Study Guide

The Progressive Era:

• The result of all of this consolidation in the industrial frontier was to create the effect of mass man in mass society. This feeling of isolation which developed within the individual during this period of rapid industrial growth of the l 870's, 80's, and 90's led to the development of what two types of insecurities for society?
• What did the Sherman Antitrust Act try to make illegal?
• What year did it become law?
• Was it effective? Why or why not?
• What group of people was the law used against?
• What years did the Progressive Movement take place?
• What two political schemes did the executive branch put forward during the progressive era as a result of progressive impulses?
• What were the six problems progressives faced. Write at least two sentences explaining each one.
• What does a “muckraker mean”? What profession did MRs belong to?
• Who did Ida Tarbell take on and what did she “dig up”?
• What did Lincoln Steffens expose?
• What did Upton Sinclair expose and what were the legislative results?
• What legislative act made it illegal for business and corporations to give “rebates”?
• Was it effective?
• Why or Why not?
• What legislative act made it finally possible to regulate R.R.s at the Federal level?
• Was it effective?
• Why or Why not?
• What gave Theodore Roosevelt the reputation of being on labor’s side?
• Wilson’s “New Freedom” was designed to do what three things?
• What was the intent of the Underwood Tariff?
• What was the sixteenth amendment and why was it needed at the time?
• Why was there a consensus of liberals and conservatives for real currency reform?
• Describe what the conservatives wanted?
• Describe what the liberals wanted?
• How did the Federal Reserve Act change the American banking system?
• Before the act, the banks were __________ owned and were ____________ controlled
• After the legislation banks were __________ owned and were ____________ controlled
• What was the new currency called that came out of the Fed. Reserve Act?
• What were the two major bills that came out of the Wilson’s administration that attempted to regulate big business?
• Where they effective?
• Why or why not?

CHANGING VALVES WITHIN SOCIETY

The Progressive Era

Learning Objective I

Discuss the change in values in American society and how this change was implemented at the state and federal level on industrial regulation.Discuss the acceptability of the big SIX Values Landed Frontier.

As a result of the experience that Americans had on the landed frontier up until 1890, the "big six" values (opportunity, survival of the fittest, pragmatism , the rugged individual, laissez faire, and social mobility) were found to be acceptable.

These values were found acceptable because Americans felt they- could identify with them and could, perhaps, apply them to their own lives. For example, in the landed frontier it was man vs. the environment, so competition was thought to be good. An individual who could compete against the environment and improve himself against the environment was thought of as the ideal man.

When the industrial frontier developed, Americans followed a natural course by applying the values they had relied upon in their past to their present situation. Their present state was an industrial frontier which differed from the landed frontier in one respect: man was_,pitted <l;gainst man in the competition to acquire natures scarce resources. In the landed frontier it was man vs. environment.

The problem with this type of competition was that the weaker individuals in society who could not compete with a Rockefeller or a Carnegie constituted the majority of people in society. This majority then classified the damage inflicted against them by stronger, more successful individuals as social abuses.

These social abuses came in the form of pooling, rebates, drawbacks, etc., which served the interests of the strong directly, while at times not being in the best interest of society.

By the 1890's the degree of built up dissatisfaction was so great that the majority of the American people were ready to accept a new value system and demanded that the government protect them against the social abuses inflicted upon them.

Discuss the development of government regulation and the beginning _Qf the acceptance of a new value system within society.

As already discussed, during the period between the 1870's and early 1900's large firms expanded at the expense of smaller ones by the process of incorporation.

Trust regulation:

In the 1880's the American public began to demand effective regulation of the trusts; but the problem of regulation was seriously hampered by the federal form of government.

Corporations were chartered by the states, not the nation.

One problem was that a corporation chartered by one state had the right to do business in every other state. Consequently, corporations escaped the restrictions of strict state laws by incorporating in states such as New Jersey and West Virginia where the laws regarding issuing stock and accountability to directors were lax.

Another problem arose because the constitutions of many states contained prohibitions against monopolies or conspiracies in restraint of trade; but most state prohibitions were ineffective, especially: after the federal courts used the 14th Amendment to protect corporations.

The Supreme Court erected similar barriers against the federal government through narrow interpretations of the Constitution. In 1895, it ruled that the power to regulate interstate commerce did not cover manufacturing. This started with the Wabash Case of 1886 and continued until the early 1900's.

The Supreme Court erected similar barriers against the federal government through narrow interpretations of the Constitution. This is exemplified with the Court's actions against the Sherman Antitrust Act of 1890.

The Sherman Antitrust Act of 1890:

As a result of widespread agitation during the late 1880's, Congress enacted the Sherman Antitrust Act.

The act was signed into law by President Benjamin Harrison on July 2, 1890. It stated: "Every contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations is hereby declared to be illegal.. .."v

It is difficult to determine the precise purpose of the act. It appears to be a tokenism to the American public because Congress provided no definition of the terms "trust," "conspiracy, and "monopoly", thus leaving the courts the task of interpreting and applying them.  

By placing responsibility upon the courts, the legislators evaded the problem and put the solution off indefinitely because, as discussed, judicial regulation proving effective.

This can be exemplified in the 1895 case of the U.S. vs. E. C. Knight & Co., in which the Supreme Court held that the mere control of 98 percent of the sugar refining of the country did not in itself constitute an act in restraint of trade.

The responsibility for the failure of the Sherman Antitrust Act should not be charged exclusively to the judiciary .

The legislature failed to amend the act; the executive failed to enforce it because the economic and social philosophy of the time had a very strong influence on their decisions and actions. It was only when the law was applied to labor unions was it somewhat effective; strikes were in restraint of trade.

The irony of the act was that it was used by big business as a tool to enforce its will against labor, for example in the Pullman strike of 1893-94.

The organization of U.S. Steel in 1901 when Andrew Carnegie sold it to J.P. Morgan climaxed the concentration of industry and transportation in large units such as pools, trusts, and holding companies .

Of the seventy-three largest industrial companies in 1900, fifty-three had not existed three years earlier.

By 1910, one percent of the nation's manufacturers accounted for 44 percent of llie t0tal industrial output.

From 1902 until America's intervention into World War I there was a move by society and different presidential administrations to bust the trust.

The result of all of this consolidation in the industrial frontier was to create the effect of mass man in mass society. This feeling of isolation which developed within the individual during this period of rapid industrial growth of the l 870's, 80's, and 90's led to the development of two types of insecurities for society:

1. Economic insecurity ......the general public needed economic guarantees. 

2. Psychological insecurity ......the general public needed political intervention and protection from the new industrial trusts as the feelings of isolation and helplessness developed as a result of this new industrial growth.

Thus starting in the late l 800's government -policy was starting to move in the direction for the security for individuals within society.

This 'trend developed as a result of the pressure put on government by the common man to have the government solve the common man's problems of economic and psychological insecurity .

Thus, government was doing for the people what.the people could not done for- themselves .

This pressure put upon government in the late 1800's led to the institutionalization of these new government activities and the permanent establishment of a new value system in America with the creation of the New Deal.

The late 1800's marked the starting point and the New Deal marked the permanent acceptability of the new values and new role and responsibility of government

Learning Objective Two: Define the progressive movement.

The years from the beginning of Theodore Roosevelt's presidency in 1901 until 1917 when the United States became involved in World War I are generally known as the progressive years or era.

This was an age dominated by a passion for social progress and reform in politics, business, and morals.

As its name implies, progressivism was a movement founded on the notion that further progress toward social justice was necessary if democracy was to survive.

Progressives aimed to correct what they considered to be the most serious social faults of the American way of life which had accompanied the growth of big business in the post-Civil War period

Federal regulatory agencies were established in an effort to curb monopolies and restore competition. Trust-busting, not necessarily successful, was the order of the day. Tariff and banking reform. For labor, the improvement of working conditions were undertaken .

Laws were passed protecting the consumer against abuses by meat packers and food and drug manufacturers.

Out of this progressive impulse arose both the "Square Deal" of Republican Theodore Roosevelt and the "New Freedom" of Democratic Woodrow Wilson. The progressive movement laid the philosophic and some of the legislative foundations of the New Deal.

Learning Objective Three:

Discuss the six problems which faced the progressives. 

The first problem was the confusion of ethics:

A confusion of ethics developed when society tried to take the moral code and values of a simple agrarian society (SAS) and tried to apply those moral values to a highly complex industrialized society (HCIS).

In the Landed Frontier, man was independent and only vulnerable to elements of the environment. The "Big Six Values" and moral codes (Social Darwinism, laissez faire, rugged individual , etc.) worked well there.

In HCIS man is interdependent upon certain elements within society for survival (upon the integrity of certain individuals and companies.) He is vulnerable to elements of complex society because he is dependent upon them for survival. The more complex society becomes the more vulnerable its people become .

Social sins and responsibility in society:

Man is a product of his environment and the environment advocated certain values . John D. Rockefeller and J.P. Morgan were only doing what society advocated. This created social sins or abuses and as more and more social sins were committed pressure was put on government for protection.

Simple agrarian society:

In simple agrarian society, social and personal morals are one and the same because you are doing business with your friends and neighbors . Direct responsibility: in most cases, social sins were not committed on purpose.

In a highly complex industrialized society, there are two sets of moral codes. ( 1) In business, the moral code is survival of the fittest or the en justifies the means. (2} In personal relationships, the 'general rule is to treat people honestly and as you would a friend.

In a complex industrialized society , there is also the diffusion of responsibility which makes social sins difficult to detect and difficult to stop.

Diffusion of responsibility developed as a result of the isolation between the corporate producer, the marketing system, and the consumer. The complexity of corporate America made it easier for management and the worker to carry out the social sins. Hence, the impersonality of social sins, along with the complexity and diversity of the new industrial society , made it difficult to fix responsibility on any one group .

The Progressives had to educate the public to a new morality. and to new values in order to make business more responsible and operated on personal morality , instead of social morality . In order to protect people, they had to do the following :

Educate the Public to abuses .

This was accomplished mainly by the muckrakers who exposed social ills and put Pass laws to make the social sins or abuses such as horizontal trusts, railroad rebates , and drawbacks illegal.

Third, create an administrative bureaucracy (i.e. Pure Food and Drug Administration) to enforce the laws--to protect individual rights.

Trust Regulation:

New social and economic problems within society developed when the "economic base" or organization of society changed from a simple agrarian society to a highly complex industrialized society. Trust regulations were Roosevelt's and Wilson's way of dealing with this change in the "economic base" caused by the rise of big business, the growth of trusts and monopolies .

Uneven Distribution of Wealth:

The problem of an uneven distribution of wealth came about because a small percentage of people had a large percentage of the wealth which provided for an unhealthy economy. The corporation was the key tool used to create this situation along with the trickle-down theory or supply-side economic philosophy .

For example, the first half of the nineteenth century saw the rise of only a few large fortunes. Most of these came from off the land or in shipping.

The industrial revolution changed all of that. An estimate in 1890 indicated that 12.5% of the people owned 87.5% of the property. It should be noted these people used their economic power to avoid just taxation and regulation of their property.

The great fortunes of the late nineteenth and early twentieth centuries came from the land, but from the exploitation of workers, as well as natural resources manufacturing , banking , and speculation.

In 1892, the New York Tribune compiled figures on the millionaires of the country.

There were 1,000 millionaires from merchandising , 600 in manufacturing , 300 in banking , 200 in transportation , and 26 farmers had made the grade.

The Rise of the American Cities American cities

had a rapid unregulated growth during the late 1800's as a result of people moving in at a faster rate than the cities could adjust. This growth created problems such as housing , health and sanitation and crime. ,•

The number of prison inmates in the United States increased by 50% in the 1880's and the homicide rate nearly tripled , with most of the rise occurring in the cities.

People were moving to the cities because they saw new opportunities which were no longer available to them in the landed frontier.

Political Corruption:

Whether working within the framework of the city, state, or federal government, the reformers frequently confronted the fifth major problem: the prevalence of political corruption. The progressive movement in politics started in the cities, spread to the state, and ultimately reached the federal government. The reasons for the breakdown of the political system were that the administrative organization, inherited from a simpler day, could not function under the weight of its new duties as it lacked the financial ability and administrative structure to solve its own problems. Also, the legitimate financial rewards of politics were so meager that able men preferred business and political offices became good only for the extra-legal benefits they brought.

Race Relations:

With the Compromise of 1877, the position of the black man deteriorated . From 1877 to 1901, the Supreme Court decisions basically undermined their position in society .

In the Civil Rights Cases of 1883, the Supreme Court ruled that the federal government hao no jurisdiction over su,ch matters as social discrimination directed by private-persons or organizations against persons of a different race or color.

In 1896 the Court held in Plessy v. Ferguson the separate but equal facilities satisfied the 14th amendment 's requirement that the states give "equal protection of the law."

The black man was left to fend for himself and with the help of some white sympathizers in the progressive movement tried to gain his rights in society through two different approaches.

Booker T. Washington was a black leader in the 1890's who was looked upon as a spokesman for the majority of the black people. He felt the black man should remain quiet, not be a social or political disturber, and try to improve his economic worth with education and new skills. If the black man improved, then society would reward him by giving him social and political equality.

W.E.B. DuBois was involved in the Niagara movement which eventually became the NAACP (DuBois was the only black ; he was Director of Publicity). DuBois felt the only way a black man could get equality in society was to gain his political rights . Blacks needed to get laws changed and get their political and civil rights guaranteed before they could enjoy economic and social benefits from whites.

Both of these views have merit, but must be done simultaneously to be effective as a solution for the black man. It is also necessary to try to modify the white's attitudes and behavior towards the black people in society.

Learning Objective Four

Define and discuss "Muckraking" and show how it was an effective tool used by the progressives to solve society's problems.

Muckraking , which suggests "digging up dirt," got its name from a speech made by President Theodore Roosevelt in 1906 about the journalists who were exposing corruption in American society . The time period during which much of this muckraking took place was from 1902-1912.

The term "muckraker" was reserved for the journalists and novelists of the Progressive era, but the literature of protest began some two decades earlier and was the work of philosophers and social scientists like Lester Ward and Henry George.

Historians date the start of muckraking with Lincoln Steffen's "Tweed Days in St. Louis" in the October, 1902, issue of McClure's, for it was not until then that such writing captivated the nation .

Muckraking arose, not because Americans fell in love with honesty, but because of the radical changes which society had just undergone.

Muckraking flared up at about the time when land was no longer freely available and large scale industry had begun to make clear that success was no longer easily possible for everyone.

The muckrakers did the work that no one else was prepared to do. They exposed the particular inequities that afflicted American life, stirred public opinion to the point where it was willing to support men like Roosevelt and Wilson in their reform programs, and planted the seeds of progressivism which the politicians were to harvest.

Muckraking was primarily a magazine phenomenon made possible by the development of the inexpensive periodical (McClure's, Everybody's, Cosmopolitan, and Collier's) with mass circulation willing to deal with controversial questions.

Examples of muckraking:

The January, 1903, issue of McClure's Magazine was sold out and the people clamored for more when it published Ida Tarbell's series on Standard Oil and the method by which the company had been built.

Tarbell published a wealth of statistical data showing how Rockefeller had crushed his competitors, seized control of natural resources, and purchased legislative favors.

Tarbell was paid $4,000 an article and Lincoln Steffen's essays on corruption in American society brought $2,000 an article.

With backing like this, the journalists were able to search court records, locate witnesses, and dig up mountains of facts.

Earlier social critics like Lester Ward and Henry George relied partly on public record and partly on guesswork but the new muckrakers named names and recounted misdeeds in sensational detail.

Perhaps the most famous accomplishment of the muckrakers was a series by Lincoln Steffens, who investigated Philadelphia, Pittsburgh, Minneapolis, St. Louis, and a host of other American cities and found them all suffering from the same ills: political corruption .

In Minneapolis , Steffens achieved one of the great coups in the history of reporting. Steffens obtained the ledger in which graft collectors had entered their accounts and the names of the persons to whom money was paid, and photographed its pages.

Steffens published the names (in McClure's Magazine) of public officials on the take and told how, under a mayor (Dr. Ames) who had been elected twice by the Republicans and twice by the Democrats, the chief of detectives (an ex-gambler--Norman King) had invited criminals to Minneapolis, fired 107 honest policemen , and freed prisoners to collect revenues for the gang.

Steffens received many letters from other cities after his articles were released asking him to come to their cities and expose the graft that existed there.

It is said that this phase of the progressive movement must be understood as a version of the old Protestant revivals. It was a revival for the sins of society, the seeking of salvation for society.

Upton Sinclair wrote a novel, The Jungle, which revealed filthy conditions in the Chicago meat-packing industry. Sinclair wrote:

"There would be meat stored in great piles in rooms, and the water from leaky roofs would drip over it, and thousands of rats would race about on it. It was too dark in these storage places to see well, but a man could run his hand over these piles of meat and sweep off handfuls of the dried dung of rats. These rats were nuisances, and the packers would put poisoned bread out for them. They would die, and then rats, bread , and meat would go into the hoppers together. This is no fairy story and no joke. The meat would be shoveled into carts, and the man who did the shoveling would not trouble to lift out a rat even when he saw one. There were things that went into the sausage in comparison with which a poisoned rat was a tidbit."

The Jungle 

Roosevelt read Sinclair's account of these conditions and dispatched two agents to confirm all that he wrote. The agents' report read, in part, as follows: "We saw meat shoveled from filthy wooden floors, piled on tables rarely washed, pushed from room to room in rotten box carts, in all of which processes it was in the way of gathering dirt, splinters, floor filth, and the expectoration of tuberculosis and other diseased workers."

As a result of Sinclair's muckraking, the Meat Inspection Act of June 30, 1906, required federal inspection of meats destined for interstate commerce and empowered officials in the Agriculture Department to impose standards of sanitation. Also enacted on that day was the Pure Food and Drug Act, which placed restrictions on the makers of prepared foods and patent medicines, and forbade the manufacture, sale, or transportation of adulterated, misbranded, or harmful foods, drugs, and liquors.

Although there were federal inspections for meat that was destined for interstate transportation, there was not such legislation for meat that was to be transported within its origin state. As recently as 1967, twenty-two states did not require mandatory inspection of livestock before and after slaughter; and eight states had no meat inspection at all.

These state plants were often peddling what was known in the industry as "4-D meat." This stood for dead, dying, diseased, and disabled, and this meat obviously could not pass federal inspections. Large meat packers, such as Armour, Swift, and Wilson and Company, claimed that they were forced into operating these non-federally inspected interstate plants by competition from unregulated establishments.

A great many important and valuable reforms were in part adopted as the result of muckraking. What the muckrakers tried to do was necessary. The evils were there and there was no hope of removing them until the public was aroused to a recon of their existence .

On September 6, 1901, six months after his second inauguration, President McKinley was shot by an anarchist and Theodore Roosevelt become President.

The Square Deal

As President, Roosevelt believed he ha l-two important functions: The first was to serve as the moral leader of the American people, and second was to enforce the national interest against special interest.

Roosevelt thought the county fed two great dangers:

The mob which could be whipped up by demagogues to overthrow existing institutions, and

The plutocracy , which lacked the necessary virtues for leadership and by its excessive greed incited the mob.

Roosevelt's role as the moral leader of the people was to balance out the differences of the two interests and give everyone –“Square Deal."

He believed in change, but gradual change, within established institutions.

Roosevelt's interest in reform was always qualified b)I his distaste for most progressives.

His own program was based upon his own moral principles and was general rather than specific.

Roosevelt advocated "trust-busting," but his moral sense led him to distinguish between "gogd trusts" and. "bad trusts." Actually, the trusts were more powerfully entrenched 'when he left than when he entered office.

"Our aim is not to do away with corporations; on the contrary, these big aggregations are an inevitable development of modern industrialism. We are hostile to them; we ·are merely determined that they shall be so handled as to subserve the public good.”

It is important to keep in mind Roosevelt came to power at a time when the country was ready for action. His philosophy was:

• to regulate all aspects of society to provide stability (stability served the national interest; tlie regulation was based on Roosevelt's moral principles,) and
• to regulate all aspects of society to provide stability (stability served the national interest; the regulation was based on Roosevelt's moral principles,) and
• to assure to each individual unfettered opportunity for realize the dignity and he satisfaction of honest work ''Square Deal"

Consequently, Roosevelt's conception of the presidency was different from that of his recently passed predecessors who had been willing to follow the leadership of Congress.

It made further prosecutions possible. Roosevelt soon ordered suits against the meat packers, the Standard Oil Trust, and the American Tobacco Company . It also served notice on all the great

corporations that they could .no longer ignore the Shermrui Act.

Roosevelt also instituted suits against 44 corporations and won a reputation as a trust-buster. It must be remembered Roosevelt was not opposed to bigness in business, but believed in federal action only in cases of serious misbehavior.

Roosevelt considered the extension of government regulation over the railroads his most important program.

"The question of transportation lies at the root of all industrial success, and the revolution in transportation which has taken place during the last half-century has been the most important factor in the growth of the new industrial conditions... At present the railway is (the highway of commerce) ...and we must do our best to see that it is kept open to all on equal terms... It is far better that it should be managed by private individuals than by the government. But it can only be so managed on condition that justice is done the public ..."

As mentioned earlier, the Interstate Commerce Act of 1887 was abandoned by Congress and emasculated by court decisions to the point where by 1900 it was useless.

Concentration of control by a few major railroads continued to grow until, by 1903, six major railway systems, representing a combination of almost 800 independent railroads and a capitalization of over $9 billion, controlled 3/4 of the mileage in the country.

After the Spanish American War, freight charges had increased sharply without any corresponding increase in wages or improvement in service, while rebates, discrimination and favoritism forbidden by the 1887 act continued unabated.

The result: in February, 1903, Roosevelt signed the Elkins Act into law. The Elkins Act redefined and outlawed rebates and provided for punishment of those receiving as –well as giving rebates.

However, the Elkins Act was continually violated as the offenders could usually obscure the violations by bookkeeping methods over which the Interstate Commerce Commission had no control.

In 1904, Roosevelt pronounced railway regulation, the "paramount issue."

Roosevelt asked Congress to confer on the Interstate Commerce Commission the power to regulate the railroads.

After an investigation, Congress responded with the Hepburn Act of 1906. The Hepburn Act made federal regulation possible for the first time.

However, the Elkins Act was continually violated as the offenders could usually obscure the violations by bookkeeping methods over which the Interstate Commerce Commission had no control.

In 1904, Roosevelt pronounced railway regulation, the "paramount issue."

Roosevelt asked Congress to confer on the Interstate Commerce Commission the power to regulate the railroads.

After an investigation, Congress responded with the Hepburn Act of 1906. The Hepburn Act made federal regulation possible for the first time.

The act extended federal regulation to include storage, refrigeration and terminal facilities.

The railroads could appeal, but the burden of proof was now on the railroads and not on the commission.

The Hepburn Act represented a substantial advance in railway regulation. Within two years, the Interstate Commerce Commission had heard almost twice as many complaints as in its previous 19 years. By 1911, the commission had reduced over 200,000 rates, some by as much as 50%.

Federal regulation was further extended in 1910 under the Mann-Elkins Act to include telephone and telegraph companies.

The Anthracite Strike: May, 1902 to March, 1903

The strike started when the United Mine Workers under president John Mitchell struck on May 12, 1902, for

(1) higher wages,

(2) union recognition, and

(3) an eight-hour day.

The mine operators were dead set against concessions. When the miners went out, the operators shut down their properties and prepared to starve the strikers into submission.

Throughout the summer and early fall, the miners held firm. They conducted themselves well, avoiding violence and expressing full willingness to submit their claims to arbitration. As the price of anthracite soared with the approach of winter, sentiment in their behalf mounted rapidly.

Roosevelt shared the public's sympathy for the miners and the threat of a coal famine naturally alarmed him. On October 3, 1902, Roosevelt called a conference of operators and miners and appointed a commission to mediate their differences, as a result of which , Mitchell called off the strike on October 21, 1902. In March, 1903, the commission awarded the union a 10% wage increase, a nine-hour day, but no union recognition.

Since Roosevelt had not intervened on the side of the owners, he established a pro-labor reputation for himself , but he was always suspicious of labor's radicalism.

The strike indicated Roosevelt's "Square Deal" philosophy as he stated himself, 11•••everyone received a Square Deal

Roosevelt shared the public's sympathy for the miners and the threat of a coal famine naturally alarmed him. On October 3, 1902, Roosevelt called a conference of operators and miners and appointed a commission to mediate their differences, as a result of which , Mitchell called off the strike on October 21, 1902. In March, 1903, the commission awarded the union a 10% wage increase, a nine-hour day, but no union recognition.

Since Roosevelt had not intervened on the side of the owners, he established a pro-labor reputation for himself , but he was always suspicious of labor's radicalism.

The strike indicated Roosevelt's "Square Deal" philosophy as he stated himself, 11•••everyone received a Square Deal.11

Woodrow Wilson. The Republican dynasty which had been entrenched in the White House since 1897 was broken in 1913 after the Roosevelt-Taft feud had split the party wide open in the election of 1912.

Wilson and Roosevelt were closer in political philosophy than the campaign rhetoric suggested as they both had the interest of the common man at heart.

In the campaign, Roosevelt with his New Nationalism welcomed big business and asked only for a powerful federal government to regulate it. Roosevelt's New Nationalism included not only the old Roosevelt policies of honesty in government, regulation of big business, and conservation of natural resources, but a relatively new insistence on social justice. Also included in the New Nationalism was his criticism of recent Supreme Court decisions, which had nullified social legislation in the states. Roosevelt felt the chief Executive was ''the steward of the public

Wilson with his New Freedom demanded free competition and the end of monopolies. He opposed Roosevelt's partnership of business and government.

Woodrow Wilson's "New Freedom"

Wilson's New Freedom consisted of a three-point program designed to foster the interest of the small capitalist.

A lowered tariff to deny the trusts an unfair advantage.

A changed banking structure to make credit more available to the small business.

New trust legislation to prevent big business .from squeezing out the small competitor.

The Underwood-Simmons Tariff

Wilson was determined to seize the initiative in law making and on the very first day in office, he summoned Congress to a special session to revise the country's old tariff system.

Wilson stated, "The tariff duties must be altered and we must abolish everything that bears even the semblance of privilege, or any kind of artificial advantage, and put our businessmen and producers under the stimulation of a constant necessity to be efficient, economical, and enterprising."

The tariff lowered average duties from 39% to 25%, but more important, it added a number of consumer goods to the free list, making them cheaper to the common man, and eliminated the protection of iron, steel, and various other products of the trusts.

Duties were decreased on 958 articles and raised on only 86.

To make up for the loss in revenue, the tariff levied a 1% tax on all incomes above $4,000., with additional surtaxes for incomes above $20,000.

This was made possible by the ratification of the 16th Amendment the Constitution. in February, 1'913.

Banking and Currency Reform

While Congress was still wrestling with the Underwood Tariff, Wilson presented a proposal to reorganize the banking system. The need for an overhauling of our banking and currency system was almost universally recognized, particularly after the Panic of 1907.

The panic suggested financial power was concentrated in the hands of a small group of eastern bankers who controlled the nation's credit and interest rate.

The Morgan and Rockefeller interests held 341 directorships of 112 corporations with a capitalization of $22,245,000,000.

All within Congress agreed to the necessity of reform, but they disagreed vigorously about what form it should take.

The conservatives wanted a central bank to be authorized by the government, but privately controlled like the former Bank of the United States, which was 80% privately owned.

They also wanted the government to issue currency which would back it, but would be privately controlled.

The liberals insisted that the power to issue notes and control of the new banking system be exclusively governmental.

The Federal Reserve Act of December 23, 1913.

Under the act, the country was divided into 12 districts, each with a Federal Reserve Bank owned by the member banks (commercial banks).

Upon joining the Federal Reserve System commercial banks are required to purchase shares of stock in the Federal Reserve bank in their district. 

The Federal Reserve is the central bank of the United States. Its unique structure includes a federal government agency, the Board of Governors, in Washington, D.C., and 12 regional Reserve Banks.

Reflecting this structure, which balances centralization with regional presence, the Fed has web sites that are national in scope (see links at right) and regional (see below).

Federal Reserve Districts

Atlanta | Boston | Chicago | Cleveland | Dallas | Kansas City | Minneapolis | New York | Philadelphia | Richmond | San Francisco | St. Louis

Board of Governors--The seven members of the Board are appointed by the President with the confirmation of the Senate. The terms are 14 years--and staggered so that one member is replaced every two years. The Board is staffed by appointment rather than elections in an attempt to divorce monetary policy from partisan politics.

The Board of Governors has the responsibility of exercising general supervision and control over the operation of the money and banking system of the nation.

The Federal Open Market Committee sets the banking system's policy with respect to the purchase and sale of government bonds in the open market. The Federal Advisory Council is purely advisory; it has no policy-making powers.

The Federal Reserve System changed the American banking system form privately owned and privately controlled to privately owned, but publicly controlled.

The best definition of the Federal Reserve System is that it is a bankers n . Everything an average person does at a bank, a bank does at its Federal Reserve Bank. There are TWO major ways in which the Federal Reserve System can exercise control over a member bank (commercial bank).

The Regulation of Business

As soon as the tariff and banking reform bills were disposed of, Wilson appeared before Congress to ask for legislation on trust and monopolies in January, 1914.

Congress responded with two bills.

The Clayton Act:

The act prohibited discrimination in prices which might tend to lessen competition and/or create a monopoly. The act aimed at plugging the worst loopholes in the Anti Sherman Act.

The law attempted to state definitely what practices and conditions would be considered interference with free competition.

The Federal Trade Commission Act which established the Federal Trade Commission.

The commission was designed to investigate violations of the anti-trust laws.

The basic objective of the F.T.C. was the maintenance of free competition, which Wilson felt was the keystone to the American economy.

'With this legislation," said Wilson optimistically,

"there is clear and sufficient laws to check and

destroy the growth of a monopoly in its infancy."

In pushing through his three-point program, Wilson had demonstrated that he was a great leader of his party, of Congress, and of the nation.

Wilson had asserted presidential leadership.

He had converted a states rights party to enlightened nationalism.

He convinced the average citizen the government was at last his servant.

He made it clear progressivism transcended party lines.