The outbreak of war in Europe distracted Wilson and the country from domestic concerns. It also proved a boon to the American economy, cutting off the flow of cheap immigrant labor and increasing the demand for American exports.
By 1916, as he ran for reelection, he saw that it would be advantageous to involve America in the war, but for the sake of the election, he continued to campaign on the anti-war platform. America’s decision to declare was hotly debated then, and is still debated today. At the war’s outset, among the Americans who wanted the United States to enter the war, there was a split regarding which side America would support; there were significant numbers of voters on both sides. Reasons for U.S. involvement in the war, especially before the Lusitania sinking and before the Zimmermann Telegram, were also murky.
Nations normally enter war if their interests are at stake - if the war will help to protect the lives, freedoms, and properties of the nation’s citizens. Nations will also enter a war if a grave injustice can be prevented by doing so. Neither was the case in early 1915; America had no direct interest in the war, and neither side of the European conflict could claim honorable intent. Yet Wilson began to see other reasons for bringing the United States into World War One.
Despite Wilson’s promise to keep us out of it, American entered the war in 1917. In hindsight, this was probably a misguided, albeit foregone, intervention. But the complaint that the war wasn’t in America’s interests misses the point. Wilson boasted as much time and again.
Wilson’s political views - he was a leader of the “progressive” movement - indicated that the government should involve itself in all aspects of people’s lives, regulating and taxing. There were limits to how much government interference the citizens would tolerate in peacetime. During war, however, citizens may tolerate greater government intrusion into their private matters if they believe that such infringement is necessary for the safety of the nation. While the European conflict had no direct impact on American interests, involvement in that conflict could give power, and excuses, for managing the details of American life. Wilson’s fellow progressives saw war as an opportunity to reshape American society and American government.
They were desperate to get their hands on the levers of power and use the war to reshape society. The capital was so thick with would-be social engineers during the war that, as one writer observed, “the Cosmos Club was little better than a faculty meeting of all the universities.”
War brings with it urgency, and awakens passions like self-sacrifice, obedience, and patriotic fervor. Instead of being directed toward the protection of freedom, these were subverted to enable the government’s intervention in the lives of ordinary citizens. The Wilson administration’s slogan was that the war was to “make the world safe for democracy,” but in fact the war effort was motivated by Wilson’s desire to make America safe for Wilson’s control of society.
When America entered the war in 1917, progressive intellectuals, versed in the same doctrines and philosophies popular on the European continent, leaped at the opportunity to remake society through the discipline of the sword.
Wilson’s fellow progressives knew that there was no direct national interest in the war. The Zimmermann Telegram - a German diplomatic communique encouraging Mexico to declare war on the United States, and promising German assistance to Mexico in any such war - was clearly a hollow threat; it was clear that Germany could not offer any meaningful help to Mexico. The sinking of the Lusitania was already a year-and-a-half past by the date of Wilson’s reelection, and almost two years gone by the time of his second inauguration. The two keys pieces of evidence for U.S. entry into the war were specious. While the progressives found the war distasteful, it was a price they were willing to pay to increase their control in American society.
It is true that some progressives thought that World War I was not well-advised on the merits.
Yet they pushed America into the war anyway. There were no “merits” to the case for war, and the war by itself was “ill-advised,”
but most supported the war enthusiastically, even fanatically (the same goes for a great many American Socialists). And even those who were ambivalent about the war in Europe were giddy about what John Dewey called the “social possibilities of war.”
John Dewey, a leading progressive thinker, saw the war effort as a chance to restructure society. What was important to the progressives was not the war, but the war effort. Galvanizing the public will, and being able to demand obedience to nearly any directive, is the desire of any utopian social schemer. Utopians inevitably pine for that chance to get everyone in society to go along with their plans.
He ridiculed self-described pacifists who couldn’t recognize the “immense impetus to reorganization afforded by this war.”
Progressives didn’t want the war, but they wanted the war effort, and were willing to override even principled pacifists to get a chance at unprecedented social engineering. Each detail of the war effort was seen in this way. The draft - the conscription of young men into the armed services - was desired by the progressives, not because it would further the nation’s military objectives, but because it would place people into organized and regimented structures, allowing them to be moved and directed en masse.
Richard Ely, a fervent believer in “industrial armies,” was a zealous believer in the draft: “The moral effect of taking boys off street corners and out of saloons and drilling them is excellent, and the economic effects are likewise beneficial.” Wilson clearly saw things along the same lines. “I am an advocate of peace,” he began one typical declaration, “but there are some splendid things that come to a nation through the discipline of war.”
Already during Wilson’s administration, political leaders developed a term for this seizure of power - “war socialism.” Tax rates went up, federal spending went up, the national debt went up. Details of the nations economy were micromanaged, from railroad schedules to the factory production of consumer goods. Importantly, these actions were done with the excuse that they were for the war effort, but they were often unrelated to military needs. Regulations were sometimes enacted to carry out the plans of some social engineer, hoping to optimize human behavior through laws. Other regulations seemed to be in place merely to prevent free market activity.
We should not forget how the demands of war fed the arguments for socialism. Dewey was giddy that the war might force Americans “to give up much of our economic freedom … We shall have to lay by our good-natured individualism and march in step.” If the war went well, it would constrain “the individualistic tradition” and convince Americans of “the supremacy of public need over private possessions.” Another progressive put it more succinctly: “Laissez-faire is dead. Long live social control.”
Progressivism incarnated itself in a maze of bureaucracies. Although FDR’s ‘New Deal’ would become famous as an ‘alphabet soup’ of various committees and agencies, Wilson beat him to it by almost two decades. These offices served not only to control the actions of individuals, but also to mystify a citizen who might hope to understand how, why, and by whom he was being manipulated.
Wilson the great centralizer and would-be leader of men moved overnight to empower these would-be social engineers, creating a vast array of wartime boards, commissions, and committees. Overseeing it all was the War Industries Board, or WIB, chaired by Bernard Baruch, which whipped, cajoled, and seduced American industry into the loving embrace of the state.
Shockingly, members of the Wilson administration used the word ‘dictatorship’ to describe their committees - a word loaded with socialist connections:
The progressives running the WIB had no illusions about what they were up to. “It was an industrial dictatorship without parallel - a dictatorship by force of necessity and common consent which step by step at last encompassed the Nation and united it into a coordinated and mobile whole,” declared Grosvenor Clarkson, a member and subsequent historian of the WIB.
Wilson’s war efforts went well beyond the direction of resources and material to the military - i.e., well beyond what was actually necessary or even relevant to the military effort. The Wilson administration intervened with wage and price controls (an experiment repeated with equal failure by Richard Nixon fifty-five years later). Predictably, whatever shortages were unavoidable due to the military needs were worsened, not alleviated, when the government dictated prices for various commodities.
The rationing and price-fixing of the “economic dictatorship” required Americans to make great sacrifices, including the various “meatless” and “wheatless” days common to all of the industrialized war economies in the first half of the twentieth century.
Members of the Wilson administration, of the War Industries Board, and of the progressive movement in general, like Grosvenor Clarkson, clearly stated their goals. Their objective was not the war, not the winning of the war, and not the war effort: their goal was the restructuring of society. War had merely given them the excuse to do it. Jonah Goldberg writes:
Grosvenor Clarkson saw things similarly. The war effort “is a story of the conversion of a hundred million combatively individualistic people into a vast cooperative effort in which the good of the unit was sacrificed to the good of the whole.” The regimentation of society, the social worker Felix Adler believed, was bring us closer to creating the “perfect man … a fairer and more beautiful and more righteous type than any … that has yet existed.” The Washington Post was more modest. “In spite of excesses such as lynching,” it editorialized, “it is a healthful and wholesome awakening in the interior of the country.”
Although Wilson’s administration began with his self-glorification as a “trust-buster,” urging Congress to pass legislation which would allegedly protect the public from the alleged dangers of alleged monopolies - the monopolies didn’t exist as monopolies, but rather faced real competition; the trusts didn’t pose a danger to the consumer and didn’t cause the price-based hardships for which they were blamed; the legislation didn’t and couldn’t protect consumers from the problems they faced - Wilson in fact encouraged and created monopolies through the WIB. In the name of the war effort, price collusion and cartels were sanctioned and organized by the Wilson administration. Superior Court Judge Andrew Napolitano writes:
During World War I, under Woodrow Wilson, much of the economy was regulated by the federal government, creating state-run monopolies that the government said were justified by the war.
The classic policy choice is between “free market capitalism” and “crony capitalism” - whether to allow a fair opportunity to each individual in the economy, allowing each to try his hand at whatever endeavor he may choose, and face either success or failure based on the choices of consumers; or whether to regulate the markets, grant special privileges to some individuals or companies, and so designate some as the eventual victors in the rigged marketplace. Wilson, whose excuse and propaganda claimed that he brought America into the war for the cause of freedom, actually chose against freedom, and for regulation.
The decision to enter the war prompted an unhealthy relationship between business and government. From the time the war effort began, plans were quickly set into motion.
Instead of created a “level playing field” for fair competition - instead of giving equal chances to various companies - the Wilson administration either chose some as winners and others as losers, or it urged them to form cartels and so function as monopolies: the very monopolies from which it claimed to protect the public.
An early effort to fuse business and government was the Council of National Defense, which included the influential Advisory Commission that consisted of private industrialists. This commission designed the system of purchasing war supplies, regulating food, and maintaining control and censorship. Although this commission was intended to be a nonpartisan link between business and government, in reality it put the power to regulate the wartime economy into the hands of
the monopolies which Wilson’s economists had created. Ordinary businessmen simply wanted a fair chance to compete. Instead, unethical business leaders - those who were willing to collaborate with the government - were rewarded for their corruption by obtaining the power to manipulate the economy.
Bernard Baruch, who had made a fortune for himself in the commodities market - mainly in sugar - , understood well the dynamics of the economy. His skills made him well-suited to manipulate the national market in raw materials. He shared with President Wilson an affection for the South, endowing an organization known as the “United Daughters of the Confederacy” with cash. Like Wilson, Baruch worked to keep African-Americans far away from financial opportunities.
The Wilson administration soon established the War Industries Board, which gained control over all purchasing, pricing, and allocating of resources. The War Industries Board was led by the notorious Progressive Bernard Baruch, who was clearly eager for the opportunity to regulate the economy, as he had presented an idea for war mobilization to President Wilson almost three years before America’s entry into the war.
In his role at the WIB, Baruch set about distorting the marketplace. An article in the New York Times on May 17, 1917, tells readers that
executives representing the large steel concerns will meet Bernard M. Baruch, chairman of the War Industries Board, here tomorrow to determine the most effective way to control and distribute the steel output of the nation to help win the war. All phases of the situation, including possible curtailment of less essential industries, coal production and transportation, will be considered. Government departments engaged in war work will be asked to submit estimates and the steel producers will be called upon for figures of plant capacity.
The meeting described is a clear intervention by the government into the marketplace in the form of a government-organized cartel. The only outcome of such discussions would be higher prices to the consumers. To anyone who wants a centrally-planned economy, such a meeting would be a joyful dream. But to those who value freedom, it is a nightmare. Justice Napolitano writes:
The corruption to which this fusion between governmental and business interests led could not be more apparent, and yet there was no check on these policies. As is typical of American governments, war can be, has been, and here was used to justify almost any inappropriate seizure of power.
When government intervenes into the work of business, or when business interferes with the work of government, a breach has occurred which is arguably much more damaging to the cause of freedom than a breach is the so-called “wall of separation” between church and state. Given that Baruch had made his fortune in the sugar market, it should be no surprise that
The U.S. government purchased the entire supply of U.S. and Cuban sugar crops. In order to create and sustain federal regulation of food through the Food Act of 1917, prices of sugar and wheat were then set at one price that was arrived at through a series of calculations. This type of market manipulation ensured that while the prices would not go up, they also could not go down. Amidst heavy regulation of the economy, wartime industry was standardized by the Conservation Division of the War Industries Board. This meant that only certain styles, varieties, colors, sizes, or models of certain products could be produced.
In the May 1917 meeting with steel producers, Baruch considered dictating to the auto industry that it reduce its output by 25%.
Railroads were seized and operated directly by the government under the Railroad War Board, which ordered them to coordinate all railroad operations. This coordination would undoubtedly have been perceived as an illegal combination under any of the nation’s anti-trust legislation. Thus the federal government not only selectively prosecuted, selectively enforced, and routinely broke its own laws; it ordered private businesses to break them as well. The government also took over the telephone, telegraph, shipbuilding, and wheat-trading industries.
Great harm was being done to consumers and to those business owners who were too ethical to collude with the government. This damage was being done in the name of the war effort, but it was a war which Wilson stated was not in the nation’s interest, nor was it a war in which the nation was supporting some grander moral cause. The war was a nationalistic and imperialistic competition between European nations, and in the name of that war, citizens of the United States were being asked to surrender their civil rights and human rights, and to see harm done to the prosperity created by a free marketplace.
Government regulation of industry during this time was harmful to small-business owners and independent contractors. The government was regulating prices and markets, and big-business owners, in conjunction with federal agencies, were given the job of awarding contracts. Unlike a privately run business or monopoly, the government could use its power to control propaganda to embarrass or shame any private industrials that were not benefitting from the wartime economy and dared to protest. Consumers were also harmed by price-fixing, as in the sugar and wheat industries, where too much regulation led to high prices and shortages.
Government-sponsored price collusion did not help American businesses in general. It helped only those corporations which violated ethical standards by forming close relationships with the government for the purposes of manipulating markets.
Governmental economic relations during this time may have benefitted certain businesses, but they were more harmful to consumers than most of the monopolies that had been attacked by Wilson and Roosevelt during their trust-busting sprees. Progressives hoped that the ideas of cooperation instead of competition that characterized the wartime economy would transfer into peacetime as well.
While honest and intelligent people will disagree about whether or not the United States should have entered into World War One, there can be no doubt that when America did actually enter the war, it was did so under Wilson’s leadership; it is clear that Wilson, originally opposed to the war, suddenly decided to bring America into the war, not because the war was protecting the nation’s interests, nor because the war had a clear moral dimension, but rather because the war offered him an excuse to implement a managed and centrally-planned economy.