Can the governor of a state like Illiinois or California that has a lot of medical and manufacturing infrastructure pass a law or executive order demanding that private industry refocus on making medical supplies necessary to address the coronavirus?
Or is there only a federal law?
Are states able to even pass laws like this that giver the government the ability to overrule private industry during an emergency?
In general, in the US system, the federal government can only do whatever the Constitution allows it to do, but the state governments can do anything that the Constitution doesn’t prohibit them from doing, as long as it doesn’t conflict with federal law.
Some state constitutions might prohibit this: With fifty to choose from, you’re bound to find all sorts of things. But if they don’t, then the state can.
What is the purpose of a defense production act? Any business is already producing as much product as they can sell. Right now relevant businesses can sell as much PPE etc as they can make. Ordering General Motors to start making ventilators doesn’t strike me as useful. It might be good optics, but if GM has some reservoir of talent in making ventilators they surely (and in fact are) would be doing so on their own.
Does such an order give new companies access to established companies designs and manufacturing expertise? The majority of ventilators are made in China for instance. Telling GM to get with he program doesn’t magically given them access to Chinese or Swiss expertise or their supply chain.
What is the point?
The point is that existing producers of ventilators have only their existing capacity (square feet of production facility, number of employees, etc.) to produce so many ventilators per day, etc. Ordering them to make more can’t make the capacity just “poof” increase. And even giving them money to increase their capacity would take time.
Ordering a company like Ford or GM, with a high level of manufacturing expertise to convert from producing autos at some of their plants to producing ventilators can be done more quickly than attempting to increase capacity at an existing ventilator manufacturer. It’s not like these machines are rocket engines. They can be easily taken apart and backward engineered to determine how to manufacture them. This what Ford and GM are doing. They will also be paid by the government who will purchase them.
Any state can impose martial law within it’s borders. I don’t know if the use of martial law to direct a business as suggested in the OP has ever been used before, but without state constitutional restrictions any governor may be able to wield such power.
States clearly can pass such laws, they could be eventually overturned at the Federal level, but that might be difficult to do before a reasonable law of this nature was put to actual use.
A state like California could mandate biotech companies to prioritize making tests for coronavirus as well as antibody tests to test for who has already recovered from infections. They could also mandate manufacturers make ventilators. They can also mandate companies with the equipment focus on PPE and mandate all these industries switch to a 24/7 schedule I assume.
A business produces whatever product sells for the most profit. In the middle of wartime, maybe making cadillacs earns the company more money than making B-2 bombers. So you use the DPA to make the factory switch from making cadillacs to making bombers.
That’s not correct. Businesses in that industry will be optimized to meet the demand that they had before the crisis hit and demand went through the roof. Generally companies would not want to pay for the capability to produce 10 million masks a month if they only expected to sell 3 million per month during normal times.
So the DPA gives several tools to government: first, to be able to “cut in line” ahead of all other potential buyers to get first dibs on critical items. Second, it can direct companies to increase production of such critical items. Third, it allows the government to pay businesses to increase production by investing in new tooling or suppliers or whatnot.
So for the business optimized for 3 million masks, the government doesn’t just storm in and say “make more! I’ll be back in a week!” It can flood the company with cash and loans to buy new machinery, or qualify new suppliers, in order to meet that requirement.
It’s not just about production though, it’s about allocating the goods. Right now those businesses are producing as much as the can, and selling to the highest bidder, which isn’t necessarily optimal. There’s even a company that was paid by the US government to design and manufacturer low-cost ventilators, but still hasn’t shipped any to the US government but is now exporting the commercial version of the ventilator.
My brother works for 3M and said they absolutely cannot make masks fast enough. They’re at capacity. There’s nothing they can do to crank out any more than they already are.
If another factory with remotely similar capabilities was compelled/mandated/forced to start making masks, 3M could send some of their people over there and get them up and running in fairly short order.
I wonder how they handle trade secrets?
Companies specialize in the goods they think they are best for their particular purposes. They may have the technical ability to build other products but don’t do so for any of a hundred reasons. E.g., back before WWII the automakers had the capacity for building tanks but there wasn’t a market for them.
GM didn’t have a good incentive on its own to take a shuttered factory, find out all the technical intricacies of building ventilators, retool the factory, train its workers to run the new machines, and endure the other problems and headaches. Telling them to do so under the DPA might have been a good move, since they’ll get compensated for their misery. I say might because I have no idea whether GM was the right company to approach.
Whatever. Getting a company not producing ventilators to do so is exactly the right move in an emergency. Technical expertise for a known, mature product is easy to acquire. Normal supply chains are not an issue; there is one buyer: the government. Any marketing considerations from normal times are irrelevant now. The free market is tossed aside in wartime, and rightly so. We are all socialists now.