President William McKinley(1897-1901) led America to victory in the Spanish-American War, raised tariffs to promote American industry, and placed the country on the gold standard. He previously served as a Representative in Congress, Governor of Ohio, and the Republican presidential nominee . McKinley defeated William Jennings Bryan twice for the presidency in the 1896 and 1900 elections. The 1896 election was contested over the issue of which monetary standard the country should adopt; the 1900 election was over the direction of U.S. foreign policy after the American annexation of Puerto Rico, Guam, and the Philippines. In addition to these new territories, McKinley returned the United States to economic prosperity after the Panic of 1893. He was assassinated by an anarchist in 1901.
When McKinley was in Congress (1877-83, 1885-91), the United States had effectively been placed on the gold standard by the Coinage Act of 1873. When silver prices dropped significantly, many, known as the “Silverites,” sought to make silver a legal tender and equal with gold in value. These Silverites believed that the increase in the money supply would offset the harm caused by inflation, while their opponents argued that these promised benefits would not materialize and would harm the United States in international trade. McKinley sided with the Silverites early in his political career, voting against his party for the Bland-Allison Act of 1878, which mandated the U.S. government purchase silver. Later McKinley would reverse his position to become an advocate of the gold standard, a change that his friend and presidential campaign manager, Mark Hanna, famously explained: “He did not pretend to be a doctor of finance and followed the popular trend of that time.”
Although he changed his position on the gold standard, McKinley was consistent in his career about protective tariffs to allow American manufacturers to develop against foreign competitors. After failing to win the speakership of the House, McKinley was appointed as the chairman of the Ways and Means Committee, where he guided the McKinley Tariff through Congress in 1890 that raised the average duty on imports almost fifty percent. The Act, supported by Republicans and opposed by Democrats, was unpopular with Americans who suffered a steep increase in the costs of products after the tariff was enacted. As a result, the number of Republican House seats went from 166 to 88 in the 1890 elections; and the Democrats won control of Congress and the Presidency in 1892. Lawmakers immediately drafted new tariff legislation and passed the Wilson-Gorman Tariff in 1894 which lowered average U.S. tariffs.
Urged by Ohio Republicans, McKinley ran for governor in 1891, defeating Democrat James E. Campbell. He was re-elected as governor in 1893. Although Democrat Grover Cleveland won the presidential election in 1892, McKinley supported and campaigned for President Harrison’s re-election campaign and was seen, after Harrison’s defeat, as the next likely Republican presidential candidate for the election of 1896. Prior to the 1896 Republican National Convention, McKinley favored a moderate position of bimetallism by international agreement; but, after consulting with his advisors, he decided to endorse the gold standard. This adoption of the gold standard in the party platform led some Republican delegates, like Colorado Senator Henry M. Teller, to walk out of the convention. However, when compared with the Democrats, the Republican divisions on monetary issues were small.
By contrast, the Democrats were bitterly divided over the monetary standard, with the party eventually adopting a bimetallic standard after William Jenning’s Bryan’s “Cross of Gold” speech. During the general election, Bryan argued that adopting free silver would allow impoverished farmers in the South and West to pay their debts and lift the nation out of the 1893 economic depression. McKinley responded that if the United States went off the gold standard, the value of paper currency would be cut into half and inflation would soar. Campaigning from his front porch, McKinley outlined his monetary policy:
McKinley won 51% of the popular vote and 271 electoral votes to Bryan’s 176 (224 were needed to win). Bryan won among farmers in the South, West, and rural Midwest, but McKinley, in addition to carrying the Northeast, was able to persuade German-American voters in the Midwest that a bimetallic standard would lead to an economic disaster of unemployment and inflation. McKinley’s views on a robust U.S. industry through protective tariffs and a currency based on gold triumphed and solidified Republican dominance of national politics until 1932.
President McKinley’s first inaugural address, the future Gold Standard Act of 1900 was outlined. McKinley stated:
The Silverites made one last push for the United States to adopt a bimetallic standard when the Dingley Act of 1897 had passed the House but was delayed in the Senate. The Act was to revise the Wilson-Gorman Tariff Act of 1894 with increased duties on imported goods, including French luxury items. French representatives offered to cooperate with the United States to develop a bimetallic standard if the new tariffs were reduced, which won the support of Silverite Republicans in the Senate. The bill was amended and McKinley signed it into law, agreeing to begin negotiations on an international bimetallic standard.
After American negotiators concluded a reciprocity treaty with France, the two states approached Great Britain about an international bimetallic standard. The British rejected the offer, leading McKinley to embrace the gold standard once and for all. With recent discoveries of new gold in the Yukon and Australia and the United States returning to economic prosperity, McKinley favored legislation to officially adopt the gold standard for U.S. currency. On March 14, 1900, the Gold Standard Act was signed into law by McKinley. The act fixed the value of the dollar at 25 8/10 grains of gold.
Besides bimetallism, the Spanish-American War consumed the attention of McKinley in his first term of office. The United States and Spain had begun negotiations on Cuban independence in 1897; and in 1898, the U.S. battleship, the Maine, was sent to Cuba to protect American lives and property. When the Maine was sunk by an underwater mine and killed 266 Americans, the United States declared war against Spain. After the defeat of Spain, Cuba became independent and the United Sates acquired Puerto Rico, Guam, and the Philippines and, separate from the war, seized Hawaii and the Wake Island. In acquiring these Pacific possessions, McKinley expanded the country’s ability to compete for trade in China with its “Open Door Policy” that would allow all nations to trade freely with China without violating its territorial integrity.
With economic prosperity and public support of the Spanish-American War, McKinley easily defeated Bryan (in the election of 1900) who campaigned again on Free Silver and attacked McKinley’s foreign policy as imperialist. Bryan won the South and rural West with 155 electoral votes, but McKinley won the rest of the country with 292 electoral votes, including Bryan’s home state of Nebraska. McKinley also increased his popular vote from the 1896 election to 51.6% to Bryan’s 45.5%.
After inauguration, McKinley gave several public addresses that urged reciprocity treaties with other nations to assure American manufacturers access to foreign markets. On September 6, 1901, McKinley was visiting the Pan-American Exposition in Buffalo, New York when he was shot twice by Leon Czolgosz, an anarchist. He died from those wounds on September 14. Vice-President Theodore Roosevelt succeeded McKinley as President. Instead of pursuing trade reciprocity, Roosevelt would focus on breaking up trusts.
Monetary History Highlights
The Rueffian Synthesis