behind systematic foreign investment. It is that as the world has advanced, nations have generally learned to know that they build their own greatness and wealth by a policy of enlightened national self-interest that causes them to devote whatever capital they can spare for the development of the national resources of other friendly countries, not with a patronizing purpose, but to make good customers and cooperators in world-trade with them.

Foreign trade follows broad foreign financing. Of course, the question may arise whether the trade that may follow will bring as much in return as if the capital were used in development at home. In other words, all nations cannot afford to lend their capital abroad, because they have natural resources of their own requiring capital. It is a question of balancing one advantage against another. A nation when it is young needs not only all the capital it can find within itself, but must borrow abroad. But in the course of years it builds railroads, opens up its agricultural sections, sees its industries grow by the appearance of factories and important mercantile cities everywhere, and values of everything rise to the level at which it takes more and more capital to continue development.

If there are other countries so situated that friendly political and trade relationship would

be naturally expected, and there are natural resources in them that can be brought to large productiveness quickly by a comparatively small expenditure of labor and capital, perhaps it is of national advantage to use productive capital in those other countries, rather than in forcing further development at home. It is a question for economic balance. The consideration comes in that, economically considered, from the national viewpoint, capital loaned abroad goes forth in the form of goods, not money, in the run of experience, so that it is not a matter of letting money go abroad that could better be used at home.

Sir George Paish says, "Loans of capital to other lands do not mean that the lending country's purchasing (or consuming) power is reduced to the extent of the capital lent. Loans of capital create an increased demand for the lending country's goods, and by stimulating production, cause the lending country to produce a great many more goods than otherwise it would do."

In line with this idea, a country that has arrived at a point where many of its factories are selling all the domestic market will take, but not as much as they could with increased efficiency put out, may quite likely find that in furnishing capital for other countries that have resources capable of easy and lucrative develop

ment, it is simply using its financial organization to find an outlet for increased manufacturing production which is in effect invested abroad, and that while the aggregate of its foreign investment stands on the books as a cash loan of so many millions, or hundreds of millions, and the investors of the country have really furnished this amount in their real money, the country's business interests as a great community have really sent abroad only the cost of manufacturing the goods.

To be specific, the factories of the United States, so competent opinion states, are at the point where they have developed very nearly. their maximum home market and can get the advantage of the efficiencies of further production only by finding an expanded market abroad. If they can find this market, they can produce more, employ more labor (and incidentally increase the purchasing power of domestic consumption) and get economies that will enable them to reduce the domestic price of their goods. At the same time, there are in some of the South American republics vast undeveloped sections where a very sturdy people could, if they had the railroads and the agricultural equipment and the supplies to support large numbers of workmen engaged in construction, use the manufactures that our factories could so advantageously produce. The

people of these South American countries are ready to make friendly bargains with us. It isn't a matter of our patronizing them or giving them any kind of charitable assistance. We can lend them our capital, send it to them in the form of our own goods, for the most part, and make a very good thing out of it. They will make a very good thing out of it also, and as their industries develop, and millions of immigrant population go into the developing regions, the trade that has been set up will continue to grow. This is not a bit of creative imagination. It is only a specific picture of what English economists say happens when one nation lends capital to another. Says Sir George Paish:

"Loans of capital by one country to another do in fact increase both the producing and consuming power of the lending countries, as well as the borrowing countries if the proceeds of the loans are wisely and productively expended. Hence the immediate effect of loans of capital by one country to another is to increase the exports of the lender and the imports of the borrower and to increase both the imports and the exports of all other countries. Subsequently, when interest is paid on the loans, the imports of the lending country and the exports of the borrowing country are increased. ***

"Introduction of large sums of capital for railway and other purposes causes large imports of manufactured goods. After a time the borrowing country increases production of foodstuffs and raw materials so largely that it is able to produce a much larger proportion of the capital it needs for itself, and they obtain the goods they require from other countries to an increasing extent by exchange of their products. I calculate that capital wisely expended upon new railways through districts containing fair agricultural and mineral resources brings about an annual production of wealth much more than equal to the total amount of capital spent upon the construction of the railways, a rate of production which could not possibly be secured if capital were not provided for railway construction. ***

"The net effect of the capital investment of the older countries in the newer ones is thus to bring about the creation of an immense quantity of new wealth of all kinds and descriptions and to cause the foreign trade of both the newer and of the older country to show immense expansion from decade to decade."

Naturally, enterprises carried on by the use of capital furnished by a lending country are apt to influence purchases from that country. A railroad built with English money is ordinarily organized with English engineers and contractors, operation officials, and operating employees. It builds with English engines, cars and materials. Its construction forces use English supplies. It continues to purchase the coal it needs from Cardiff. Collateral enterprises come under its influence. They are apt to buy in England.

England is said to have $3,000,000,000 invested in South America. The investments of the United States are now probably somewhere in the neighborhood of $125,000,000. These are not authoritative estimates. The United States controls a number of enterprises there. On the West Coast it has mining developments and a voice in the nitrate industries. It has some steam and electric railways. At the north, it operates asphalt production. United States interests are reported to be going extensively into the petroleum districts on the West Coast and, may be, in Patagonia. Some important railway and electric developments were promoted and started going with United States money, being sold later. Even the temporary financing of these has meant lasting trade with them, for the operating organization has remained largely Yankee.

It would appear as if United States money could be "wisely and productively expended" in many parts of South America. There are still, great mining properties untouched on the West

Coast and nearby. The Brazilian plateau is rich and only scratched. The great tangled forests of the Amazon may furnish the world's paper-pulp within a decade or two.

Argentina and the neighboring countries of Uruguay and Paraguay are every year receiving a vast increase of good immigration from Europe. Railroad building is rapidly and steadily increasing the wealth and the "going value" of the country. Patagonia is still very sparsely inhabited, but is reported to hold immense possibilities of agricultural development on the "bonanza" scale. Not only the business interests of the United States have a speculative interest in the development of its trade possibilities, but the investors who find the "wise and productive" enterprises may have an equity in a rapid increase of the capital value of them and of their annual profits.

South America has been fair and responsible in its treatment of foreign capital. The courts of Argentina and Brazil have protected, at some cost, occasionally, to their own people, the interests of those who took the early chances in promoting enterprises and investing money in them. A story of North American experience will illustrate the spirit with which South America treats such investors.

United States electrical interests went to Rio de Janeiro some years ago to build an electric light and railway plant there. They made their arrangements with the local authorities and got their concessions and franchise from legislative sources. They had gone ahead to build when the owners of an already established gas company objected to their sale of light. It was claimed that the new company was preparing to infringe the patent of the old which, in its concession, had obtained the exclusive privilege of "purveying illuminants through pipes."

There was a contest in the Brazilian courts which ended in a decision by the highest tribunal that, within the view of Brazilian equity, selling electric light along wires was "purveying illuminants through pipes." The court declared that it would not be held down to a discussion of the physical difference between a pipe and a wire and between a material gas and an immaterial thing like electricity, but would rule that when the gas franchise was given the idea exposed in the phrase "purveying illuminants through pipes" covered the subsequent electrical development. The gas company had risked its money, had built up a business selling light. The electric company's project would destroy the value of the right Brazil had given and that the gas company had won by honest service. The electric company had to buy the gas company's property before it could go on with its plans.

During the year 1914 the Savings Bank Section of the American Bankers' Association has probably been more active than in any other year of its existence. The membership of the section consists not only of mutual savings banks, but also of stock savings banks, of trust companies and National and State banks having savings departments.

At the annual convention held in Richmond in October, and which was largely attended, the delegates representing these different institutions met and discussed fully and frankly with each other matters of moment to savings banks in general. There was manifested at this convention, as at all other meetings of the Section, a broad spirit which showed very conclusively that the delegates were influenced by no selfish motives. Whether representing mutual savings banks or stock savings banks, they had in mind first of all the broad subject of thrift, upon which special emphasis is being laid. At the present time it would seem to be wise to use every effort to impress upon the people of the country the absolute necessity for thrift and economy. For many years we have been going upon the "easy come, easy go" principle, and earning and spending as though there were no end to the resources of the country or to the wealth that we might produce. But of late years the idea is gaining ground that our resources are not so limitless as we have been in the habit of believing them, and that it behooves us as a people to put into practice the economies which the peoples of other nations have been practicing. We have been a veritable spendthrift among the nations. The present distressing war in Europe is bringing home to us the fact that in future we shall have to depend more and more upon ourselves for capital with which to carry on the great undertakings in a financial way which are sure to come to us in the near future. With half the world at war, straining all their own resources to keep up with the tremendous expenditures occasioned by the war, we are deprived of a source from which we have re

plenished our capital and met our financial requirements. When this war is over, it will be necessary for most of the European countries to keep at home for their own needs much of the capital which, under ordinary circumstances, would have found its way to the United States for investment, and this will cause larger demands upon our own stores of capital. There is but one way to meet these demands, and that is by the exercise of prudence, thrift and economy on the part of all our people. Along these lines the American Bankers' Association has been endeavoring to conduct a "Thrift Campaign," doing its best to impress upon the people, through the public press and from the lecture platform, the imperative necessity of the cultivation of habits of thrift. If we can once get this idea thoroughly impressed upon our people, we shall have made a good start toward supplying our future needs in the way of required capital. In the city of New York lecture courses have been conducted in the evening schools, with the object of explaining to the people just what the functions of banks are, and of impressing upon them the importance of thrift and of economy. This movement is already beginning to spread through the country, and we are hopeful that before many years its effects will be felt.

At the convention in Richmond a committee was formed with a view of finding out what might be done to make the Federal Reserve Banking system acceptable to trust companies. State banks, and possibly to savings institutions. Under the present law there seems to be no way in which a mutual savings institution can directly avail itself of the advantages of the Federal Reserve Banking system. A circular letter has been sent to upwards of 2,000 savings institutions in the country, asking for suggestions as to what changes in the law might be necessary to make the Federal Reserve Banking system of real use to the savings banks. The replies that have been received in response to this letter show a wide divergence of opinion. So far comparatively few have answered, and it will not be possible to crystallize the