WILSON'S DESTINY, Part II
 
By:
Byron King
Date:
04/08/2004
Location:
Learning Centre: Banking, Economics, Money, US Government, US History


Yesterday, we began to explore the impact President Woodrow Wilson has had on the international system. The world, we wrote, still spins on a Wilsonian axis. Yet how did one man manage to impart such a lasting legacy - one that has shaped national and world events ever since?

Wilson clearly could not have achieved what he did without the help of a few key tools. The first year of his presidency say the advent of three elements which would, as Wilson put it, greatly assist him in putting government "at the service of humanity." Today, we look at how Wilson used these tools... and how his actions have shaped the world we know today.

Wilson was an activist in expanding the federal role in the economy, pushing through such legislation as the establishment of the Federal Trade Commission (1914) and the Federal Farm Loan Act (1916). Both of these laws brought the federal government into the daily lives of Americans, in a way that would have been incomprehensible to the Founding Fathers.

On the international front, during his first term Wilson embroiled the U.S. in Mexico's civil war, up to and including invading Mexico, a bone of contention between the two nations ever since. (In his second term, Wilson would send U.S. troops into Russia to oppose the Bolshevik Revolution, but this gets ahead of the story.)

When the Great War broke out in Europe in 1914, Wilson's administration of U.S. international trade and monetary policy was decidedly lopsided, and certainly lacking in a sense of balanced neutrality towards all belligerents. The Wilson administration forbade "loans" by U.S. banks to the warring powers. Yet Wilson's administration permitted U.S. banks to extend massive "credits" to the French and British, thus creating an economic situation in which the U.S. bankrolled their conduct of the Great War.

Without U.S. "credit" to fund their purchases in 1914 and 1915, such credit extended into the economy by the U.S. Federal Reserve and its "elastic currency," it is quite likely that Britain and France would have run out of cash after a few months of fighting. In all likelihood, Britain and France would have had to make some accommodation for peace with Germany, and bring the War to a relatively swift conclusion. But absent peace imposed by the pocketbook, the European war went on and on, sucking more nations into the fray and wrecking the lives and cultures of many peoples.

It cannot be overstated that, during Wilson's first term in office, European combat was funded and supported on the Allied side by U.S. money, its elastic currency, and U.S. materiel. Meanwhile, Germany, a militaristic culture lacking any real internal political process that would sanction failure of its armed forces to prevail, had little choice but to dig deeper into its economy and fight on.

In essence, Wilson's economic and trade policies, abetted by the Federal Reserve, perpetuated the European War. They also led to (and even required, from a military standpoint) German submarine warfare on the high seas. That is, with submarine technology at its disposal, German military strategy had no other option but to sink ships carrying war materiel to Britain and France. So long as U.S. "credit" paid for the materiel, the ships would sail and the cargoes, once landed, would threaten Germany.

There was deeply rooted opposition in the U.S. electorate to any direct American participation in the European War. However, the nation enjoyed the economic boom times caused by the war-related orders pouring in from Britain and France. Mines, mills, factories and farms all posted and received premium prices for their wares, courtesy of U.S. "credits" to the Allies and the newly created Federal Reserve and its elastic currency. The economic myth was that the Allies were supporting the booming U.S. economy with their purchases of war materiel. The reality was that the Allied purchases were based on U.S. credits, supplied
ultimately by Wilson's new creation, the Federal Reserve. Thus, the war boom was at root simply inflation created by the FED.

Running for his second term in 1916, Wilson's campaign slogan was "He kept us out of war." This was not quite correct, because by 1916 the U.S. was deeply invested in the British and French role in the fighting. After Wilson was safely re-elected for a second term, his obstinate pursuit of his otherwise failed economic and trade policies favorable to Britain and France led to a point where German submarine warfare became an American cassus belli. Less than ninety days after beginning his second term, Wilson called upon Congress for a declaration of war against Germany.

Domestic opposition to Wilson's policies was intense, particularly within the large Irish and German populations in the U.S. But Wilson, the learned scholar of Government and former President of Princeton, was prepared to control this dissent with some of the most sweeping laws ever passed to limit free speech and political dissent. And Wilson's Federal Reserve and newly enacted national income tax funded the war effort, all the while giving Wilson the resources he needed to expand his domestic vision of a powerful central government that literally took over many elements of U.S. industry.

According to historian Robert Nisbet, "The blunt fact is that when (under Wilson) America was introduced to the War State in 1917, it was introduced also to what would later be known as the total, or totalitarian, state."

As if the foregoing accomplishments would not be enough for any president, whether or not "ordained" by God to govern, another of Wilson's enduring legacies was a direct outgrowth of U.S. participation in the Great War. This was Wilson's effort to shape the peace and his remarkable turn of phrase, to "make the world safe for democracy." This term, and its underlying panglossian concept of remaking the world in a Princeton-honed image of American participatory government, has haunted U.S. policy ever since it was uttered. Nine decades later, U.S. foreign policy is fundamentally Wilsonian. The concept of a world "safe for democracy" has such Jovian gravity as to be inescapable, and essentially all modern political debate in the Western world is framed in its terms.

But a "world safe for democracy" requires certain underlying assumptions of power and price, which are the key elements in "making" anything happen anywhere, and certainly in "making the world safe for democracy." Whether he understood the implications or not, Wilson had a Federal Reserve, an elastic currency, and a national income tax with which to do his bidding. Not all peoples, races and nations are so fortunate.

Had Woodrow Wilson never been president, would the U.S. and the world have had a far different 20th Century? Or was Wilson just one man in a particular time of great change, a man who articulated concepts that were beneath the surface and waiting to be revealed? When Wilson walked into the White House in 1913, Germany and Italy had already spent 40 years creating and building centralized, debt-financed governments. In this regard, Wilson was an imitator, not an inventor. So did Wilson make history, or perhaps give it a shove in a particular direction, or was he merely governed by historical forces whose time had come?

These types of questions are endless, and just asking them certainly gives one thoughts of a world far different from this one in which we live. Absent Wilson, would there have been a U.S. central bank, the Federal Reserve, to fund the type of world economy that has evolved? Absent Wilson, what would U.S. politics have done with the 16th Amendment, the income tax amendment? How did Wilson's presidency effect the direction of the national income tax? And absent the tax revenue, what would have happened with the early growth under Wilson of centralized federal power in the U.S.?

Absent Wilson's inept neutrality, his biased diplomacy and willingness to throw U.S. dollars into the Great War on the side of Britain and France, would the U.S. have become involved in what was later named World War I? Would the Great War have lasted so long and caused so much damage to the fabric of European civilization and colonial influence? Would the world ever have heard, just a few years later, of war veterans such as Herr Hitler and Signor Mussolini?

Absent U.S. participation in the European War, would a pedestrian lawyer, and middling state-level politician named Franklin Delano Roosevelt have found his first federal job as Assistant Secretary of the Navy? Would the U.S. ever have bred such soldiers as Douglas MacArthur and Harry Truman, and most of the rest of the list of future political-military leaders of mid-century?

Absent events put into motion by Wilson, would the Great War have lasted so long as to cause Russia to break up and descend into a Bolshevik Revolution? Absent Wilson, would U.S. troops have gone ashore in Russia to take sides in the matter? In another region of the world, absent Wilson, would the Ottoman Empire have dissolved, to spawn the modern politics of the Middle East? And absent Wilson, would the concept of League of Nations/world governance ever have gained the traction it did?

Woodrow Wilson said that he wanted to put government "at the service of humanity." But when you distill things to a basic essence, Wilson bequeathed his nation, the world, and "humanity" the legacy of federal credit, national debt, a large centralized government, and an imperious, if not crusading, international moral ideology built and financed thereon.

What is more, Wilson's legacy has lasted for nine decades and today seems immutable. None who are alive have experienced anything different from a Wilsonian world. No one can remember or recall first hand any time when this world of ours worked otherwise. And when things change, and change they certainly will, most people will be trapped in a Wilsonian paradigm and not understand what is happening.


Regards,

Byron King
for The Daily Reckoning

Editor's Note: Byron King has been engaged in the private practice of law for 14 years and currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University.


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