G. RÉSUMÉ OF OUR BALANCE OF TRADE FROM 1820 TO 1914

The historical survey of our balance of trade, as given in the preceding pages, has served its purpose if it has made clear the broad outlines of our gradually changing international situation, as now one factor and now another has exercised a predominating influence. Defective as many of the data are, particularly in the earliest periods, the main facts of the record stand out with quite astonishing clarity, so that very rarely is one in serious doubt in ascertaining what in any given period were the factors of major consequence, or in measuring the extent of their effect upon the balance of merchandise trade.

Since our account has been purposely condensed to the bare essentials of a descriptive summary, there is no need of detailed résumé. The general course of our trade and our trade balance from 1821 to 1914 is shown in the accompanying charts. The first1 shows the annual exports and imports. In the second chart, below, is shown the average annual balance of trade in each of the periods from 1821 to 1914. It shows that in response to alterations in the

various invisible items of indebtedness, the size and the state of the balance have undergone gradual change; and that, in general, except for the brief period from 1838 to 1848, our balance of trade was unfavorable down to 1874, first by reason of our shipping earnings, then because to these earnings was added an inflow of foreign capital, and finally on account of our large production and export of gold, combined with still heavier borrowings of foreign capital; but that, since the overturn which occurred in 1874, our balance has been favorable, first moderately, because of the gradually growing interest charges on foreign capital invested in earlier periods, and then, since the late nineties, more markedly, by reason of the rapid growth of tourists' expenditures and immigrants' remittances.

1On pages 160-161 supra.

* After 1873, these figures include imports and exports of silver.

II. THE HISTORY OF OUR FOREIGN TRADE BALANCE DURING THE GREAT WAR1

A. INTRODUCTION

With the great war came a profound dislocation of international commerce. Exports from the United States have grown into figures such as have never been witnessed in any country. There has been an inflow of gold so enormous that today the United States is holding one-third of the total monetary stock of the world. A nation which down to 1914 had been the world's greatest borrower of capital has become the world's greatest lender, in the scale and rapidity of its advances if not in the total amount at present outstanding. Finally, our merchant marine, virtually moribund since Civil War times, has been revived, at least temporarily, on a gigantic scale.

And this is not all. As a result of war's interferences with normal economic activities, there have been other significant realignments of international currents. For the time, at least, a great change has taken place in the organization of commerce. Before the war the British and German merchant fleets in their voyages around the world brought back all sorts of products from all corners of the earth, to be redistributed over the world. The United States acquired its Egyptian cotton, its Far Eastern and Brazilian rubber, its

1 Bullock, Williams, and Tucker, The Balance of Trade, pp. 234-238.

East Indian and Bolivian tin, its Australian and Argentine wool largely through these great trading nations. Today we buy our raw materials direct from the producing countries. The reëxport trade of Hamburg has, of course, been stopped; that of London has declined; and the United States has become an important reëxporter.

In the minds of some, the growth of reëxports appears to signify our permanent participation in international merchandising, in the middleman functions of world commerce, with New York as a central world market from which there will extend a world-wide distributive organization, operating through American banks in foreign countries, American export and import houses around the world, and, as the central pillars of support for so vast a structure, large capital investments in other lands and a great merchant fleet. That is one of the interesting questions. Is our reëxport trade to grow, or is it

only incidental and sporadic? Is New York to become an international trading center, a second London, or have we taken over some of the functions and constructed some of the machinery of such a center merely for the time, and because temporarily we have been obliged to do so? During the war there has been a remarkable extension of American banks into foreign fields, and at home the establishment of agencies for the analysis and promotion of foreign investment. By new commercial and banking legislation we have provided a more adequate basis for a large-scale, permanent business of export. Our foreign trade conventions and councils are conducting educational campaigns to promote foreign trade. Do these activities point at once to a two-fold permanent development of large-scale foreign investment and foreign trade, similar to that of Great Britain and Germany before the war?

Our unprecedented export trade during the war, our enormous loans to Europe, and the revival of our merchant fleet have brought about a profound change in our balance of international payments, so that, for the time at least, the United States, up to 1914 a debtor nation, has become the world's creditor. Such a condition implies the receipt of payment from the debtor, either in gold, in securities, or in goods. Payment of our enormous balances in gold is out of the question. Payment in securities implies a continuance of the war condition of our trade—an outward flow of capital and goods, an excess of exports over imports. Such a movement financed, as it must be, by further credit expansion in European countries, and occurring coincidently with the payment of the German indemnity, would probably produce in the Allied countries further inflation of price levels, already raised to new heights in all countries. And if, for a time, we "carry the bag" and enable Europe to settle her adverse balances out of advances from our own pockets, eventually those balances, augmented by the new borrowings, must be paid in goods. Our imports must increase, our excess of exports disappear; and it may be, though that subject is reserved for later discussion, that an excess of imports will take its place. When will this change occur? And what will be its effect upon the level of prices in the United States, as compared with that in European countries?

These are some of the interesting questions raised by the war just ended. Many of the larger problems we cannot hope to discuss in