Study Guide: Woodrow Wilson, Banking, and American Imperialism

Overview of Woodrow Wilson's Progressive Reforms

  • Sixteenth Amendment: Introduction of a graduated income tax

    • Aimed to address unfair tax burdens on different classes

  • Previous Discussion: Woodrow Wilson's attempts to control tariffs via the Underwood Tariff Act

The Wall of Privilege: Control of Banks

  • Context: Wilson aimed to dismantle the privilege of banks treating middle and lower classes unfairly

    • Banks serve a vital role in the economy as institutions for storing and borrowing money

  • Problems with the Banking System:

    • Access to Loans:

    • Poor individuals face rejection due to perceived low likelihood of success in starting a business

      • Example: Requesting a loan of $10,000, banks dismiss the poor as high-risk borrowers

    • Middle-class individuals receive loans but face higher interest rates

      • Example: Average interest charged for loans can range from lower rates for the wealthy to exorbitantly high (e.g., 20%) for middle-class borrowers

  • Interest Rates:

    • Define interest rates as the fee paid to banks when borrowing money

    • Example of Interest Calculation: Borrowing $10,000 at 10% interest equates to repaying a total of $11,000 (principal + interest)

Federal Reserve Act

  • Creation and Purpose:

    • The Federal Reserve Act was passed to create the Federal Reserve Board

    • Aims to regulate interest rates across the nation to promote fairness and control the money supply

Monetary Policy

  • Definition: Monetary policy refers to the regulation of money supply and interest rates by the Federal Reserve

  • Historical Context: Previous discussions of monetary policy related to gold standard backing of currency

  • Impact on Economy:

    • Controlling money supply helps prevent inflation, which is the decrease in value of currency

    • High money supply leads to inflation, causing the dollar’s value to decrease and prices of goods to rise

Interest Rate Mechanics

  • Controlling Circulation:

    • An increase in interest rates discourages borrowing, leading to reduced money circulation

    • Example: If the Federal Reserve raises interest rates, consumers and businesses are less likely to take loans, subsequently slowing economic activity

  • Consequences of Low Money Circulation:

    • Business expansion is hindered, potentially leading to unemployment and economic recession

    • Recession characterized by reduced hiring and increased layoffs

Federal Reserve's Role in Managing Economy

  • Acts as a regulator of economic health by adjusting interest rates to either stimulate growth or curb inflation:

    • Tools for manipulation of the economy include raising or lowering interest rates

    • High rates discourage spending and increase savings, controlling inflation

    • Low rates encourage borrowing and spending, stimulating economic expansion

The Second Wall of Privilege: Monopolies and Trusts

  • Federal Trade Commission (FTC):

    • Established to oversee business activities and prevent monopolistic practices

  • Antitrust Legislation:

    • Introduction of the Clayton Antitrust Act—an enhancement over the Sherman Act to prevent monopolies and promote fair competition

    • Government empowered to dismantle monopolies that abuse power

  • Historical Example of Wilson's Limitations:

    • Alignment with coal owners during a miners’ strike demonstrated inconsistencies in Wilson's progressive stance

Assessment of Progressivism

  • Achievements:

    • Rate: B+ due to accomplishments including multiple constitutional amendments (16th-19th) enhancing social justice and economic fairness

    • Critique: Lack of action addressing racial issues and discrimination limits the movement’s eligibility for an 'A'

World War I and the Decline of Progressivism

  • Impact of WWI: Transition to greater focus on global events over domestic issues, leading to the decline in progressive momentum

Transition to Imperialism

  • Contextual Shift: Imperialism occurred concurrently with Progressive Era reforms under presidents McKinley, Roosevelt, Taft, and Wilson

Definition and Types of Imperialism

  • Definition: Dominance of one country over another through military, political, economic, and cultural means

    • Four Ways of Dominance:

    1. Military: Control through armed forces

    2. Political: Governance and administrative influence

    3. Economic: Extraction and exploitation of resources

    4. Cultural: Imposing societal norms and practices

American Values and Imperialism

  • Contradiction with foundational American values of freedom and independence (from British colonialism)

  • Shift in perspective towards imperialism driven by economic motivations

Reasons for American Imperialism

  • Economic Motivations:

    • Extraction of resources (e.g., Alaska for oil, coal, and lumber)

    • Desire for new markets due to overproduction in American factories

  • Global Competition:

    • Pressure to compete with European imperial powers for economic dominance

  • Naval Strategy and Alfred Mahan:

    • Emphasis on naval power; proposed that a robust navy necessitates control of islands for refueling and logistics during military campaigns

  • Social Darwinism:

    • Views supporting imperialism as a means to civilize perceived lesser cultures, encapsulated in the term "white man's burden"

    • Advocated the idea that the U.S. had a moral responsibility to uplift other nations through cultural influence

Key Figures Influencing Imperialism

  • Alfred Thayer Mahan:

    • Notable for his assertions on naval power and its necessity for a great nation

  • Josiah Strong:

    • Promoted the idea that America's mission was civilizational, bolstered by social Darwinist beliefs