Classical and laissez faire economic theories that had developed in a period when capitalism was small-scale no longer applied to a system of giant industrial and financial cartels and monopolies. By the 1880s and 1890s, as the U.S. became the leading industrial power in the world, it was already clear to Populists and Progressives that previous political and economic theories about capitalism and the proper role of the state would have to be greatly revised—in a more regulatory and socialistic direction, even if the actual "s" word was not used. John Maynard Keynes became the most important economist during the era of Fordism and industrial capitalism, and his views generally reflected those of Progressives, social democrats and New Dealers. He argued that capitalism did not produce full employment in the absence of fiscal and monetary stimulus from the central government, which would increase aggregate demand (Mankiw 770). Reduced government spending, balanced budgets and austerity measures were not the correct way to deal with depressions, although this had been the standard government response in the depressions of the 1840s, 1870s and 1890s—
U.S. History Midterm Exam
Essay questions, two (2) questions, 10 pts. each, for total of 20 pts. Answer everything in bold!
Reflecting back on Units 1 through 11, describe America's incredible industrialization and urbanization from 1865 to 1945. What were the key elements of this change and what were the costs of such rapid industrialization (i.e. environmental and human costs and the Great Depression)? How did activists and politicians respond to these changes (in the Progressive Era and the New Deal)? How did wars affect the economy?
By 1900 the U.S. had become the leading industrial power in the world, with more railroad mileage and a larger steel industry than the rest of the world combined. As it became an urban, industrial society with a rapidly growing population and millions of immigrants, it faced new social and economic problems, which were addressed by an expanding government at all levels. Both the Progressives in 1900-20 and the New Dealers in 1933-40 had attempted to regulate and stabilize capitalism. In the Progressive Era under Presidents Theodore Roosevelt and Woodrow Wilson, the Federal Trade Commission, the Pure Food and Drug Act and Federal Reserve Act were passed to regulate corporations and the financial system, while antitrust laws like the Clayton Act were used to break up cartels and monopolies. Progressives had also passed constitutional amendments that created a federal income tax, allowed women to vote and required direct election of Senators, all of which were designed to reduce the political and economic power of the wealthy elites.
Millions of immigrants entered the United States during this period, increasingly from Southern and Eastern Europe after 1890, and formed much of the unskilled, lowly-paid labor force in the mining, iron and steel and automobile industries, and were increasingly joined by blacks and poor whites from the South, escaping from sharecropping, tenancy and the horrendous economic conditions in agriculture there. In general, though, labor unions like the American Federation of Labor (AFL) were only open to skilled, native born white men. One important exception to this rule, however, was the radical International Workers of the World (IWW) which was also suppressed during World War I when its leaders went to prison for opposing the war. Samuel Gompers, head of the AFL, supported the war, and was rewarded by a federal policy that permitted collective bargaining in industry for the first time. This policy was reversed once the war ended, leading to massive strikes in 1919, which in cities like Seattle sometimes developed into full-fledged general strikes, but these were also violently suppressed.
The 1930s depression was the worst in U.S. history, and led not only to the complete collapse of Wall Street and the financial system, but of industrial production as well. This which fell 85% in 1929-33, while the Gross National Project fell by half and in some cities like Chicago the unemployment rate rose as high as 50-60%. At the same time, the entire banking system collapsed by 1933, as did agricultural prices, and money stopped circulating. Because of the extreme conditions of the 1930s depression, the New Deal under Franklin Roosevelt went further in attempting a wide variety of expedients such as the National Recovery Administration in 1933-35 and the Agricultural Adjustment Act (AAA) to subsidize and inflate agricultural prices, as well as a new antitrust program in the Justice Department from 1938 onward. Under the New Deal, Wall Street was regulated for the first time by the Securities and Exchange Commission (SEC), investment banking was separated from commercial banking, and new federal investments in roads, harbors, public power and infrastructure were made through the Reconstruction Finance Corporation (RFC) and Tennessee Valley Authority (TVA). It permitted organized labor to bargain collectively in the National Labor Relations Act of 1935 and laid the foundation for the modern welfare state in the Social Security Act at the same time. Because of the sit-down strikes from 1937 onward, the Congress of Industrial Organizations succeeded in unionizing heavy industry for the first time in American history, including steel, automobiles and electrical goods, and the CIO became a major force in the New Deal coalition for decades.
2. Describe how the United States went from isolationism to an internationalist and interventionist foreign policy. You should discuss the 1870-1945 period and focus on the following topics in your response. Why did America's stance change over time?
• Expanding into foreign markets
• Imperialism
• World War I, the Fourteen Points, and the League of Nations
• 1920s-1930s isolationism and trade
• World War II, getting in, fighting it, and planning the postwar world
Regime change is not new in U.S. foreign policy, and in fact it started with the coup against the Hawaiian monarchy in 1893. Its central thesis is that, far from promoting democracy abroad, the United States has reacted many times against the threat that democracy poses to American investments and corporate interests. During the 1890s and early-1900s, these large financial and industrial interests were quite open in expressing the their needs to obtain markets and investments opportunities abroad, including in Asia and Latin America, although this put the U.S. In direct competition with older, more established empires as well as rising powers like Germany, Japan and Russia. Corporations have been the dominant influence in U.S. politics since the late-19th Century, and foreign leaders who resist them often risk being overthrown. Secretaries of State like Elihu Root were agents of Wall Street and large corporate interests within the American foreign policy establishment, which prefered to deal with 'friendly' dictators and corrupt oligarchs rather than nationalistic, populist or radical democratic governments in the developing world. After the war with Spain in 1898, the U.S. annexed Hawaii, Guam, Puerto Rico and the Philippines, while under the Platt Amendment it reserved the right to intervene in Cuba and change the government at any time it chose. From 1900-33, it seized Panama from Columbia, occupied Nicaragua, Haiti and the Dominican Republic and intervened repeatedly in Mexico.
Therefore, to state the main purpose of U.S. foreign policy was to advance the cause of liberalism and democracy in the world, as Woodrow Wilson proclaimed in his 14 Points in 1918, was to say the least an incomplete version of history. In the developing world -- the nonwhite world -- this was most definitely not the case before 1945 and the U.S. behaved like any other imperial power. In both world wars, of course, even though its initial policy was to stay neutral, America eventually intervened decisively on the side of the Allies in 1917-18 and again in 1941-45. Traditionally, though, U.S. foreign policy had been to remain aloof from wars between European empires, and as late as the 1930s this nationalist or 'isolationist' policy was still dominant in Congress, which passed the Neutrality Acts in 1935-37. Woodrow Wilson had proposed a global-hegemonic role for the U.S. after World War I, through promoting international free trade, liberal capitalism and participation in a League of Nations, but Congress and public opinion rejected this role in the 1920s and 1930s.
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