Government Regulation of the Economy, 1865-1914

For my research paper, I chose to research government regulation and its effect on the American economy. The period following the Civil War, and leading up to World War I, was a period of time in which no central banks existed. The economy almost collapsed multiple times due to irresponsible leadership and a lack of cohesion in the chambers of government, which are supposed to work together to pass laws and fix problems in each country. This period showed the country what a life without slavery would do to the Southern economy, as well as dealt with the issues of reconstruction, union strikes, and Wall Street becoming a problem in the future of American economy.

However, period 1 saw many types of government involvement that had an effect on the economy, positive and negative. Between the multiple presidential elections, trust busting, industrialization, immigration, and the slavery blowback period of reconstruction, Period 1 was rife was chaos and instability in the economy.

Period 1 begins at the end of the Civil War, with 9% of the adult male population dead, a country in ruins, and a vague idea that the North was going to keep troops stationed in the South while controlling the South's economy. While Slavery was immoral, it did bring profits into the Southern states and now that it didn't exist anymore, they were left with nothing to work with in the wake of a defunct archaic system. Since the idea of Government regulation of the economy is a large encompassing idea, this will either be an extremely long paper or I will have to be more specific with the topic.

In addition to the Civil War, Lincoln passed the Revenue Act of 1861, which created an income tax on people making over $800. In an effort to create a National Bank charter, the National Bank Act was passed in 1863 as a way to make more money from taxing state banks and to bar any non federal currency from being in existence. This act also served to create the Office of the Comptroller of the Currency, the purpose of which was;

"The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks. It also supervises the federal branches and agencies of foreign banks. Headquartered in Washington, D.C., the OCC has four district offices plus an office in London to supervise the international activities of national banks.

The OCC was established in 1863 as a bureau of the U.S. Department of the Treasury. The OCC is headed by the Comptroller , who is appointed by the President, with the advice and consent of the Senate, for a five-year term. The Comptroller also serves as a director of the Federal Deposit Insurance Corporation (FDIC) and a director of the Neighborhood Reinvestment Corporation. "

Reconstruction began as an attempt to fix the economy, social, and monetary issues of the Cold War and turn the country around and into its glorious self. Given that all the slaves that were previously slaves, were now free, the Southern States had to find another way to reach quotas and make money. Unfortunately, I view reconstruction as a failure that alienated that entire region of the country, black and white, and the constant battling over who led reconstruction ultimately lead to the downfall of the Southern States. Even now, we look at states like Alabama and Mississippi and you see that they still haven't recovered from the punishment they suffered 140 years ago. Given that all ranking members of the Republican party at the time didn't seem to want to offer any federal assistance to the region, with the Liberal Republicans pushing for troops to be pulled out as fast as possible, the moderates taking a Laissez-faire approach to the south, and the Radical Republicans pushing for intensely harsh penalties on the south.
In 1890, The Sherman Anti-Trust act was passed, a law in which it was presented that the economy was not to be dominated by large corporations that control everything. It was intended to create competitiveness in the market place and stop conglomerates like the AT*T, Microsoft, or General Electric of now from continuing to dominate the economic circumstances. Companies like Standard Oil controlled a majority of the business in one field back in those days, and when they were broken up into multiple companies, they always ended up competing in the marketplace. The American Tobacco company was also broken up due to the Anti-Trust act passed by Congress under the Guide of John Sherman.

Ulysses S. Grant won the presidency in 1869, and one of his first acts as president was to sign a bill that bailed out Wall Street, but primarily seemed to ignore the rest of the Economy as a whole. The Coinage Act of 1873 established the Gold Standard and demonetized silver, which helped out the Government economically but caused a massive countrywide panic that contributed to the recession that grant presided through. By depressing silver prices, the act embraced Gold as a form of money, but reduced the money supply, which caused investors to shy away from long-term bonds. The instability of this bill created the Panic of 1873. The railroad industry was severely affected by these actions, and a top banking financier was forced to declare bankruptcy. The Domino affect then hit, with the New York Stock Exchange closing for 10 days, ¼ of all the railroads went bankrupt, and 18,000 businesses failed. As Union Strikes turned violent and a 14% unemployment rate became the norm, the Republican Party lost control of the House, and reconstruction started to die under Democratic leadership. However, Grant did have the Specie Resumption Act passed in 1875, which was set to fix the problems they were having starting in 1879. The Greenback party opposed this because they feared millions of citizens would overrun the banks and demand they give them gold for greenbacks. Fortunately for some, the government at the time managed to convince the American people that greenbacks were worth money as to avoid a possible financial meltdown.

President Hayes came into office at the end of the Depression caused by what many like to blame on President Grant. Hayes passed the Bland-Allison act which was intended on fixing the problems caused by the Coinage Act of 1873. Unfortunately, economic conditions during his presidency also caused pay cuts to the railroad workers, who went on strike. Hayes responded by dispatching federal troops, and around 70 people were killed. This kicked off a long period of infighting between the underpaid workforce and its overpaid CEO's. When Grover Cleveland assumed the presidency after the 1884 election, he and his treasury secretary Daniel Manning almost immediately tried to null the effects of the Bland-Allison Act by trying to reduce the worth of silver and increase the worth of Gold. Cleveland's support for the reduction of the tariff encountered stiff opposition in the House and Senate, as both chambers supported raising taxes to help out American Industries and provide a boost to the weak economy. The Tariff issue cost him the election in 1888 to Benjamin Harrison.

Benjamin Harrison spent his presidency lowering the tariff, which in turned ended the countries prosperity and created a budget deficit. Harrison was responsible for the Sherman Anti-Trust act which was signed the same year that Standard Oil formed its conglomerate, and paved the way for future court battles with major corporations such as Standard Oil, Tobacco Companies, AT*T, and various other companies. Harrison also increased the usage of silver in currency, which was the dominant issue of the time in terms of currency. Every president from the Civil War to around this time tried to push an agenda around gold, silver, or greenbacks, and each president failed to make anything work. Unfortunately, the public viewed the tariff issue as a memorandum on the Harrison presidency, and felt compelled to let President Cleveland become the only president to serve two non-consecutive terms in the presidency. Cleveland's second term started with the Panic of 1893 which was caused by Harrison's policy of increasing the amount of silver in circulation which decreased the amount of gold in circulation. The Panic brought on a second depression in 20 years, which in turn caused massive striking and a weak economy. The period beginning in the 1890's was also known as the Progressive Era, where for 30 years, they started cleaning up corruption in government and businesses while also heralding the beginnings of child labor laws and various other laws that greatly affected the businesses of that time.

The election of 1896 saw the Populist William Jennings Bryan and the Democratic Party blaming the economic depression on Cleveland and Harrison's monetary policy, which frightened all the business owners and caused them to throw their support towards Governor Mckinley of Ohio who supported keeping the Gold Stanadard. Again, in 1900, President Mckinley became one of the many consecutive presidents who passed laws regarding the use of Gold, Silver, and Greenbacks. His 1900 Gold Standard Act established Gold as the only thing you could redeem for currency. The election of 1900 saw a rematch between Bryan and Mckinley, in which Mckinley won a decisive victory stemming from the economic prosperity brought on by the Gold Standard maintaining itself as the norm. Unfortunately, Mcinkley was assassinated and Theodore Roosevelt took over. Roosevelts presidency was known for his aggressiveness in trust-busting and helping the middle class. Towards the end of Roosevelt's presidency, he sought to regulate big business as he became increasingly distrustful of their motives. Roosevelt wanted to tax the rich, force corporations to be given charters, and force corporations to offer injury assistance. None of these things were pushed while he was president, and William Howard Taft became president before Roosevelt could get any of the laws enacted. Taft pushed the anti-trust laws to the forefront of his presidency, eventually pursuing 80 different lawsuits against various corporations. Unfortunately, Taft's tax laws cost him the support of his party, businesses, and his friend, former President Roosevelt.

The big economic issue of Period 1 was the issue of Gold versus Silver. It was such a big issue that William Jennings Bryan ran for president three times on the "Free Silver" ticket, consecutive presidents passed laws increasing circulation of one or the other, and two depressions resulted from presidential incompetence in monetary policy. As the 20^th century approached, the presidents passed laws and created federal agencies that helped regulate economic matters and control corporations from turning into huge conglomerates with no oversight I probably should have chosen to use that topic up for my period 3 paper, since we have quite the interesting economic times afoot. With Congressman Ron Paul parading around being the lone voice in his promotion of the Gold Standard, a recession on its way, and both major political parties spending countless hours trying to come up with an economic plan that will ease the impact of the coming recession. Now when you look at how Government runs the economy with its rules and regulations, you might think they're acting like a chicken with their head cut off. We're in a war, but they want to continue to cut taxes, and interest rates, and give us rebate checks. The leadership of this country is going against every standard the country was founded upon in an attempt to avoid a recession. They ignored the idea that a balance needs to occur between guns and butter, and that you can't cut taxes and decrease government spending at the same time. Our economy is collapsing because of the leadership of our country, Republican and Democrats alike, and all they can do is sit by and attack each other for arbitrary and unimportant problems.

Sources:

http://www.occ.gov/dugan.htm