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America's History in the Making

A Growing Global Power

Theme 2

American imperial ambitions and the events of World War I forged a new partnership between business and government.

After 1900, the government relied increasingly on technology and innovation from private industries to build up its military. When the United States entered World War I, the federal government organized public and private resources for the war effort. President Wilson believed that centralized planning in the mass production of war materials would lead to military victory. The government restructured the economy by creating new federal agencies—such as the Bureau of War Risk Insurance (1917) and the United States Railroad Administration (1918)—to manage the war effort. The BWRI was successful in its system of federal payments to servicemen's dependents, and the railroads ran more efficiently under the USRA. The government also succeeded in collaborating with the private sector when it came to building cheap, efficient ships to carry cargo across the Atlantic. Wilson looked to Charles Schwab the world's biggest shipbuilder to fix the problem, just as Roosevelt would look to Kaiser Shipyards three decades later.

The federal government's large expenditures gave businesses involved in war production a financial windfall. Corporate earnings soared because of the industrygovernment partnership and the demand for war materials from the Allies. As the war progressed, the federal government's reliance on industry intensified. This relationship extended to large tax breaks that the government gave wealthy businessmen through their foundations, such as the Carnegie and Rockefeller Foundations. The understanding between big business and government was that these foundations would invest their savings from tax breaks in scientific research to benefit both the government and industry.

Primary Sources