Since the first election of President McKinley, the people of the United States have for the first time acc.u.mulated a surplus of capital beyond the requirements of internal development. That surplus is increasing with extraordinary rapidity. We have paid our debts to Europe and have become a creditor instead of a debtor nation; we have faced about; we have left the ranks of the borrowing nations and have entered the ranks of the investing nations. Our surplus energy is beginning to look beyond our own borders, throughout the world, to find opportunity for the profitable use of our surplus capital, foreign markets for our manufactures, foreign mines to be developed, foreign bridges and railroads and public works to be built, foreign rivers to be turned into electric power and light. As in their several ways England and France and Germany have stood, so we in our own way are beginning to stand and must continue to stand towards the industrial enterprise of the world.

That we are not beginning our new role feebly is indicated by $1,518,561,666 of exports in the year 1905 as against $1,117,513,071 of imports, and by $1,743,864,500 exports in the year 1906 as against $1,226,563,843 of imports. Our first steps in the new field indeed are somewhat clumsy and unskilled. In our own vast country, with oceans on either side, we have had too little contact with foreign peoples readily to understand their customs or learn their languages; yet no one can doubt that we shall learn and shall understand and shall do our business abroad, as we have done it at home, with force and efficiency.

Coincident with this change in the United States, the progress of political development has been carrying the neighboring continent of South America out of the stage of militarism into the stage of industrialism. Throughout the greater part of that vast continent, revolutions have ceased to be looked upon with favor or submitted to with indifference; the revolutionary general and the dictator are no longer the objects of admiration and imitation; civic virtues command the highest respect; the people point with satisfaction and pride to the stability of their governments, to the safety of property and the certainty of justice; nearly everywhere the people are eager for foreign capital to develop their natural resources and for foreign immigration to occupy their vacant lands.

Immediately before us, at exactly the right time, just as we are ready for it, great opportunities for peaceful commercial and industrial expansion to the south are presented. Other investing nations are already in the field--England, France, Germany, Italy, Spain; but the field is so vast, the new demands are so great, the progress so rapid, that what other nations have done up to this time is but a slight advance in the race for the grand total.

The opportunities are so large that figures fail to convey them. The area of this newly awakened continent is 7,502,848 square miles--more than two and one half times as large as the United States without Alaska, and more than double the United States including Alaska. A large part of this area lies within the temperate zone, with an equable and invigorating climate, free from extremes of either heat or cold. Farther north in the tropics are enormous expanses of high table-lands, stretching from the Atlantic to the foothills of the Andes, and lifted far above the tropical heats; the fertile valleys of the western cordilleras are cooled by perpetual snows even under the equator; vast forests grow untouched from a soil of incredible richness. The plains of Argentina, the great uplands of Brazil, the mountain valleys of Chile, Peru, Ecuador, Bolivia, and Colombia are suited to the habitation of any race, however far to the north its origin may have been; hundreds of millions of men can find healthful homes and abundant sustenance in this great territory.

The population in 1900 was only 42,461,381, less than six to the square mile. The density of population was less than one-eighth of that in the state of Missouri, less than one-sixtieth of that in the state of Ma.s.sachusetts, less than one-seventieth of that in England, less than one per cent of that in Belgium.

With this spa.r.s.e population the production of wealth is already enormous. The latest trade statistics show exports from South America to foreign countries of $745,530,000, and imports of $499,858,600. Of the five hundred millions of goods that South America buys, we sell them but $63,246,525, or 12.6 per cent. Of the seven hundred and forty-five millions that South America sells, we buy $152,092,000, or 20.4 per cent--nearly two and a half times as much as we sell.

Their production is increasing by leaps and bounds. In eleven years the exports of Chile have increased forty-five per cent, from $54,030,000 in 1894 to $78,840,000 in 1905. In eight years the exports of Peru have increased one hundred per cent, from $13,899,000 in 1897 to $28,758,000 in 1905. In ten years the exports of Brazil have increased sixty-six per cent, from $134,062,000 in 1894 to $223,101,000 in 1905. In ten years the exports of Argentina have increased one hundred and sixty-eight per cent, from $115,868,000 in 1895 to $311,544,000 in 1905.

This is only the beginning; the coffee and rubber of Brazil, the wheat and beef and hides of Argentina and Uruguay, the copper and nitrates of Chile, the copper and tin of Bolivia, the silver and gold and cotton and sugar of Peru, are but samples of what the soil and mines of that wonderful continent are capable of yielding.

Ninety-seven per cent of the territory of South America is occupied by ten independent republics living under const.i.tutions substantially copied or adapted from our own. Under the new conditions of tranquillity and security which prevail in most of them, their eager invitation to immigrants from the Old World will not long pa.s.s unheeded. The pressure of population abroad will inevitably turn its streams of life and labor towards those fertile fields and valleys. The streams have already begun to flow; more than two hundred thousand immigrants entered the Argentine Republic last year; they are coming this year at the rate of over three hundred thousand. Many thousands of Germans have already settled in southern Brazil. They are most welcome in Brazil; they are good and useful citizens there, as they are here; I hope that many more will come to Brazil and every other South American country, and add their vigorous industry and good citizenship to the upbuilding of their adopted home.

With the increase of population in such a field, under free inst.i.tutions, with the fruits of labor and the rewards of enterprise secure, the production of wealth and the increase of purchasing power will afford a market for the commerce of the world worthy to rank even with the markets of the Orient, as the goal of business enterprise. The material resources of South America are in some important respects complementary to our own; that continent is weakest where North America is strongest as a field for manufactures; it has comparatively little coal and iron. In many respects the people of the two continents are complementary to each other; the South American is polite, refined, cultivated, fond of literature and of expression and of the graces and charms of life, while the North American is strenuous, intense, utilitarian. Where we acc.u.mulate, they spend. While we have less of the cheerful philosophy which finds sources of happiness in the existing conditions of life, they have less of the inventive faculty which strives continually to increase the productive power of man and lower the cost of manufacture. The chief merits of the peoples of the two continents are different; their chief defects are different. Mutual intercourse and knowledge cannot fail greatly to benefit both. Each can learn from the other; each can teach much to the other, and each can contribute greatly to the development and prosperity of the other. A large part of their products find no domestic compet.i.tion here; a large part of our products will find no domestic compet.i.tion there. The typical conditions exist for that kind of trade which is profitable, honorable, and beneficial to both parties.

The relations between the United States and South America have been chiefly political rather than commercial or personal. In the early days of the South American struggle for independence, the eloquence of Henry Clay awakened in the American people a generous sympathy for the patriots of the south as for brethren struggling in the common cause of liberty. The clear-eyed, judicious diplomacy of Richard Rush, the American minister at the Court of St. James, effected a complete understanding with Great Britain for concurrent action in opposition to the designs of the Holy Alliance, already contemplating the part.i.tion of the southern continent among the great powers of continental Europe. The famous declaration of Monroe arrayed the organized and rapidly increasing power of the United States as an obstacle to European interference and made it forever plain that the cost of European aggression would be greater than any advantage which could be won even by successful aggression.

That great declaration was not the chance expression of the opinion or the feeling of the moment; it crystallized the sentiment for human liberty and human rights which has saved American idealism from the demoralization of narrow selfishness, and has given to American democracy its true world power in the virile potency of a great example.

It responded to the instinct of self-preservation in an intensely practical people. It was the result of conference with Jefferson and Madison and John Quincy Adams and John C. Calhoun and William Wirt--a combination of political wisdom, experience, and skill not easily surpa.s.sed. The particular circ.u.mstances which led to the declaration no longer exist; no Holy Alliance now threatens to part.i.tion South America; no European colonization of the west coast threatens to exclude us from the Pacific. But those conditions were merely the occasion for the declaration of a principle of action. Other occasions for the application of the principle have arisen since; it needs no prophetic vision to see that other occasions for its application may arise hereafter. The principle declared by Monroe is as wise an expression of sound political judgment today, as truthful a representation of the sentiments and instincts of the American people today, as living in its force as an effective rule of conduct whenever occasion shall arise, as it was on December 2, 1823.

These great political services to South American independence, however, did not and could not in the nature of things create any relation between the people of South America and the people of the United States except a relation of political sympathy.

Twenty-five years ago, Mr. Blaine, sanguine, resourceful, and gifted with that imagination which enlarges the historian's understanding of the past into the statesman's comprehension of the future, undertook to inaugurate a new era of American relations which should supplement political sympathy by personal acquaintance, by the intercourse of expanding trade, and by mutual helpfulness. As secretary of state under President Arthur, he invited the American nations to a conference to be held on November 24, 1882, for the purpose of considering and discussing the subject of preventing war between the nations of America. That invitation, abandoned by Mr. Frelinghuysen, was renewed under Mr.

Cleveland, and on October 2, 1889, Mr. Blaine, again secretary of state under President Harrison, had the singular good fortune to execute his former design and to open the sessions of the first American conference at Washington. In an address of wisdom and lofty spirit, which should ever give honor to his memory, he described the a.s.sembly as--

... an honorable, peaceful conference of seventeen independent American powers, in which all shall meet together on terms of absolute equality; a conference in which there can be no attempt to coerce a single delegate against his own conception of the interests of his nation; a conference which will permit no secret understanding on any subject, but will frankly publish to the world all its conclusions; a conference which will tolerate no spirit of conquest, but will aim to cultivate an American sympathy as broad as both continents; a conference which will form no selfish alliance against the older nations from which we are proud to claim inheritance--a conference, in fine, which will seek nothing, propose nothing, endure nothing that is not, in the general sense of all the delegates, timely, wise, and peaceful.

The policy which Mr. Blaine inaugurated has been continued; the Congress of the United States has approved it; subsequent presidents have followed it. The first conference at Washington has been succeeded by a second conference in Mexico, and now by a third conference in Rio de Janeiro; and it is to be followed in years to come by further successive a.s.semblies in which the representatives of all American states shall acquire better knowledge and more perfect understanding, and be drawn together by the recognition of common interests and the kindly consideration and discussion of measures for mutual benefit.

Nevertheless, Mr. Blaine was in advance of his time. In 1881 and 1889 the United States had not reached a point where it could turn its energies away from its own internal development and direct them outward towards the development of foreign enterprises and foreign trade, nor had the South American countries reached the stage of stability in government and security for property necessary to their industrial development.

Now, however, the time has come; both North and South America have grown up to Blaine's policy. The production, the trade, the capital, the enterprise of the United States have before them the opportunity to follow, and they are free to follow, the pathway marked out by the far-sighted statesmanship of Blaine for the growth of America, North and South, in the peaceful prosperity of a mighty commerce.

To utilize this opportunity certain practical things must be done. For the most part these things must be done by a mult.i.tude of individual efforts; they cannot be done by government. Government may help to furnish facilities for the doing of them, but the facilities will be useless unless used by individuals. This cannot be done by resolutions of this or any other commercial body; resolutions are useless unless they stir individual business men to action in their own business affairs. The things needed have been fully and specifically set forth in many reports of efficient consuls and of highly competent agents of the Department of Commerce and Labor, and they have been described in countless newspapers and magazine articles; but all these things are worthless unless they are followed by individual action.

I will indicate some of the matters to which every producer and merchant who desires South American trade should pay attention.

1. He should learn what the South Americans want and conform his product to their wants. If they think they need heavy castings, he should give them heavy castings and not expect them to buy light ones because he thinks they are better. If they want coa.r.s.e cottons, he should give them coa.r.s.e cottons and not expect them to buy fine cottons. It may not pay today, but it will pay tomorrow. The tendency to standardize articles of manufacture may reduce the cost and promote convenience, but if the consumers on the River Plata demand a different standard from the consumers on the Mississippi, you must have two standards or lose one market.

2. Both for the purpose of learning what the South American people want and of securing their attention to your goods, you must have agents who speak the Spanish or Portuguese language. For this there are two reasons: one is that people can seldom really get at each other's minds through an interpreter, and the other is that nine times out of ten it is only through knowing the Spanish or Portuguese language that a North American comes to appreciate the admirable and attractive personal qualities of the South American, and is thus able to establish that kindly and agreeable personal relation which is so potent in leading to business relations.

3. The American producer should arrange to conform his credit system to that prevailing in the country where he wishes to sell goods. There is no more money lost upon commercial credits in South America than there is in North America; but business men there have their own ways of doing business; they have to adapt the credits they receive to the credits they give. It is often inconvenient and disagreeable, and it is sometimes impossible, for them to conform to our ways, and the requirement that they should do so is a serious obstacle to trade.

To understand credits it is, of course, necessary to know something about the character, trustworthiness, and commercial standing of the purchaser, and the American producer or merchant who would sell goods in South America must have some means of knowledge upon this subject. This leads naturally to the next observation I have to make.

4. The establishment of banks should be brought about. The Americans already engaged in South American trade could well afford to subscribe the capital and establish an American bank in each of the princ.i.p.al cities of South America. This is a fact, first, because nothing but very bad management could prevent such a bank from making money; capital is much needed in those cities, and six, eight, and ten per cent can be obtained for money upon just as safe security as can be had in Kansas City, St. Louis, or New York. It is a fact also because the American bank would furnish a source of information as to the standing of the South American purchasers to whom credit may be extended, and because American banks would relieve American business in South America from the disadvantage which now exists of making all its financial transactions through Europe instead of directly with the United States. It is unfortunately true that among hundreds of thousands of possible customers the United States now stands in a position of a.s.sumed financial and business inferiority to the countries through whose banking houses all its business must be done.

5. The American merchant should himself acquire, if he has not already done so, and should impress upon all his agents that respect for the South American to which he is justly ent.i.tled and which is the essential requisite to respect from the South American. We are different in many ways as to character and methods. In dealing with all foreign people, it is important to avoid the narrow and uninstructed prejudice which a.s.sumes that difference from ourselves denotes inferiority. There is nothing that we resent so quickly as an a.s.sumption of superiority or evidence of condescension in foreigners; there is nothing that the South Americans resent so quickly. The South Americans are our superiors in some respects; we are their superiors in other respects. We should show to them what is best in us and see what is best in them. Every agent of an American producer or merchant should be instructed that courtesy, politeness, kindly consideration, are essential requisites for success in the South American trade.

6. The investment of American capital in South America under the direction of American experts should be promoted, not merely upon simple investment grounds, but as a means of creating and enlarging trade. For simple investment purposes the opportunities are innumerable. Good business judgment and good business management will be necessary there, of course, as they are necessary here; but, given these, I believe that there is a vast number of enterprises awaiting capital in the more advanced countries of South America, capable of yielding great profits, and in which the property and the profits will be as safe as in the United States or Canada. A good many such enterprises are already begun.

I have found a graduate of the Ma.s.sachusetts Inst.i.tute of Technology, a graduate of the Columbia School of Mines, and a graduate of Colonel Roosevelt's Rough Riders smelting copper close under the snow line of the Andes; I have ridden in an American car upon an American electric road, built by a New York engineer, in the heart of the coffee region of Brazil; and I have seen the waters of that river along which Pizarro established his line of communication in the conquest of Peru, harnessed to American machinery to make light and power for the city of Lima.

Every such point is the nucleus of American trade--the source of orders for American goods.

7. It is absolutely essential that the means of communication between the two countries should be improved and increased.

This underlies all other considerations and it applies to the mail, the pa.s.senger, and the freight services. Between all the princ.i.p.al South American ports and England, Germany, France, Spain, Italy, lines of swift and commodious steamers ply regularly. There are five subsidized first-cla.s.s mail and pa.s.senger lines between Buenos Ayres and Europe; there is no such line between Buenos Ayres and the United States. Within the past two years the German, the English, and the Italian lines have been replacing their old steamers with new and swifter vessels of modern construction, accommodation, and capacity.

In the year ending June 30, 1905, there entered the port of Rio de Janeiro steamers and sailing vessels flying the flag of Austria-Hungary, 120; of Norway, 142; of Italy, 165; of Argentina, 264; of France, 349; of Germany, 657; of Great Britain, 1785; of the United States,--no steamers and seven sailing vessels, two of which were in distress!

An English firm runs a small steamer monthly between New York and Rio de Janeiro; the Panama Railroad Company runs steamers between New York and the Isthmus of Panama; the Brazilians are starting for themselves a line between Rio and New York; there are two or three foreign concerns running slow cargo boats, and there are some foreign tramp steamers.

That is the sum total of American communication with South America beyond the Caribbean Sea. Not one American steamship runs to any South American port beyond the Caribbean. During the past summer, I entered the ports of Para, Pernambuco, Bahia, Rio de Janeiro, Santos, Montevideo, Buenos Ayres, Bahia Blanca, Punta Arenas, Lota, Valparaiso, Coquimbo, Tocopilla, Callao, and Cartagena--all of the great ports and a large proportion of the secondary ports of the southern continent. I saw only one ship, besides the cruiser that carried me, flying the American flag.

The mails between South America and Europe are swift, regular, and certain; between South America and the United States they are slow, irregular, and uncertain. Six weeks is not an uncommon time for a letter to take between Buenos Ayres or Valparaiso and New York. The merchant who wishes to order American goods cannot know when his order will be received nor when it will be filled. The freight charges between the South American cities and American cities are generally and substantially higher than between the same cities and Europe; at many points the deliveries of freight are uncertain and its condition upon arrival doubtful. The pa.s.senger accommodations are such as to make a journey to the United States a trial to be endured and a journey to Europe a pleasure to be enjoyed. The best way to travel between the United States and both the southwest coast and the east coast of South America is to go by way of Europe, crossing the Atlantic twice. It is impossible that trade should prosper or intercourse increase or mutual knowledge grow to any great degree under such circ.u.mstances. The communication is worse now than it was twenty-five years ago. So long as it is left in the hands of our foreign compet.i.tors in business, we cannot reasonably look for any improvement. It is only reasonable to expect that European steamship lines shall be so managed as to promote European trade in South America, rather than to promote the trade of the United States in South America.

This woeful deficiency in the means to carry on and enlarge our South American trade is but a part of the general decline and feebleness of the American merchant marine, which has reduced us from carrying over ninety per cent of our export trade in our own ships to the carriage of nine per cent of that trade in our own ships and dependence upon foreign shipowners for the carriage of ninety-one per cent. The true remedy and the only remedy is the establishment of American lines of steamships between the United States and the great ports of South America, adequate to render fully as good service as is now afforded by the European lines between those ports and Europe. The substantial underlying fact was well stated in the resolution of this Trans-Mississippi Congress three years ago:

That every ship is a missionary of trade; that steamship lines work for their own countries just as railroad lines work for their terminal points, and that it is as absurd for the United States to depend upon foreign ships to distribute its products as it would be for a department store to depend upon the wagons of a competing house to deliver its goods.

How can this defect be remedied? The answer to this question must be found by ascertaining the cause of the decline of our merchant marine.

Why is it that Americans have substantially retired from the foreign transport service? We are a nation of maritime traditions and facility; we are a nation of constructive capacity, competent to build ships; we are eminent, if not preeminent, in the construction of machinery; we have abundant capital seeking investment; we have courage and enterprise shrinking from no compet.i.tion in any field which we choose to enter.

Why, then, have we retired from this field in which we were once conspicuously successful?

I think the answer is twofold.

1. The higher wages and the greater cost of maintenance of American officers and crews make it impossible to compete on equal terms with foreign ships. The scale of living and the scale of pay of American sailors are fixed by the standard of wages and of living in the United States, and those are maintained at a high level by the protective tariff. The moment the American pa.s.ses beyond the limits of his country and engages in ocean transportation, he comes into compet.i.tion with the lower foreign scale of wages and of living. Mr. Joseph L. Bristow, in his report upon trade conditions affecting the Panama Railroad, dated June 14, 1905, gives in detail the cost of operating an American steamship with a tonnage of approximately thirty-five hundred tons as compared with the cost of operating a specified German steamship of the same tonnage, and the differences aggregate $15,315 per annum greater cost for the American steamship than for the German; that is $4.37 per ton. He gives also in detail the cost of maintaining another American steamship with a tonnage of approximately twenty-five hundred tons as compared with the cost of operating a specified British steamship of the same tonnage, and the differences aggregate $18,289.68 per annum greater cost for the American steamship than for the British; that is $7.31 per ton. It is manifest that if the German steamship were content with a profit of less than $15,000 per annum, and the British with a profit of less than $18,000 per annum, the American ships would have to go out of business.

2. The princ.i.p.al maritime nations of the world, anxious to develop their trade, to promote their shipbuilding industry, to have at hand transports and auxiliary cruisers in case of war, are fostering their steamship lines by the payment of subsidies. England is paying to her steamship lines between six and seven million dollars a year; it is estimated that since 1840 she has paid to them between two hundred and fifty and three hundred millions. The enormous development of her commerce, her preponderant share of the carrying trade of the world, and her shipyards crowded with construction orders from every part of the earth indicate the success of her policy. France is paying about eight million dollars a year; Italy and j.a.pan, between three and four million each; Germany, upon the initiative of Bismarck, is building up her trade with wonderful rapidity by heavy subventions to her steamship lines and by giving special differential rates of carriage over her railroads for merchandise shipped by those lines. Spain, Norway, Austria-Hungary, Canada, all subsidize their own lines. It is estimated that about $28,000,000 a year are paid by our commercial compet.i.tors to their steamship lines.

Against these advantages of his compet.i.tor the American shipowner has to contend; and it is manifest that the subsidized ship can afford to carry freight at cost for a period long enough to drive him out of business.

We are living in a world not of natural compet.i.tion, but of subsidized compet.i.tion. State aid to steamship lines is as much a part of the commercial system of our day as state employment of consuls to promote business.

It will be observed that both of these disadvantages under which the American shipowner labors are artificial; they are created by governmental action--one by our own Government in raising the standard of wages and living, by the protective tariff; the other by foreign governments in paying subsidies to their ships for the promotion of their own trade. For the American shipowner it is not a contest of intelligence, skill, industry, and thrift against similar qualities in his compet.i.tor; it is a contest against his compet.i.tors and his compet.i.tors' governments and his own government also.

Plainly, these disadvantages created by governmental action can be neutralized only by governmental action, and should be neutralized by such action.

What action ought our Government to take for the accomplishment of this just purpose? Three kinds of action have been advocated.

1. A law providing for free ships--that is, permitting Americans to buy ships in other countries and bring them under the American flag.

Plainly, this would not at all meet the difficulties which I have described. The only thing it would accomplish would be to overcome the excess in cost of building a ship in an American shipyard over the cost of building it in a foreign shipyard; but since all the materials which enter into an American ship are entirely relieved of duty, the difference in cost of construction is so slight as to be practically a negligible quant.i.ty, and to afford no substantial obstacle to the revival of American shipping. The expedient of free ships, therefore, would be merely to sacrifice our American shipbuilding industry, which ought to be revived and enlarged with American shipping, and to sacrifice it without receiving any substantial benefit. It is to be observed that Germany, France, and Italy all have attempted to build up their own shipping by adopting the policy of free ships, have failed in the experiment, have abandoned it, and have adopted in its place the policy of subsidy.

2. It has been proposed to establish a discriminating tariff duty in favor of goods imported in American ships--that is to say, to impose higher duties upon goods imported in foreign ships than are imposed on goods imported in American ships. We tried that once many years ago and abandoned it. In its place we have entered into treaties of commerce and navigation with the princ.i.p.al countries of the world, expressly agreeing that no such discrimination shall be made between their vessels and ours. To sweep away all those treaties and enter upon a war of commercial retaliation and reprisal for the sake of accomplishing indirectly what can be done directly should not be seriously considered.