPA, and was often reluctant to enforce criminal sanctions against black marketeers.  Approximately four thousand “substantial cases” against regulation violators remained to be considered by Justice as late as June 1947, more than half a year after the termination of controls.[70]  That a government organization such as Justice would so strongly oppose economic controls as to disregard the letter of the law was a striking index of how significant and widespread dissatisfaction with the OPA was.  It was beyond mere grumbling.

            One explanation for Justice’s reluctance to cooperate with the OPA is given by Ruth Duhl, who argues that Jutice’s position can be explained by the notion at Justice that the defendants in cases referred to them by the OPA—a broad cross-section of consumers and business people—were not part of the “criminal class.”[71]  From Biddle’s statement given above, it seems fair to go even farther.  At least some of the time, the Justice Department showed outright disapproval of the OPA and refused to advance the OPA’s cases.

            While many historians, economists and writers of memoirs have addressed the topic of black markets, the question of their significance has yet to be satisfactorily answered.  In a 1947 monograph, Imogene H. Putnam makes a strong effort.  Putnam attributes the OPA failure to prevent black markets during World War II to the agency’s views being distorted by an overabundance of officials drawn from particular professions.  Both because of the nature of the organization and the recruitment tactics of Henderson, the OPA’s upper management was staffed primarily by “lawyers, economists, and industry specialists.”  For Putnam, the OPA’s flaw was that because of its professional makeup, it only thought in terms of rules and technicalities.  Thus the OPA focused overmuch on designing complicated regulatory systems while neglecting public opinion.  According to Putnam, if only more OPA employees had been “a politician, a social worker, a psychologist, or an advertising man,” the OPA would have more deftly courted public opinion, and the problem of the black market would have all but melted away.[72] For Putnam, the arrival of Chester Bowles at the OPA in spring of 1943 finally put “an advertising man” at the head of the organization, and indeed, some problems were solved.  The gasoline black market did after all shrink somewhat by 1945.

Putnam’s interpretation, though interesting, doesn’t seem to hold up well to scrutiny.  Her assertion that public dissatisfaction was the key element of the black market is correct, but her idea that a better public relations campaign would have dramatically changed public opinion is doubtful.  For while the black market in gasoline did fade after Bowles’ appointment as Administrator—well over a year after—Bowles, for all his radio speeches and newspaper interviews, does not seem likely to have been the cause of the gasoline black market’s demise.  The decline in the gasoline black market was far more closely tied to improvements in printing ration coupons that were more difficult to counterfeit coupled with the implementation of Regional Verification Centers.  The answer to the gasoline problem, it turned out, was a technical one after all.  The meat black market, where no similar technical improvements were made, raged on until the end of controls in 1946.  As long as there was a way around OPA regulations, Americans somehow found them.  The black market experience during World War II revealed more than that the approach to economic control was flawed.  Rather, the very idea of an overarching system of economic control was inappropriate and unworkable in the American context.

Works Cited

Baruch, Bernard M.  “Priorities: The Synchronizing Force.” Harvard Business Review Spring 1941: 261-270.

Bowles, Chester. Promises to Keep: My Years in Public Life, 1941-1969. New York: Harper and Row, 1971.

Campbell, D’Ann.  Women at War with America: Private Lives in a Patriotic Era.  Cambridge MA: Harvard University Press: 1984.

Duhl, Ruth et al.. “Enforcement History.” Ts. OPA Enforcement Dep., 1947.

Emerson, Thomas I. Young Lawyer for the New Deal.  Savage: Rowman and Littlefield, 1991.

Lerner, Max. Public Journal: Marginal Notes on Wartime America. New York: Viking, 1945.

Lochridge, Patricia. “I Shopped the Black Market.” Woman’s Home Companion Feb. 1944: 20+.

Mansfield, Harvey C. A Short History of the OPA. Historical Reports on War Administration: OPA. 15. Washington: US Govt. Printing Office, 1947.

Maxwell, James A. and Margaret N. Balcom. “Gasoline Rationing in the United States,” The Quarterly Journal of Economics 61.1 (1946) 125-155.

“7 PM Curfew of Gasoline Said to be Imposed on Eastern Seaboard.” New York Times 1 Aug. 1941, late city ed.: A1+.

“AAA Offers Plan to Save Gasoline.” New York Times. 11 June 1941, late city ed.: A23.

“Baruch Stresses Priorities in Arms.” New York Times 9 Mar. 1941, late city ed., sec. 1: 26.

“Bowles Explains the Operations of Black Markets and Tells How They Can be Broken.”  New York Times  1 Mar. 1944, late city ed.: A13.

“Butchers Shut by Thousands; Armed Forces Short of Meat.” New York Times 27 Jun. 1943, late city ed., sec 1: 1+.

“Food Black Market Costs $1,200,000,000 Bowles Declares.” New York Times 1 Mar. 1944, late city ed.: A1.

“Gasoline Ration in East Nearer; Cards Drawn Up.” New York Times.  6 Aug. 1941, late city ed.: A1+.

“Housewives Cling to Ration Coupons.” New York Times. 2 Mar. 1943, late city ed.: A1+.

“Nation’s Bar Asks for Fair Agency Trials.” New York Times 29 Feb. 1944, late city ed.: A1+.

“Paper Work Found Still Huge Burden: OPA is Most Criticized.” New York Times 3 Mar. 1943, late city ed.: A13.

“Senators, OPA Exchange Charges at Inquiry on Food Black Markets.” New York Times 11 Apr. 1945, late city ed.: A1+.

“Survey Shows 70% in City Use Black Market, a Third of People Make it Regular Practice.” New York Times 14 May 1944, late city ed., sec. 1: 40.

Office of Price Administration. First Quarterly Report for the Period Ended April 30. Washington: United States, 1942.

Palmer, Greta. “How to Combat Black Market Diseases.” Woman’s Home Companion Feb. 1944: 21+.

Putnam, Imogene H. Volunteers in OPA. Historical Reports on War Administration: OPA. 14. Washington: US Govt. Printing Office, 1947.

Rockoff, Hugh. Drastic Measures: A History of Wage and Price Controls in the United States. Studies in Economic History and Policy: the United States in the Twentieth Century.  New York: Cambridge University Press, 1984. [2004 Edition]

United States. Govt. Printing Office. Senate Hearing Before Subcommittee of the Committee on Agriculture and Forestry on S. Res. 92 Washington: United States, 1946.

United States. Govt. Printing Office. Hearing Before a Subcommittee of the Committee on Interstate and Foreign Commerce: Petroleum Investigation (Black Market in Gasoline). Washington: United States, 1944..

Vatter, Harold G. The U.S. Economy in World War II.  New York: Columbia University Press, 1985.

Williamson, Harold et al. The American Petroleum Industry.  Evanston: Northwestern University Press, 1963.

• Return to index
• gtexts blog