America has always had the desire to be an important part of our world. The U.S. needs a connection to the other countries, especially because of our isolated location. When World War One first began, America had to ally itself with either the Central Powers, or the Allies. Ultimately The U.S. decided to join the Allies because of multiple reasons which included strong economic and ancestral ties with the Allied countries, and the German submarine attacks against British vessels with American passengers aboard. To support this effort, the US government needed to raise funds and was obligated to control the economy during WWI to protect their newly established trade industry and to gain the support and loyalty from the Allied countries to protect US foreign affairs. Controlling the economy was consistent with the American ideals because in the end, it benefited American citizens.
The US was able to solidify crucial trade connections with important European powers by supplying these countries with much needed war supplies. Trade has always been an extremely important part of American culture, and without it our society would not be able to function or progress and there would be an extreme shortage of jobs. Because European countries were not in a position to create war machinery, they looked towards the U.S. for help and the United State’s steel production reached twice its prewar level by 1917 . U.S. exports to Europe rose from $1.479 billion dollars in 1913 to $4.062 billion in 1917, and with so much industrial output, annual incomes rose from $580 in 1914 to more than $1,300 by the end of the decade. (U.S. exports to Europe are from U.S. Bureau of the Census (1975), series U324.) Wilson made the necessary actions to make sure that our trade industry was doing well by demanding European countries take goods from America instead of loans to ensure that there were employment opportunities for citizens, and because of this America became known as a great supplier. World War One was an extremely important time for America’s economy and by the end of the war Europe was billions of dollars in debt to the U.S. which allowed the U.S. to become a stronger economic power.
The US needed to contribute to the war to show their support towards the strong European nations, and also needed to create new allies. Before World War One America had a week military of only 200,000 men and limited supplies for war. Congress passed the Selective Service Act in May 1917 which required men to sign up for the military, and as a result, would be randomly selected to fight for their country. Overall 4,791,172 Americans served in World War I. The US needed a quick large sum of money to finance these soldiers. There was a rapid increase in federal spending from $477 million in 1916 to $8,450 million in 1918 and an estimated thirty two billion dollars was spent on the war. (Rockoff, Hugh. "US Economy in World War I". Rutgers University. February 10, 2008.) When the U.S. showed their support to the Allies, the allies bought most of there war supplies from them , which greatly benefited the U.S. economy.
In order to fund the war the US needed to create new taxes, borrow money from the people, and print more money. Many people believed there should have been be a balance between creating more taxes and borrowing money from the citizens of America. The Treasury Secretary, William Gibbs McAdoo, believed that financing about 50 percent from taxes and 50 percent from bonds would be the right balance because if they finance the war purely from taxes, then the wealthier class would’ve gotten upset and frightened, and eventually lose support for the war. (Rockoff, Hugh. "US Economy in World War I". Rutgers University. February 10, 2008.) In October 1917 Congress created the War Revenue which, “increased the personal and corporate income tax rates and established new excise, excess-profit, and luxury taxes.” These increases in taxes raised government revenues from $930 million in 1916 to $4,388 million in 1918. (Rockoff, Hugh. "US Economy in World War I". Rutgers University. February 10, 2008.) The U.S. government had a special system of printing new money, that didn’t dramatically inflate the economy, but creating new money was looked down upon because of the failure of the new money created to finance the Civil War called the Greenbacks, which destroyed the economy.(Mitchell, Wesley Clair, "A History of the Greenbacks With Special Reference To the Economic Consequences of Their Issue 1862-65", University of Chicago, Chicago, 1903.)During World War One the U.S. was still on the gold standards, and didn’t want to take their chances with printing new bills, after they had already had much success with their economy. Another way to finance the war was to borrow money. The Treasury created the famous Liberty bonds during this time, and was able to raise over 20 billion dollars to help war efforts.(Massachusetts Historical Society, Focus on Women and War, June 2002) There were multiple ways the government was able to raise money to support American troops, and by keep a balance between the economy and the people they protected the interests of American citizens.
Although Wilson was the one making most of the financial decisions at this time, he made smart decisions and didn’t let the power get to him. Wilson saw the benefits of getting the U.S. involved in the war and was able to greatly influence the position of America’s power. Although, a depression occurred after the war, the whole world was in a time of recovery from the devastation of the war. If the US had not joined WWI, other countries might have looked at the US as a cowardly country, and wouldn‘t have respected America. This was the first time that as a country we were able to significantly contribute to other nations, and in return the other nations helped our trade industry immensely. It was important for the US to become a part of the world, and not ignore the problems happening on another continent. Instead of being forgotten about, the US was able to stand up and prove themselves as a rising world power.