| Book Review | The American Historical Review, 111.3

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| Book Review | The American Historical Review, 111.3 | The History Cooperative

Book Review

Canada and the United States

Mira Wilkins. The History of Foreign Investment in the United States, 1914–1945. (Harvard Studies in Business History, number 43.) Cambridge: Harvard University Press. 2005. Pp. xxvi, 980. $95.00.
America's twentieth-century credit history would confuse a bank loan officer. The world's largest debtor before 1914, the nation became its largest creditor almost overnight before returning to the status of greatest global borrower in the 1980s. The first two acts of that drama are told with extraordinary precision in Mira Wilkins's latest book. With over 600 text pages and nearly 300 pages of footnotes and bibliography, the work strives for, and attains, authoritative status. The protagonists here are firms, not nations or individuals, yet there is no lack of drama. By tracing hundreds of developments that never reached section one, much less the headlines, Wilkins shows that the trajectory of foreign investment paralleled the grimmer events of history's bloodiest half century.	1
Wilkins presents the world of Atlantic finance as stable and open before 1914. The gold standard meant that currency exchange rates were of "little consequence" to foreign investors (p. 8), and governments interfered less in financial markets than they would once the catastrophes of war, depression, and more war descended. On the eve of the Great War, Europeans had more than twice as much capital invested in the United States as Americans had sent abroad. The British alone held over $3 billion in American securities, nearly all stocks and bonds. During the war, Britain urged its citizens to liquidate these holdings to provide dollars for war purchases, compensating them with war bonds. The world crisis pushed other investors to sell their U.S. securities as well, resulting in the sharp decline in European portfolio holdings that historians have long noted.	2
Wilkins complicates this familiar story by disaggregating portfolio (FPI) and direct investment (FDI). The latter grew even during the war as foreign companies expanded to supply America's booming economy. While small relative to the overall U.S. economy, the foreign sector set the pace in several high-tech industries such as chemicals, pharmaceuticals, synthetic fabric, and petroleum.	3
Wilkins uses her extraordinary command of capital flows to debunk some old myths. She rejects the premise, widely accepted by Americans in the 1920s, that foreign investments "propelled America into war" (p. 21). American belligerency was inevitable, she says, with or without foreign investment. She also examines the legend that foreign withdrawals from Wall Street in September 1929 precipitated the October crash. She concludes that a precocious sell-off by British investors "should be included among many factors in the bursting of the stock market bubble" but did not itself trigger the crash (p. 301).	4
An important strand of this story is the dramatic increase in state power from 1914 to 1945. Even as Woodrow Wilson denounced Bolshevik expropriations in Russia, American firms benefited from his government's seizure of German properties, especially some 6,000 patents, mainly in chemical processes. These confiscations gave rise to the "patent-intensive, science-based American [chemical] industry," led by Du Pont. State meddling was worse across the Atlantic, where politicians often looked on foreign investment as far-flung national assets rather than private property. The Third Reich proclaimed that "a German citizen who, knowingly and unscrupulously ... leaves property abroad, thereby causing gross injury to the German economic system, will be punished by death" (p. 379). German investors took care to cloak their foreign holdings thoroughly. When the upstart Securities Exchange Commission probed a camouflaged affiliate of I.G. Farben, the company pleaded that it "did not know whether it had a parent" (p. 408).	. . .

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