that the net sum invested during the period 1850-73 was $1,300,000,000 in nominal value, representing an actual value of perhaps $300,000,000 to $400,000,000 less.

Against this sum is chargeable the annual payments of interest. This item can be only roughly approximated. In the early fifties, on about $220,000,000 of foreign capital, interest at 6 per cent amounted to $13,200,000 a year. By 1855, when the total of foreign capital was estimated at $364,000,000,1 it may have been about $22,000,000; and in 1860 on foreign capital of $400,000,000, it was about $24,000,000. When foreign securities were returned in 186163 it must have sunk to $10,000,000. In 1869, Wells estimated interest at $88,000,000; and on $1,500,000,000 in the early seventies it must have been about $90,000,000. These heavy payments, however, occurred only in the last six or eight years of the period. For the whole period the total interest charges may be estimated at $904,000,000.2

Other items of the balance are of minor importance, and data are lacking regarding their amount. For the most important one, tourists' expenditures, some figures are available. They were estimated at the beginning of the period at more than $15,000,000 a year. And in 1869 they were estimated by David A. Wells at $37,000,000 a year. This increase, however, could not have

3

1 Hunt's Merchant's Magazine, December, 1857, p. 664.

2 This is estimated as follows. During the eleven years 1850-1860, inclusive, the annual interest charge increased from about $13,000,000 to $24,000,000 and averaged about $18,500,000. This gives a total of $203,000,000 for these eleven years. After sinking to $10,000,000 in 1861 the annual charge increased to $88,000,000 in 1869, which gives an average charge of $49,000,000 during these nine years and a total of $441,000,000. This figure, however, is excessive because the bulk of the new capital came here after 1864. To allow for this fact we may decrease the estimate for the period by $100,000,000, thus reaching the figure of $341,000,000 for the nine years ending in 1869. From 1870 to 1873, inclusive, the annual charge averaged about $90,000,000, or $360,000,000 for the four years. The total thus computed is $904,000,000 for the twenty-four years.

3 Kettell, Eighty Years Progress, Vol. I, p. 244.

4 Report of Special Commissioner of the Revenue (1869), p. xxxi. He deducts $12,000,000 for the expenditures of foreigners in this country, reckoning $1000 apiece for both classes of tourists. The total number of American citizens returning from abroad in 1850–1873 was 735,000. The total number of aliens not immigrants, i.e. foreign tourists arriving in 1850-1873, was about 157,000.

occurred prior to or during the war; and for the whole period, it is probable that the balance on this account did not average more than $24,000,000 a year, which gives a total of $576,000,000. There were some 6,600,000 immigrants admitted in this period.

E. FIFTH PERIOD, 1874 TO 1895: EXCESS OF EXPORTS DEFINITELY REESTABLISHED BY GROWTH OF INTEREST CHARGES

ON FOREIGN INDEBTEDNESS

The crisis of 1873 was world-wide. It began in May with a panic in Vienna, extended to Germany and England, and in September broke out in New York. European lending ceased, railroad construction was halted, prices fell to a point where imports must diminish and exports expand. In 1874, for the first time since 1862, exports exceeded imports.' Before 1874 the balance of trade had been generally unfavorable; from that year on, the balance has been favorable except in three years, 1875, 1888, and 1893.2 The year thus marks a turning point in our foreign trade.

The table on page 178 shows the annual trade balances for the period 1874-95. Silver is included with merchandise; the gold balance is stated separately.

Before examining the balances for the whole period, attention is called to the late seventies and early eighties. The first column shows an extraordinary expansion of the exports. From 1875 to 1881 exports expanded $353,505,000, or 63 per cent. For the six years 1876-81 the excess of exports over imports totaled $1,234,406,000 and averaged $205,734,000. The total excess was about one-half of the total for the entire period 1874-95, and the average almost three times that of the other sixteen years.3

1 (These figures are for merchandise only.)

2 Excluding silver, the balance was also unfavorable in 1889, by $2,730,277

*These figures include exports and imports of silver.
† July 1 to June 30.

These large balances were due mainly to the unprecedented expansion of agricultural exports, which at that period comprised from - three-fourths to four-fifths of the total. The expansion was particularly marked in 1880 and 1881. In the summer of 1879 harvest failures in Europe, together with good crops at home, enabled our farmers to export unprecedented quantities of breadstuffs and other products at high prices. Exports of wheat and wheat flour increased 162 per cent from 1875 to 1881; exports of meat and meat products

doubled; exports of cotton increased 30 per cent; agricultural exports as a whole about doubled.1

These heavy exports induced a large net inflow of gold, totaling $183,544,000 from 1878 to 1884. Of this, $174,585,000 came in 1880 and 1881, the years when exports reached their highest level prior to 1890. The gold imports insured the successful maintenance of specie payments, resumed in 1879. Coming in such a heavy stream into a gold-producing country, normally an exporter of gold, they indicate beyond question that in the years when exports were largest and the trade balance most favorable, 1879-81, the United States had a surplus of credits on all international transactions. The demand for our exports, combined with new capital borrowings in this period, was so large as more than to offset the total outgoings for imports plus invisible items of indebtedness.

These years were of course exceptional. In general, the more modest favorable balances characteristic of the period 1874-95 served for the payment of our indebtedness on the various invisible items of international exchange. Summing up the figures of merchandise trade for the period, exports amounted to $17,231,064,000, as against $14,738,313,000 of imports, leaving an excess of exports of $2,492,751,000, or an average excess of $113,307,000, merchandise and silver. The normal flow of gold was outward, but moderate; the total excess of exports being $111,903,000, or an average of $5,087,ooo a year. The total excess of exports of merchandise and specie was $2,604,654,000, an average of $118,394,000 a year. It is this amount, plus new foreign capital invested in this period, against which the items of invisible indebtedness are chargeable.

The chief item of indebtedness was the payment of interest charges on foreign capital. To approximate the amount of these payments we must follow the course of the investment account, as indicated by international financial conditions, by the cyclical movement of business, and by such statistical estimates as appear reliable. The Commercial and Financial Chronicle of May 18, 1872, estimated

1 Exports of wheat and wheat flour Exports of meat and meat products Exports of cotton

All agricultural exports

(In thousands of dollars) 1875 1881 Increase 82,320 212,746 130,426 67,955 134,254 66,299 190,639 247,696 57,057 389,410 738,124 348,714

the total of American securities held in Europe to be $1,500,000,000. This estimate agrees with that of David A. Wells, and may be taken as an approximately accurate statement of the foreign investments at the time of the panic of 1873. During the period of depression succeeding the crisis, there was a considerable return of securities from Europe, the withdrawals amounting in 1876-78 to $300,000,000, of which $150,000,000 pertain to the year 1878.1 In 1879, as already noted, occurred the revival and the marked expansion of agricultural exports. Prosperity among the farmers and the grain carrying railroads made business brisk for merchants and manufacturers of raw materials. Railroad construction began afresh, 28,253 miles of new road being built in the three years 1880-82. Though the favorable reaction was felt more in the United States than in Europe, the railroad boom soon attracted foreign capital,2 as had that preceding 1873. By 1883 United States railroad securities quoted in London amounted to $1,535,000,000; 3 adding federal and state bonds, municipal securities, land, mining, and industrial stocks, the total of foreign investments could not have been less than $2,000,000,000. In the last half of 1881 the tide turned. The crops of that year represented a loss of two hundred million bushels of wheat, five hundred million bushels of corn, and over a million bales of cotton. The immoderate railroad construction, the feature of which was the paralleling of old established lines, ended in a prolonged period of liquidation, which reached its low point in 1884. Rate cutting and rate wars became the distinctive feature of the industrial situation. From July, 1882, to July, 1885, there was a reversal of the security movement, similar to that following the panic of 1873, though much smaller in volume. From bankers' records, the Chronicle computed an average withdrawal of capital of $25,000,000 a year. Statistical indices of the volume of business show 1885 to have been the dullest year of the decade. Then came a revival, so prompt that the Chronicle declared 1886 to be the best business year since 1880.5 Rapid railway construction began again,

1 Data furnished by F. D. Graham, Rutgers College.

2 See C. K. Hobson, The Export of Capital, p. 147.

3 Sir George Paish, Trade Balance of the United States, p. 173. National Monetary Commission, 1910.

4 Commercial and Financial Chronicle, Vol. LX, Part 2, p. 633.

5 See W. C. Mitchell, Business Cycles, p. 46.