The New Empire of Debt: The Rise and Fall of an Epic Financial Bubble (16 page)

Woodrow Wilson was the worst kind of politician—he wouldn’t lie and couldn’t be bought. He was so full of good intentions he could practically pave the road to Hell by himself.

Between the beginning of the twentieth century and the end of World War II, the United States became the world’s richest, most advanced, and most powerful nation in history. More people owed more money to America than had ever owed money to any nation anywhere. More people viewed America favorably than ever had viewed any country before. Americans stood astride the globe, a well-meaning and able colossus.

But there never was a silver lining without a cloud wrapped around it. America was too fortunate for her own good. Now, just six decades later, the country is the world’s biggest debtor. It is the world’s biggest consumer—the “world’s mouth.” It is the world’s most aggressive and meddling military power. No country on earth is so godforsaken as to escape America’s notice nor too poor to lend it money. The United States had been the freest country on earth. Now, it has more people locked up in jail than any other country (some of whom it tortures) and employs a huge army of busybodies and snitches all determined that no commercial act between consenting adults will take place without the explicit approval of a half dozen major bureaucracies.

We pause a moment and wonder how we got where we are. Surely, some terrible crime has been committed. We go to the scene to look for evidence. There, we find a few samples and take them over to the lab. And what do we find? The DNA samples are those of Thomas Woodrow Wilson.

We do not blame the man. Or hold him uniquely responsible. His protégé at the Navy Department, Franklin Roosevelt, was an eager accomplice. Lyndon Johnson drove the getaway car. Ronald Reagan, Alan Greenspan, and George W. Bush joined the gang later. But Wilson was the mastermind. It was he who decided to “improve” the U.S. system of government. It was he who also decided to improve much of the world. It was as if he thought all the generations of Americans that preceded him—and all the peoples of the world outside U.S. borders—were a bunch of nincompoops. He and, apparently, he alone was blessed with the ability to see just what the entire world needed. And thus he undertook to change the U.S. Constitution in the most fundamental ways and to reorder the system of international relations that had evolved over thousands of years.

“The spirit of liberty is the spirit which is not too sure that it is right,” said Judge Learned Hand in 1944.
⁷
Such modesty never bothered America’s twenty-eighth president.

“A mentally ill, pitiless, mythomaniac, . . . who believed himself in direct communication with God, guided by an intelligent power outside of himself. . . .”
⁸
Thus did the father of modern psychoanalysis describe Woodrow Wilson. But Freud’s judgment of the man was too generous. Wilson was a self-satisfied, sanctimonious delusional bungler who practically single-handedly transformed the country into a mocking shell of what it was supposed to be.

We begin our inspection with a quotation attributed to Wilson after his presidential election victory: “Remember that God ordained that I should be the next president of the United States. Neither you nor any other mortal or mortals could have prevented this.”

Is there any doubt that Wilson was mad? He claimed to be a Democrat. Later, he claimed to want to make the world “safe for democracy.” But right here, we see he believed in divine providence to decide leadership issues. He had not been elected by the people; he had been chosen by God.Why then, bother to have elections at all?

We also pause to wonder how the former college professor could have known God’s mind. We have tried ourselves, many times. Does God intend stock prices to rise, we ask ourselves? Will God let this plane land safely, we wondered recently? Where the hell did God let us leave the car keys? But though we have given the matter a good-faith try, we have never mastered it.

Surely,Woodrow must have supped with the gods. Perhaps he had God’s ear or even his throat. For the man could look into the future as easily as we can look into an empty beer stein. He knew not only that he was destined to become president, but that he could build a world even better than the one God had given him—by looking into the future and improving it before it happened and by replacing the private goals and hopes of millions of people with those of his own.

How did he know that the world would be a better place if a Federal Reserve System were set up to control the nation’s money? How did he know that Mexico would be a worse country and a worse friend to the United States—if it had General Huerta at its head, instead of Wilson’s man, Carranza? What made him think that his own judgment about what sort of government Mexicans should have was better than that of the Mexicans themselves? What made him think that a democracy was superior to a constitutional monarchy or that World War I would end better if Americans got involved in it?

In his April 2, 1917, speech, in which he urged the nation to war,Wilson noted that the Russians had always been “democratic at heart.”“[W]onderful, and heartening things . . . have been happening with the last few weeks in Russia,”
⁹
he continued. What had been happening was the beginning of the uprising that would later become the Bolshevik Revolution. First, the moderates took over from the Tsar. But the Kerensky government kept Russia in the war. Germany, meanwhile, feared America’s entry in the war on the enemy’s side. She desperately needed to stabilize the Eastern Front so she could turn her attention to the renewed threat in the West. Her technique was as clever as it was disastrous. She found a windy revolutionary named Lenin who had been exiled from Russia many years before. He was bank-rolled, put on a train, and sent back into Russia with the express purpose of making trouble.The trouble he made was the Bolshevik Revolution, which knocked Russia out of the war, just as the Germans had hoped.

Wilson had no clue. He had no way of knowing what would happen anywhere. He was guessing, just like everyone else, and almost always guessing wrong. Many readers will rush to judgment. “He made a mistake,” they will say. Or,“How could anyone know that the Russian Revolution would be followed by one of the most cruel and absurd episodes of bad government in the entire sordid, history of the planet?” Since it is impossible to know, they will add,“You just have to do your best. . . . Besides, you have to take action!”

The prejudice for action in public affairs is a constant. And a constant disappointment.

Of course, Wilson could not know what would happen. It was vain to think otherwise. But Wilson did think otherwise and was determined to edit history before it was written—in Haiti, in Mexico, in Nicaragua and then, when the stakes were bigger, in Europe. He even sent troops to Russia to try to beat back the Bolsheviks. But this was typical of Wilson. He seemed to want to intervene everywhere.

Americans were perfectly happy with the government of Porfirio D’az in Mexico. But then, the malcontents in Mexico began causing trouble because the most important industries in the country were owned by non-Mexicans. In economic terms it barely matters what passports capitalists carry, but politicians prefer to have locals own local industries, so that they will be closer to hand to lean on. Beyond that, the Mexicans found foreign ownership a useful spoon with which to stir up the mobs. A new president, Francisco Madero, came in after Porfirio was overthrown in 1910. He immediately went to work trying to dispossess the foreigners—many of whom were Americans.

“Give us a dictator we can trust,” the dispossessed said to then-president Taft. In February 1913, Madero was overthrown and murdered by General Victoriano Huerta. The new American president, Wilson, did not like the latest regime in Mexico and refused to recognize it. Instead, he backed the opposition movement, led by Venustiano Carranza and his Constitutionalist party. Wilson said he was following a policy of “watchful waiting,” but he must have gotten tired of watching after a while. On April 21, 1914, he decided to act. He ordered the bombardment of Vera Cruz. Blowing up another country’s city is not an ambiguous act. It is a decisive act of war. The United States Constitution specifically says that Congress, and only Congress, has the power to declare war. But Wilson couldn’t wait.

The Mexican “crisis” pot had been on a low boil for months. Foreign ships lay off the coast of several Mexican ports awaiting trouble. An incident in Tampico, where a group of American sailors was detained by Mexican troops, turned up the heat. The sailors were released shortly, with apologies. But Wilson rarely let an opportunity for mishap pass unmolested. He demanded that the Huerta government hoist the American flag over Tampico and give a 21-gun salute to atone for the insult. Huerta would have rather jumped naked into an alligator pond. He refused.

Wilson brought up his marines. But Tampico had no decent place to land them; Vera Cruz was substituted.

The proximate reason for Wilson’s attack on Vera Cruz was the approach of a German ship, said to have arms aboard for the Mexican government. Mexico was not at war with the United States.The United States was not at war with Germany. No one was at war with anyone. Mexico could buy its arms from whatever country it wanted.Wilson’s intervention was fantastic, almost unbelievable.

In the battle of Vera Cruz, 90 Americans died and more than 300 Mexicans. What they died for, no one knew.Wilson’s military meddling quickly produced the exact opposite result than the one he had expected. His man, Carranza, was so appalled he joined forces with his adversary, uniting the entire country against the United States and demanding the removal of American troops. The Mexican government severed diplomatic relations with the United States and prepared to seize assets of U.S. nationals. Now, the two nations were on the verge of real war. And for what? Mr. Wilson had never met either General Huerta or Mr. Carranza, nor as far as we know, had he ever set foot in Mexico, eaten a single taco, or swallowed a single shot of tequila. Yet, the American president thought he knew best who should be head of state south of the Rio Grande.

The whole affair ended as preposterously and pathetically as it began. The war in Europe began and Wilson’s wife died. The president no longer had the time or energy to build a better world in Mexico. After a bit of negotiation,Wilson typed up a press release:

Both General Carranza and the Convention at Aguascalientes having given the assurances and guarantees we requested, it is the purpose of the Administration to withdraw the troops of the United States from Vera Cruz on Monday, the twenty-third of November. All the persons there for whose personal safety this Government had made itself responsible have now left the city.The priests and nuns who had taken refuge there and for whose safety fears were entertained are on their way to this country.
¹⁰

But the Wilsonian intervention was not over. After the settlement of the Vera Cruz incident,Wilson backed a rival to Carranza—a colorful character named Francisco “Pancho”Villa, who once owned a chain of butcher shops.Villa must have been an early role model for Che Guevara. He loved publicity and was accused of staging battles only to get his name in the paper. Hollywood adored him. If there had been a T-shirt industry in 1916, his picture would have been on millions of them. But Villa was not only comic, he was lethal. On January 10, 1916, his men attacked a group of American mining engineers who had been invited to the area to revive abandoned mines at Santa Ysabel. Villa murdered 18 of them. Then on March 9, he grew more provocative. His men crossed the border to attack a small garrison in Columbus, New Mexico. The town was burned and 17 Americans were killed in the raid. Before you could say
ay Chihuahua,
people all over the United States were foaming at the mouth, eager for war. Once again, Wilson gave up watchful waiting and appointed General John J. (“Black Jack”) Pershing to bring him the head of Pancho Villa—dead or alive. This, too, was a failure. Despite the call-up of a punitive force of 12,000 soldiers, Pancho always seemed to get away.“Villa is everywhere, but Villa is nowhere,” Pershing told Wilson.

Pershing chased Villa for nine months. He was called home by Wilson two months before the president announced his plans for a new intervention, this time a major-league operation. But Villa did not get away for long. He was ambushed several years later and killed.

From humbug, to farce, to disaster, Wilson had written the script for nearly all America’s imperial military adventures. The effect of Wilson’s interventions in Latin America (he had troops in Nicaragua, Haiti, and the Dominican Republic as well as Mexico) was the opposite of what he had hoped for. Instead of increasing friends of the United States in the region, the number of her sworn enemies multiplied. For the next two generations, the expression, “Yanqui go home” was as familiar as frijoles in many Latin American countries.

He had a “self-regarding arrogance and smugness, masquerading as righteousness,” says historian Paul Johnson of Woodrow Wilson, “which was always there and which grew with the exercise of power.” Like all the great empire builders,Wilson was so sure he was making things better he had no need for the polite constraints of bourgeois society, simple truth, or constitutional government. Wilson had “a passion for interpreting great events to the world,” he told his first wife. He wanted to “inspire a great movement of opinion.”
¹¹
It was not enough to boss around the hidalgos of Latin America;Wilson had an even greater ambition, to lord it over the Europeans, too. Economically, the nation was already on top of the world—U.S. gross domestic product surpassed England’s in 1910. Just as every young buck wants to challenge the old bulls, here was America’s turn to assert itself militarily among the world’s major powers. In answer to the question, why did the United States begin meddling in foreign affairs in the twentieth century, and not before, comes the easy answer: because it could.