SOME ECONOMIC IMPLICATIONS OF AMERICA'S

CHANGING WORLD STATUS

By ERNEST MINOR PATTERSON

(Read April 21, 1928)

It is not possible to discriminate sharply between changes due to the late war and those that were already occurring. America's position in world affairs was altering rapidly before 1914 and much that has happened since that date would have transpired even if there had been no war. For the most part developments have merely been hastened yet some of their significance has been enhanced by this acceleration. Four of these changes in the economic field may be briefly stressed.

First is our modified attitude toward immigration. For a century the United States was changing. A country with a small population and a meager supply of capital but with large undeveloped resources was becoming more densely populated and more independent of foreigners who had capital to lend. Some resources were showing signs of exhaustion while nearly all were more fully utilized. With the annual influx of immigrants increasing and with greater difficulties in assimilating them we have put up the barriers.

But this has not settled the matter. Instead it has merely entered on a new phase. Last summer Albert Thomas, Director of the International Labor Office, pointed out that two problems must soon be faced and an answer secured. May the people in densely populated areas claim the right to multiply as they see fit and then demand that their excess numbers be received freely in regions where there are a fewer number per square mile? On the other hand may those people now occupying the sparsely settled areas insist that they may retain control over those areas to the exclusion of others? These two issues will probably

become more acute as the years pass. From time to time they appear in international conferences where invariably the representatives of densely populated countries insist that their people should be allowed to migrate freely. This view is just as regularly opposed by delegates from sparsely settled areas. The latest expression of these differences came only a few days ago from Havana.

Another sign of the growing significance of the question is the meeting last summer in Geneva of the first Conference on World Population, a gathering which discussed dispassionately the available facts regarding population growth as found and analyzed by biologists, statisticians, sociologists and economists. At the end of their sessions an organization for permanent study was created. Population growth and the migration of peoples furnish an issue which may soon become acute in international policies.

The problem presented is not easy of solution. Thus far Americans have taken refuge in the easy but superficial contention that immigration is a purely domestic question and that we may decide it as we see fit. But is it? The same argument has been pressed in support of our tariff policy, yet slowly and surely people of all parts of the world are coming to realize that restrictions on the importation and exportation of commodities are facts of international signifiWhat is done by one country is a matter of concern to all. To read the report of the World Economic Conference held a year ago at Geneva is to learn of the unity and interdependence of the economic world.

cance.

Our immigration policy will be challenged and vigorously. The issues raised are becoming more insistent and the answer is not easy. Mere assertion of so-called rights will be inadequate. Americans are not willing to concede unqualified rights to the people of other countries. Many of us have argued that the Chinese should not raise their tariffs; that the Mexicans should not modify their land laws; that the producers of rubber in the British Empire ought not to stabilize prices with the aid of the Stevenson plan; that the

Brazilian government should not attempt to influence the price of coffee. In some cases we urge treaties, previous legislation or the establishment of vested interests in support of our contentions but the point is that we are not willing to concede that the nationals of other countries have an unqualified right to do as they please. It happens that I favor the restriction of immigration into the United States but there is no denying the existence of the problem. How can we claim the right to do as we please with our large land area still sparsely settled and protest the rights of others to do as they please with their coffee, their oil and their rubber?

A second change is the rapid growth of large scale production and the existence of huge plants for the building of ships, the manufacture of chemicals, steel and textiles, the mining of coal. Years ago only limited areas in the world were devoted to manufacturing. Now the vast majority of the people of Western Europe live in cities and in the United States over half of our population is now urban. Even Japan, India and China are rapidly industrializing. Huge factories have been built in each country, many of them with little regard for construction elsewhere, until the aggregate productive capacity is in many lines far in excess of the readiness of the world to buy.

The test is the present capacity of the market to purchase the output. The cotton spindles of the world are about 15 per cent more numerous than in 1913 but the world demand for cotton cannot keep them busy. There is acute depression in many countries, among the worst sufferers being old England and New England. World coal output is eight or ten per cent greater than in pre-war days and the coal markets are clogged. The British coal industry has had two serious strikes since the war. Although the strikes have ended the problem has not been solved and another crisis is now developing. Continental output has been growing and in the United States the strike in the bituminous fields is a reflection of an overdeveloped industry.

Similar data can be given for other leading industries,

among them shipbuilding and steel. Demand for steel fluctuates rapidly but production in England, Germany, Poland, the United States and elsewhere has during the last year or two been only from 50 to 75 per cent of capacity during much of the time.

Excessive equipment in many lines has not been unknown in the past but has now appeared on so huge a scale as to be a new sort of problem. It is being met in part by private agreements between the producers of different countries. In part it is not really faced at all with the result that there are huge losses suffered by many investors and the still worse fact of persistent unemployment and suffering for hundreds of thousands of workers.

Years ago we would have left it all to a magic "law of supply and demand." We would have expected capital and labor to shift from crowded fields to others where the demand might be greater. Today the difficulties of such adjustments are so serious that attention by governments or by international action is imperative. We are finding that unrestrained private competition is an inadequate remedy when labor and capital function in such huge units and are so immobile.

A third change is our sudden shift from debtor to creditor status, accompanied by alterations of the reverse kind in Europe where creditor groups have become debtors. In 1914 foreigners owned the stocks and bonds of American corporations, municipalities and states and we were a debtor group to the extent of several billion dollars. At the same time we were allowing foreigners to carry our trade in their vessels, were insuring much of our property through their companies and financing many other transactions through their bankers. To meet these and other annual payments our exports exceeded our imports by about $500,000,000.

Today American citizens own perhaps $14,000,000,000 of foreign stocks and bonds in addition to the claims of our government against foreign governments with a nominal value of about $10,000,000,000 more. We are expecting these

foreigners to pay the charges on these public and private debts and are urging them to go on purchasing an increasing volume of exports. At the same time we are making it more difficult for their laborers to work it out by coming to America. We are insisting too that we desire to carry our foreign trade in our own vessels and that we prefer to finance our own business transactions with the aid of our own bankers. Moreover our tariffs have been raised since the war.

This curious contradiction in policies has been maintained by our willingness to accept each year more promises of foreigners to pay at some future date. The American market has been open for the sale of huge quantities of securities. This is presumably a movement that will in time diminish somewhat in volume. If so, we must submit to default on a substantial amount of these foreign loans, perhaps sacrificing first the amounts due our government or else we must readjust our policies in such a way as to permit our receiving a larger amount of foreign goods and services in annual payment. Shipping policies and the tariff must ultimately be reconsidered.

Fourth and last in this short list of changes may be mentioned the money problem. America is a gold producing country and should normally export or at any rate import very little gold. Yet for some time gold has been imported in large amounts and we now hold something over 40 per cent of the world's supply. For several years our efforts have been directed toward preventing a huge expansion of credit on the basis of these holdings, the policies of our Federal Reserve officials being designed to this end. This has been done so fully that observers abroad are alleging that the world now operates on a "dollar" standard instead of the old gold standard; that their price levels will be determined by the amount of gold we hold or release to them; and that our attitude and their monetary fate are settled by a small group of American banking officials.

This characterization may be somewhat overdrawn and it describes a condition that may not persist. In fact gold is