One brief comment may be made on the significance of these figures. It may be questioned if figures showing the proportions of our industry devoted to supplying goods for the foreign market correctly indicate the importance of the foreign market to us. It may be urged that if we should lose our foreign market, we should merely turn to producing more for the domestic market, and that the loss would not be the whole of our receipts from foreign trade, but merely the cost of transition, and the loss that comes from shifting to production to which we are less suited. This is, doubtless, true. But the loss reckoned this way may well be greater than the loss reckoned on the basis of my figures! It is equally true, moreover, that our domestic trade is not important to the extent indicated by my figures, since if we lose part of our domestic trade, our producers will turn to supplying more for the foreign market. But one must not regard the cost of transition as a negligible matter! The cost may easily be prolonged depression. Certain parts of our foreign trade are really vital to us, both on the import and (to a less degree) on the export side. The most important practical use to which the figures here given may be put are in connection with short-run problems. Foreign trade is so important to us that any sudden alteration in its amount may bring great adversity or great prosperity—as the course of the present War abundantly testifies.[307]
An application of our method to the years 1850 and 1860 gives a percentage for foreign trade of 12.7 in 1850, and 16.0 in 1860.[308]
Certain other cautions are needed in presenting these figures. For one thing, variations in railway rates will make a given volume of gross earnings mean different things in different years as to the physical volume of traffic. In the writer's opinion, which is confirmed by Professor W. Z. Ripley, there is no possible way of making allowance for this, as the cross-currents affecting railway rates are altogether too numerous and obscure. Nor has any effort been made to allow for variations in the proportions of freight and passenger receipts, or of different classes of freight traffic.
Again, the proportions of railway traffic connected with foreign trade may vary greatly, and it may happen that a big increase in railway gross receipts is due to increasing foreign trade, primarily. There is reason to suppose that much of the increase of 1916 is to be explained that way. This makes our comparison for 1916 particularly adverse to foreign trade, since we count as domestic trade what is really foreign trade. The figures, however, are presented as they stand. Moreover, for 1916, the great increase in foreign trade is in exports. Merchandise imports are not much greater than in previous years.[309] Our exports have been chiefly paid for by "invisible items," gold and securities, and short term credits. These do not appear anywhere in our figures. A substantial source of error appears from this cause in our 1916 figure. I should think it safe to put the ratio for foreign trade to domestic trade for 1916 at above 20%, instead of the 17.9% our table shows.
The reader will wish to know for a given year how much of the increase or decrease is due to physical growth of business, as represented by railway gross receipts, and how much is due to changes in prices. To give this information, and to make it easy for a critic to check the results, a table showing the index numbers from which the figures for net income are computed is subjoined.[310]
TABLE I[311]
| 1 | 2 | 3 | 4 | |
|---|---|---|---|---|
| Calendar Years | Net Income of the United States | Domestic Trade of United States = Net Income minus Imports at Retail Prices | Foreign Trade of United States = Exports at Retail Prices | Ratio of Foreign to Domestic Trade |
| 1890 | $ 9,300,000,000 | $ 8,100,000,000 | $1,300,000,000 | 16.1% |
| 1891 | 10,400,000,000 | 9,200,000,000 | 1,400,000,000 | 15.2% |
| 1892 | 10,000,000,000 | 8,700,000,000 | 1,400,000,000 | 16.1% |
| 1893 | 10,100,000,000 | 8,900,000,000 | 1,300,000,000 | 14.6% |
| 1894 | 8,300,000,000 | 7,300,000,000 | 1,200,000,000 | 16.5% |
| 1895 | 8,400,000,000 | 7,200,000,000 | 1,200,000,000 | 16.7% |
| 1896 | 7,900,000,000 | 6,900,000,000 | 1,500,000,000 | 21.8% |
| 1897 | 8,000,000,000 | 6,900,000,000 | 1,600,000,000 | 23.2% |
| 1898 | 9,100,000,000 | 8,200,000,000 | 1,900,000,000 | 23.2% |
| 1899 | 10,900,000,000 | 9,700,000,000 | 1,900,000,000 | 19.6% |
| 1900 | 12,900,000,000 | 11,700,000,000 | 2,200,000,000 | 18.8% |
| 1901 | 14,600,000,000 | 13,300,000,000 | 2,200,000,000 | 16.5% |
| 1902 | 15,600,000,000 | 14,200,000,000 | 2,000,000,000 | 14.1% |
| 1903 | 17,700,000,000 | 16,200,000,000 | 2,200,000,000 | 13.6% |
| 1904 | 18,000,000,000 | 16,500,000,000 | 2,200,000,000 | 13.3% |
| 1905 | 19,600,000,000 | 17,800,000,000 | 2,400,000,000 | 13.5% |
| 1906 | 21,500,000,000 | 19,500,000,000 | 2,700,000,000 | 13.8% |
| 1907 | 26,600,000,000 | 24,500,000,000 | 2,900,000,000 | 11.8% |
| 1908 | 23,000,000,000 | 21,300,000,000 | 2,600,000,000 | 12.2% |
| 1909 | 27,600,000,000 | 25,400,000,060 | 2,600,000,000 | 10.2% |
| 1910 | 30,500,000,000 | 28,200,000,060 | 2,800,000,000 | 9.9% |
| 1911 | 29,600,000,000 | 27,300,000,000 | 3,100,000,000 | 11.4% |
| 1912 | 33,800,000,000 | 31,100,000,000 | 3,600,000,000 | 11.6% |
| 1913 | 34,800,000,000 | 32,100,000,000 | 3,700,000,000 | 11.5% |
| 1914 | 32,600,000,000 | 29,900,000,000 | 3,200,000,000 | 10.7% |
| 1915 | 35,400,000,000 | 32,700,000,000 | 5,300,000,000 | 16.4% |
| 1916 | 49,200,000,000 | 45,800,000,000 | 8,200,000,000 | 17.9% |
TABLE II. INDEX NUMBERS FROM WHICH THE FIGURES FOR NET INCOME ARE DERIVED