America in the late 19th and early 20th century was going through tremendous growth, with mass immigration and the consequent rapid growth of cities and urbanisation, industrialisation and mass production. Teddy Roosevelt, Taft and Wilson, the 3 main presidents of the early 20th century are often known for their many achievements both abroad and at home, and economic problems are one of the many problems that they dealt with during their terms as president.
This essay will touch on the economic problems in that era and how the presidents dealt with those problems. The first of the presidents Theodore ‘Teddy’ Roosevelt was a president who worked successfully as a ‘trust buster’. As industrialisation developed in America, there was a rise of monopolies where big businesses. They started to have major and sometimes even full control of a particular product by buying out rival companies so they were the only business involved for the whole process, and this is called ‘Vertical Integration’.
These caused problems as small businesses were attacked by big businesses undermining the opportunities for them therefore caused uncompetitive business in US. As a response to this problem, president Theodore Roosevelt (TR) enforced the Sherman Anti-Trust Act 1890 which was ignored by previous presidents like Cleveland, and was considered successful. Under this Act, in 1902 TR filed a lawsuit against James J. Hill’s and J. P Morgan’s Northern securities decision which had the aim of trying to merge the three major rail lines to form the Bulington Northern Railroad.
This eventually caused the giant railroad company to disband pushing back the rising power of the big businesses, dismantling the big business back to its original smaller size. Roosevelt’s success in beating the big businesses shows that he was successful in addressing economic problems. In 1903 the ‘Elkins Act’ was passed by congress which allowed TR to punish railroad companies that issued ‘uncompetitive rebates’. This showed TR’s attempts to bring back competitive business back into US by preventing over control of one company over the small companies.
This authority to punish big businesses was reinforced by the 1906 Hepburn Act which increased the power of the Interstate commerce commission to regulate and this authority gave it the power to fix maximum rates. The disband of the big railroad company and the attempts of TR to regulate the rise of big companies by giving strong authority to Interstate Commerce Commissions which dealt issues related to big businesses showed how the rise of the monopolies were now more regulated and monitored. On the other hand, Roosevelt’s contribution in this could be seen as not completely successful as apart from the J. hill’s and J. P Morgan case, T. R brought about 25 indictments of trusts but lost more cases than he won.
This shows that Roosevelt was not all about success in dealing with America’s economic problems but was also a little unsuccessful. While TR was in office, an economic crisis struck which is known as the ‘the panic of 1907’. This was partly caused by the issuance of watered stock by recently merged corporations and the money panic itself revealed that weakness in nation’s currency and banking system has aggravated the crisis. As a response to this crisis, TR signed the bill for the ‘Aldrich-Vreeland Act’ in 1908.
This created the ‘National Monetary Commission’ which had the job of studying and recommending the reform of the currency and banking system. In addition, this act allowed National Banks to issue notes on a wider range of securities than previously allowed suggesting that it was now better monitored. Most importantly, this act allowed banks to use the bonds of states, cites and countries along with commercial paper allowing more money to be put into circulation as ‘liberalisation’ for a faster and efficient recovery of the money.
This shows TR’s intuitive idea in attempting to recover the economy. However the National Monetary Commissions was weak as the reports of studies were not issued until 1912 suggesting that it was not very efficient. Also, many conservatives claimed that Roosevelt had caused the jolt of this panic by destroying big businesses’ confidence through trust busting. This could mean that this also was a good attempt of Roosevelt as illegal actions of big businesses was being monitored but wasn’t very efficient.
Compared to the very active TR, Taft was quite a quiet president and is thought not to have done much during his term as he had more intent in providing more efficient administration for the existing policies. Despite this, he is known as ‘the great trust-buster’ as he conducted more trust prosecutions, 99 in all (compared to the 20 odd that Roosevelt managed). The most famous antitrust cases under Taft were, The Standard Oil Company of New Jersey and the American Tobacco Company, which were actually cases that Roosevelt had started.
He had also won cases like getting the American Sugar Refining Company to break up the ‘sugar trust’ which rigged prices. Overall this shows that Taft, despite his conservativeness, made major corrections that needed to be made to the economy, proving his success in dealing with economic problems. Despite his success in trust busting, by 1911 Taft began to back away from his antitrust efforts. This was largely due to the criticism he received from his conservative business supporters and his uncertainty of the long term effects that trust busting had on the national economy.
In some way his decision to step away from the trust busting was dignified as it was true that the big businesses were the ones keeping America at the forefront of world trade, but generally it showed his cowardice in not wanting to confront the big businesses which made him seem like a weak politician. This shows how Taft might not have been all that successful in attending the economic problems, but at the same time shows how he may have been passive with the trust busting with the intention of future stability of the American economy. Taft showed more of his successful and unsuccessfulness with the passing of the Payne-Aldrich Tariff Act.
The tariff was passed by Congress in 1909, and it was the first change in tariff laws since the Dingley Act of 1897. The issue had been blatantly ignored by Roosevelt during his terms and the Republicans wanted to revise the tariff downward. To do this Taft called Congress to a special session, and the bill was promptly passed, reducing rates. The senate substituted a bill which reduced the number of downward revisions and increased many others. This angered many and so a compromise bill was adopted which moderated the high rates that Aldrich had pushed for.
Overall the tariff lowered 650 items, raised 220, and left 1150 unchanged. Although it was a push economic change, it was a largely protectionist move from Taft, showing that he had not much determination in fixing economic problems. But at the same time it shows that tariffs were needed to maintain some leverage in the economy, which could show that Taft was fairly successful. Another change in economic policies which Taft changed was the passing of the 16th amendment. In 1909 during the tariff debate, Taft proposed income taxes for corporations.
His proposed tax on corporate net income was 1% on net profits over $1500, and this lead to receipts growing from $21 million in 1910 to $34. 8 million in 1912. On July 1909 a proposed amendment to allow the federal government to tax incomes was passed, but was quickly ratified by the states and on February 1913 it became the 16th amendment as part of the Constitution. The passing of the amendment shows Taft’s successfulness in fixing America’s economic problems. President Woodrow Wilson was another successful president in addressing America’s economic problems.
America had problems of having to be pushed out in international competitions and caused problems as high part of the income of the nation was due to export. Therefore he came up with the ‘Underwood Tariff’ in 1913 which reduced duties and freed certain items such as food and wool which were produced cheaply in the US. This prevented the US from wasting money importing as these items were produced within the country cheaply and so did not need protection from foreign competitions showing how Wilson’s attempts of preventing the wasting of money on imports was successful.
Wilson also made sure that an economic crisis wasn’t going to hit America. The ‘Federal Reserve Act’ in 1913 created the first banking system in the US. This bank could lend money to member banks at rediscount rates meaning that the money was no longer dependent on gold. This allowed the value of money go lower. Moreover, the control of the federal reserve bank (centre bank) allowed to prevent inflation and deflation as other federal banks were discouraged to borrow money when they faced inflation as the federal reserve bank increased the rediscount rates allowing the money to reduce in circulation and vice versa when deflation was met.
This system allowed the US from being prevented from facing hyperinflation and deflation which could have led to a depression or economic crisis like the one in 1839 or the one in 1907 when Roosevelt was in office. This showed how successful Wilson was to work against economic problems as he has considered the past’s economic crisis and got into action in order to not repeat the same mistake, as the 1907 panic was caused by the weakness of the banking system. President Woodrow Wilson also is known to be a successful president as a trust buster.
He tried to prevent injustice in business as he came up with ‘Clayton Anti-Trust Act’ which replaced the ‘Sherman Anti-Trust Act’ in 1890. It made certain businesses’ practices illegal such as price discrimination where some big businesses were able to have less paying through negotiations and this was common issues monopolies which tried to have full control illegally which caused uncompetitive business. Therefore this action of Wilson showed his strong attempts on reducing the power of big businesses by also bringing back the competiveness in US business.
In order to reinforce and regulate the rising powers big businesses, President Wilson created the Federal Trade commission in 1914. It was a board of 5 members who had power to oversee businesses controlled in interstate trade by requiring annual reports and investigation, and this was the first time for companies to hand in reports such as advertising and labelling which showed that Wilson was much more keen to regulate the rise of big businesses than any other presidents.
This action of Wilson showed how he was regulating illegal actions of big businesses by checking and looking regularly to prevent illegal movements of big businesses therefore allowed the ones guilty to be punished suggesting how he was very successful as he prevented monopolies and trusts. Despite all the presidents having contributed their part to aiding the American economy, we feel that Wilson was the most successful of the three in handling economic problems.
We feel this because, even though Roosevelt and Taft ‘trust-busted’ and managed to handle some economic problems, Wilson was very successful as he created many solutions which were both successful and efficient compared to the inefficiency of Roosevelt and the minor contribution that Taft made to solving America’s economic problems. Wilson was especially successful due the creation of the Federal Reserve Bank, the Underwood tariff and the Clayton Anti-Trust Act which all help fix and then further strengthen the American economy.