The History of Foreign Investment in the United States, 1914-1945 (review)

With her latest work, Mira Wilkins has again contributed an invaluable source on a difficult (and some would say dry) subject that most historians would shy away from, the movement and impact of early twentieth-century foreign investment in the United States. Readers can anticipate in this volume the same level of meticulous research, excellent detail (seventy-five tables and charts, with more than two hundred pages of appendixes and notes!), and sage analysis that serve as hallmarks of Wilkins's scholarship, particularly her encyclopedic studies on the growth of U.S. multinational enterprise.

Yet this study also presents many delightful departures from the formulaic nature of Wilkins's previous works. From the start, Wilkins demonstrates a masterful new turn as she ably weaves an engaging narrative on the drama and uncertainty that plagued Western investment markets upon the abrupt commencement of World War I. Using the magic of storytelling, Wilkins highlights the many twists, downturns, and recovery efforts employed by stock exchange officials and investment firms to meet payment demands and stave off the exodus of hastily retreating shareholders. Through her lively, opening narrative, Wilkins offers such intriguing details as the nearly year-long closures of the New York and London Stock Exchanges, the destabilization of American gold reserves as European investors hurriedly cashed out their stocks to meet prohibitive new tax laws at home, and the investment vacuum left in the wake of the rapid liquidation of foreign investment.

Business historians particularly will appreciate Wilkins's wartime portrait of European firms struggling to maintain offices and manufacturing facilities in the United States. Foreign companies, especially German firms, faced additional, prohibitive barriers related to gold exports and capital lending, along with severe disruptions in overseas communications, shipping, and trade. Refreshingly interdisciplinary in nature, Wilkins's work also features the interplay of diplomatic decisions, such as American neutrality, European antibelligerents and tax laws, U.S.-Canadian relations; technology (telegraphy, ocean transport ships, submarines, and so on), and military concerns, such as strategic materials, equipment procurement, and naval blockades in the restriction of foreign firms. The inventive efforts of these firms to meet such wartime challenges through investment and market reassociations makes for fascinating, as well as informative, reading.

Building on the first chapter's rich data, Wilkins concludes that World War I transformed the "U.S. position in the global economy," as "not only had the United States rid itself of its debtor nation status and become a creditor nation . . . but by war's end the earnings on U.S. capital investments abroad already surpassed foreigners' earnings on their U.S. investments" (p. 65). Wilkins also notes that while creditor status inspired a "new nationalism," American "ambivalence about the nation's new position" spurred a return to trade protectionism along with liberalization and a kind of "internationalism with insularity," in which "federal government policies more often than not failed to rise to the challenges of world economic leadership" (pp. 78–79).

Along with politics, Wilkins points to the economic consequences of the war as creating a new business climate in the United States, noticeably marked by the diminishing importance of foreign direct investment (FDI) and foreign portfolio investment (FPI). With the American economy two and a half times that of 1914, FDI and FPI, even when restored to pre-1914 levels by 1939, could not match the aggressive, new strides of U.S. investment. No longer creditors and now debtors, European nations also became saddled with wartime repayment obligations. Unlike in previous eras, American securities markets did not suffer appreciably after 1914 from the ensuing lack of European funds, nor did they realize significant gains when foreign investors did return. U.S. firms also gained a newfound autonomy as American banks, insurance companies, and investment firms filled the FDI and FPI void by increasingly lending capital amassed during the war. Wilkins notes that U.S. firms also took advantage...