Economic historians and economic theorists can make an interesting and socially valuable journey together, if they will. It would be an investigation into the sadly neglected area of economic change.

As anyone familiar with the history of economic thought will immediately recognize, practically all the economists of the nineteenth century and many of the twentieth have believed uncritically that all that is needed to explain a given historical development is to indicate conditioning or causal factors, such as an increase in population or the supply of capital. But this is sufficient only in the rarest of cases.

More than forty years have passed since Catteral's monograph on the second Bank of the United States was published, and, though that account has never been superseded, it antedates all recent literature on central banking and therefore presents inadequately the public purposes of the bank. Furthermore, it includes nothing about the bank's Pennsylvania successor, which failed, and thus omits the denouement of Biddle's conflict with Jackson. The inevitable effect of the failure, in the rough justice of history, was to make Jackson seem right and Biddle wrong; and this impression, especially in the absence of attention to the purpose and functions of the bank, seems in recent years to have been strengthened. I think it needs correction.

It is with some diffidence that I submit the following notes which I have not been able to work up into a fully developed argument. The inartistic use of numerals has been resorted to in order to mark off clearly the various problems touched upon.

By a nation's economic growth we understand a sustained increase in its magnitude as an economic unit. Conversely, stagnation and decline can be defined as a sustained failure of the nation's economic magnitude to increase, or as its persistent decline.

The American tradition emphasizes the importance of sea power, especially the great age of sea power which began with Columbus and led first to the expansion of Spain and Portugal and then to the empire building of England, Holland, and France, and the development of North America. In America itself we are also familiar with the epic march across the continent to the Pacific, and the way in which the expanding frontier shaped, or at least strongly influenced, our society and our institutions, as expounded by Turner. Even our continental history, however, was initiated by the crossing of the Atlantic; and from then on even our period of most active continental expansion was never free of the influences and effects of sea power, sea-borne commerce, the investment of European capital, and acceleration of population growth by the immigration of Europeans.

Japan's transformation into a modern state began shortly after the middle of the nineteenth century when she was forcibly opened to international trade. In the ensuing years, the old social, economic, and political structure was overhauled to the end that Japan might become a powerful nation able to stand on an equal footing with the more advanced Western nations. Early attention was given to land reform and peasant emancipation since the country was predominantly agricultural, with about four fifths of the population engaged in cultivating the soil. In the early 1870's the prevailing system of servile land tenure was swept away and replaced by a system of private ownership of land. Henceforth, the peasants, who had formerly held land from feudal nobles in return for certain dues and services, were given title to land on which they, as owners, paid a land tax.

During the early years of the nineteenth century the mercantile community of Boston suffered the inconvenience of a double currency system. Boston banks accepted for deposit only “Boston money,” bank notes issued by Boston banks and readily redeemable in specie on demand at the counter of the issuing bank. But the common currency for all ordinary transactions was “foreign money” or “current money,” bank notes issued by out-of-town banks usually called country banks. Originally the Boston banks had accepted the notes of country banks at par or at a small discount and had returned them to the issuing banks for redemption rather than placing them back into circulation in Boston in competition with Boston bank notes. This policy had to be abandoned because of the inability of some country banks to redeem their excessive issues and the subterfuges adopted by other banks to avoid or delay redemption on the ground that the request for redemption was an imposition which restricted their legal circulation of bank notes. Moreover, there was always the risk that a country bank might fail before its notes could be presented for redemption by the Boston banks.

On June 4, 1946, the Federal Communications Commission approved the request of Western Union for an increase in rates. In the same breath the commission declared:

That such increased rates provide no assurance chat the Western Union Telegraph Company will now be able to furnish a rapid, efficient, nation-wide communication service with adequate facilities at reasonable charges, and that serious questions are presented as to the company's ability to continue in operation as a solvent enterprise, providing satisfactory service on a comprehensive nationwide basis, in the absence of some further relief.

A plant that is largely obsolescent, a rate structure requiring thorough overhauling, deteriorated quality of service, high unit labor costs, failure to withstand severe competitive pressures–these are some of the ills that currently beset Western Union. And many of these ills, as I shall indicate, have their origin in the development of the industry over many decades.

The political events of the interval between the war and the im pending political changes have given new urgency to the critical analysis of the industrial ambitions of undeveloped regions. The older industrial regions face readjustments of substantial magnitude. Every feature of the world economy is distressingly unstable. Cultural and institutional factors will be of importance in determining the rapidity of change and the degree of efficiency achieved in the management of resources, but the direction of change and the magnitudes, of the changes will be conditioned by the basic resources of the various regions. Resource analysis can furnish a concrete background for the various policy problems of the older and newer centers of industrialization.

Every significant index attests to the extraordinary growth of the electric-power industry throughout the first four and a half decades of the present century. Physical output multiplied forty times between 1900 and 1939, a record exceeded during this period only by the automobile and cigarette industries. Labor efficiency and efficiency in the use of fuel increased well above the average for industry generally, and yet employment rose ninefold. Fixed assets were approximately ten times greater at the end of the period than they were at the beginning. Electric rates—the cost of the product to the consumer—have declined throughout. Here is a record of very great progress, even for an industry that was in its infancy in 1900—increased investment, efficiency, employment, and output, and reduced prices. It raises some interesting questions for public policy, questions related both to the future of the electric-power industry and to possibilities in other fields where lessons drawn from this experience may be pertinent.

The power of the Medici as a banking house, and their weakness also, become clearer when we examine the source of their funds. The main problem is whether the Medici bank operated mainly with the money invested by the partners or whether most of the operating capital was supplied from outside sources. It would be easy to settle this question if some balance sheets of the Medici bank were still available. As none have come down to us, another method of approach has to be used.

On the occasion of Thomas Edison's death, in 1931, President Hoover issued a proclamation in which he noted that it had proved impossible to adopt the suggestion to shut down all power plants even for one minute in Edison's memory, but the President concluded that “this demonstration of the country's dependence upon electrical current for life and health is in itself a monument to Mr. Edison's genius.” The ubiquity and indispensability of electricity is, of course, a commonplace. From the standpoint of this paper and its topic, however, it may be emphasized that approximately two thirds of the electrical energy used currently in the country is generated in steam plants and hence derived largely from coal and, in smaller measure, from oil and natural gas.

To discuss the influence of one type of economic activity such as transportation on economic growth is a hazardous undertaking. There is the obvious temptation, which has led many astray, to magnify the importance of that which is particularized. Such a characterization as “Transportation a Measure of Civilization” or the assertion that the railway “is a revolution among nations … [a] moral revolution … affecting the diffusion of knowledge, the interchange of social relations, the perpetuation of peace, the extension of commerce; and a revolution in all the relations of property,” is hardly impartial or balanced with respect to the whole picture of economic activity. A prime objective of this paper is to avoid the dominant parochial note in appraisals of transportation's contributions to economic growth and to present instead thoroughly critical analysis.

Canada has suffered throughout her history by the comparison of her rate of progress with that of the United States. Almost every traveler to this continent during the past two or more centuries has found occasion to comment on the apparent difference in the degree of economic prosperity on the two sides of the border. Lord Durham was compelled to recognize this difference as one of the underlying causes of political disaffection in the country. Local observers joined in deploring the failure of Canada to keep pace economically with the United States. Haliburton, expressing his views through his fictitious Yankee clockmaker, was scathing in his denunciation of the lack of industry and business imagination among his fellow Nova Scotians. Canadians today, with a similarly critical insight into the economic state of their country, are but little less inclined to point out the unfavorable comparison it makes with the neighbor to the south. The belief persists that the really enterprising Canadian must cross the border if he is to realize his fullest ambitions.