Foreign Investment in the U.S. Economy before 1914

Abstract

The United States was the world's largest debtor nation in 1914. From independence to the mid-1870s, American federal, state, and local government securities had represented the greatest single attraction for foreign investors, yet by 1914 foreign investment in sovereign debt was small. By the mid-1870s, the private sector had become the major recipient of foreign investment, with huge sums going into financing the vast national railroad system. Then, large American industrial, public utility, and retail corporations looked to foreign as well as domestic sources of finance. Because Americans could obtain funds from abroad, American growth was never retarded by the absence of capital. Especially in the late nineteenth and early twentieth century, foreign direct investment—carrying with it technology, know-how, and management—went into U.S. agriculture, manufacturing, and services. Foreign capital played a substantial and beneficial role in U.S. economic development from independence to 1914.