American investments abroad were negligible before the Civil War. As a debtor nation (more foreign capital was invested in the United States than U. S. capital was invested abroad), the United States was chronically short of capital. Americans invested in domestic enterprises that utilized the country’s abundant natural resources and had little interest in doing business elsewhere.
In the late 19th and early 20th centuries, American manufacturers, insurance companies, utility operators, and mining companies found it advantageous to develop a foreign presence. Most of these enterprises, like the Singer Manufacturing Company, which opened a sewing machine plant in Scotland in 1882, were launched to distribute their products to foreign markets. A variety of factors converged to encourage American businesses to establish operations in foreign countries: high tariffs in Canada after 1879 and Japan in 1899; restrictions on the use of electrical patents in France and Germany; and deposit requirements for insurance businesses in Germany, Austria, and Switzerland. Nevertheless, in these enterprises American firms were able to attract foreign capital, managers, and even technology.
American businessmen preferred investing funds in neighboring North American countries. In Mexico, the country with the largest American investments before the Mexican Revolution began in 1910, the dictatorship of Porfirio Diaz created a climate favorable to foreign investment. Canada was second in favor as a location for American investment. In Cuba and elsewhere in the Caribbean, American investments increased after the Spanish-American War. After the depression from 1893 to 1897, American businesses eagerly sought opportunities to develop markets by operating abroad, and the United
States became a net exporter of capital during the period from 1898 to 1901.
Further reading: Mira Wilkins, The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914 (Cambridge, Mass.: Harvard University Press, 1970).
—Bruce Abrams
World History
