# Popular Science Monthly/Volume 55/June 1899/The Philippine Islands and American Capital

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* THE PHILIPPINE ISLANDS AND AMERICAN CAPITAL.
By J. RUSSELL SMITH.
THAT the Philippine Islands are of value as a place for investment is an unexplained generalization that is now being used to tempt business men. The object of this article is to discuss this generalization. The idea that the Philippine Islands are of importance to us, as a new field for our industrial developments, depends upon two assumptions: First, that we need to go beyond the bounds of the United States; second, that the Philippines offer the best available field for the satisfaction of that need.
As to the first assumption, the occasion and origin of the demand for the retention of the Philippines furnish presumptive evidence that it represents no real economic want of the American people. No one ever thought of it until we heard the boom of Dewey's guns at Manila. The demands that then arose for Eastern territory were the natural result of a just pride in the amazing triumph of our navy. Before the battle of Manila a suggestion that we should take the Philippines and receive $20,000,000 as a bonus we would have deemed preposterous. Before that battle, one idea was uppermost in the minds of the American people—namely, the development of the American continent. And yet, along with the enthusiasm over the accomplishments of our army and navy, the idea has crept into some minds that we are in need of more land to develop, and that we must find it in the Eastern Hemisphere.
Examination of the internal condition of the United States does not seem to indicate such need. Our exports are an index to our condition. In 1872 we exported merchandise to the value of $522,000,000; in 1898 the amount had swelled to $1,230,000,000, an increase of two hundred and thirty-five per cent. No European nation has shown such progress. Despite their colonial empires, their armies and navies, their chartered companies, their spheres of influence, and all their elaborate paraphernalia, we are competing with them in their own markets. We have pursued a policy the opposite of theirs and are outstripping them in the race for a share of the world's trade. It is not compatible with industrial wisdom to change and adopt the policy of our less successful rivals just as the success of our own policy is being fully demonstrated.
A nation's commercial supremacy rests upon the same principles as a business man's leadership in his trade—namely, superiority of production. It does not require a citation of evidence to say that the producers of Europe are staggering under the burden of their armies and navies. While they are thus handicapped, we have nothing to ​fear unless we inflict upon ourselves a similar burden. We have succeeded by attending to our own industries, by developing our natural resources, by producing things that the people of other nations must have. That development is but begun. Even England, the ruler of the greatest colonial empire the world has ever known, the greatest manufacturing nation, the mistress of the seas, stands with almost stationary exports. The United States, the nation with a small navy, the nation that never really had a colony, the so-called isolated nation, has come by rapid strides to the point where she is the leading exporter of the world.
There is no reason why the progress of the United States should be checked. England has demonstrated the fact that the nation that has the iron and coal is the commercial mistress of the world. The United States is continuing, and will continue the demonstration. England has but 900 square miles of much-used coal lands, and she gets her iron ore from Spain. We have over 200,000 square miles of untouched coal lands; an almost continuous bed of iron ore, reaching from Lake Ontario to Alabama. Beside this great ore bed is the Appalachian coal field, with coal mines in every State between New York and Alabama. There are mountains of iron ore in Missouri and Michigan. By the special lines of lake steamers the iron ore of Lake Superior is taken to Chicago and Cleveland, and thence carried by rail to Pittsburg. There the eastern coal completes the conditions for the most economical production of iron and steel. That gives the United States the basis for our export trade in iron, steel, and machinery. We are capturing the iron markets of the world, and, judging by our supplies, can hold them for ages. As our iron and coal are the basis of all manufacturing industry, continued attention to them will give us the control of the world's trade.
There are many other lines of our internal development that are yet barely begun. Irrigation is an example of this. The report of John W. Noble, Secretary of the Interior for 1891, said, "One hundred and twenty million acres that are now desert may be redeemed by irrigation so as to produce the cereals, fruits, and garden products possible in the climate where the lands are located." That is an area nearly twice as large as the Philippine Islands, and it is open to the American settler, while there is an indication that the Philippines may be inaccessible on account of their climate. Moreover, ​they are four times as densely populated as is the United States; and while we deem the Chinee so undesirable that we exclude him from our shores, all authorities agree that his race is superior to that of the Malays, Tagals, and Negritos who inhabit the Philippines.
The irrigable area is much larger than the States of New York, Pennsylvania, Illinois, and Massachusetts combined. Those States at the present time are supporting a population of over seventeen millions, and many authorities claim that they will in the future support at least fifty millions. The regions of scanty rainfall that can be irrigated are fairly crusted with potash and other soluble mineral ingredients that nourish plant life, and give to the valleys already irrigated their astonishing fertility. This enables the farmers to support themselves on such small areas that the life is almost a communal one. The irrigated West can sustain a population as great as that sustained on an equal area in the East, or even greater. For years that dry climate has been a health restorer to the sojourner there. This is not claimed for the Philippine Islands. The building up of this Western empire with its canals and irrigating ditches, its railroads and cities, will absorb a vast amount of capital, and it is a natural and easy line of development for us. Mr. Irwin has said, "To capital seeking investment in a large way, irrigation enterprises in the West offer a most solid, lucrative, and tempting field." Secretary Noble has said, "No one can now compute the money value that will concentrate in these reservoirs and canals and ditches, carrying water to the fields of the husbandman, and upon which the people must depend for their prosperity."
Five centuries ago large parts of eastern and western England were impenetrable morasses. These have entirely disappeared before the skill of the engineer.
N. S. Shaler says, "The total area of the inundated lands of the United States probably exceeds 115,000 square miles, counting only those flooded areas which are at present unsuited by their excessive humidity for agricultural use, but which may be won to the service by engineering devices such as have been applied in the regions occupied by older civilizations." This is more than 73,000,000 acres of drainable swamps and marshes. Lands more easy of access have, in the past, so occupied our attention that these lowlands have thus far been almost entirely neglected. They are located ​along our northern, eastern, and southern borders in close proximity to water transportation and to the large cities of the seaboard. They can be drained, as were the swamps of England. Their fertility will make this profitable, and they will support a large population.
The public highways of the United States are, on the whole, in anything but a desirable condition, and their improvement is a good investment for the commonwealth. We have railroads to build, harbors to deepen, and canals to dig. The United States is young yet, and tremendous tasks await her labor and capital.
In this country, so full of promise for the future, we are still using borrowed foreign capital. In The Forum for February, 1895, Mr. Alfred S. Lauterbach said, "That the people of the United States require European capital for the full development of the great resources of our country there can be no doubt." The same author made a "very conservative estimate," and said that we owed to Europe annually:
| "For dividends and interest upon American securities still held abroad, minimum | $75,000,000 |
| "For profits of foreign corporations doing business here, and of non-residents, derived from real estate, investments, partnership profits, etc., about | 75,000,000 |
| | $150,000,000" |
That is to say, we were paying a five-per-cent interest on $3,000,000,000 of foreign money.
As to the second assumption: It is claimed by some that we should have the Philippines because they will furnish us the tropical products that we are using in ever-increasing quantities. Two things are revealed in the examination of our needs of tropic products and a comparison of the Philippines with the American tropics:
1. That the Philippines are at a great disadvantage in location.
2. That America is of sufficient area and natural wealth to meet all our needs, and more.
As to location: It is a first principle of commerce to get supplies where they are most accessible. It is about ten thousand miles from New York to Manila, twelve hundred to Havana, and eighteen hundred to the continent of South America. Under these conditions the freight rates must always discriminate in favor of tropic America. The disadvantage of the Philippines is increased by the fact that the ships going from San Francisco or Panama to Manila are compelled to carry their coal three thousand four hundred miles at one stretch—from Honolulu to Yokohama, the most available route. Then, again, a large part of our tropic trade, and one that shows promise of the most growth, is in the green fruits, such as cocoanuts, pineapples, lemons, oranges, and bananas. Of the last article our ​imports have doubled every five years since 1865. On account of distance it is not practicable to bring any of these fruits from the Philippines, but there is no limit to the amount of trade that can grow up on the lines that are now beginning to form between us and our southern neighbors.
As to the fitness of tropic America to supply our needs: There are Central America, South America, and the West Indies. An examination of their area and productiveness shows that there is little to induce American industry to control any part of the Eastern Hemisphere. Of the 17,000,000 square miles that make up the Western Continent, the tropics make up 5,000,000 square miles—an area sufficient to make more than one hundred States as large as Pennsylvania; an area nearly fifty times as great as the Philippines. The variety of its productions is scarcely excelled even by the East Indies. There are only two important tropic products imported into the United States that are not already largely produced on this continent. They are Manila hemp and tea, and it would appear that the reason they come from the East is because of present labor conditions there. Manila hemp is a sort of half-wild product that may yet have an introduction to our rich tropics just as the potato was introduced into Europe, and many of our crops have been introduced from Europe. Even the tea plant thrives in the warm regions of America as far north as Tennessee. Small quantities of tea are now grown in various parts of America, but the cheap labor of the East has made it unprofitable here. We are at the present time getting nine tenths of our tea from India, where Anglo-Saxon care has developed the industry and is fast driving China out of the tea market of the world.
There is a difference when it comes to the two great tropic staples of coffee and sugar. Our imports of these two articles in 1897 were valued at $180,000,000, while the imports of tea were less than one twelfth as much. At the present time nearly all the coffee used in the United States comes from Central and South America, whence also comes the greater part of the world's supply. The declining price of coffee indicates that we shall get it under more favorable terms in the future.
We import about $100,000,000 worth of sugar per annum. Approximately two fifths of it is beet sugar and comes from the continent of Europe, and the rest is cane sugar from scattered sources in the tropics. Only one sixth comes from the Eastern Hemisphere. We are getting sugar from Europe, not because it is the natural development of the industry, but because those countries are willing to give an export bounty on all that is exported. This makes ​exportation possible. Meanwhile the American sugar industry is left to unprogressive and slovenly methods, but it needs only a reasonable addition of capital and labor to enable it to supply the markets of the world. An Englishman of much experience in the sugar-growing colonies of Great Britain says that by the introduction of improved methods all the sugar that we use in this country could be grown on one half of the little island of Porto Rico. This would cause heavy complaint from the sugar-cane region of Louisiana, and from those sections of our country that are beginning to hope for a future in the beet-sugar industry. Certainly America can supply herself in this particular.
India rubber is another of our tropic imports that promises to increase in importance with improvements in our ability to use it. Nearly the whole supply comes from the American tropics. There it thrives everywhere. We are importing it from almost all of our sister republics, and although it responds readily to cultivation and yields a profitable crop, the main supply is yet taken from the wild trees of the forests. Like the other products it waits for the capital which it will well repay.
By a comparison of the average yields per acre of the leading tropic imports with the amounts of those imports, we shall find the area of the territories that are in cultivation to meet our present needs. In 1897 we imported into this country from all sources the crops that would be yielded by 3,400 square miles of coffee, 30 of bananas, 40 of cocoa beans, 60 of India rubber, 10 of oranges; a total of 1,540 square miles. Add to that the area that will be needed for our sugar, and the result does not equal the whole of Porto Rico. The area of Porto Rico is less than 4,000 square miles. Multiply these crop areas by ten, to make allowance for crop rotation and for the time taken for new plantations to come into bearing. The result will be less than 40,000 square miles, a territory not half as great as the area of the West India islands. They in their turn do not comprise the fiftieth part of the area of tropic America.
When the time comes that American industry needs to develop more lands, there they lie. They are our opportunity. They have an almost margin soil, because we have been too busy with our own internal development to give them needed attention. They need ​capital, and we have been borrowing money abroad to meet our needs at home. Their inhabitants are idle for lack of employment; they will respond to our capital. The United States is the natural market for the West Indies; they lie close to our shores, and when the Nicaragua Canal comes they will be but islands in an American lake—parts of the industrial unit of Greater America. They can give us the things that are needed to round out our consumption, and we can do the same for them.
It is illogical and unlike American shrewdness to go seven thousand miles for tropic lands when an equally valuable, a more valuable, area is within seven hundred miles of us. The comparison becomes even more striking when it is remembered that the control of the Philippines brings to us a burden of problems from which industrial development in this country is free.
The Government at Washington may spend our millions and establish government in the Philippines, but will American capital go there? Will our citizens invest their money seven thousand miles away while tropic America is so much nearer, and is, moreover, an equally rich and far more extended field? This does not assume the conquest of American regions. It is not necessary to have governmental control in order to profit by the industries of a country. The conditions of modern industry prove this most conclusively. But for this fact the progress of the world would have been much less rapid. We have an example of this in American railroads: they have been largely built by English capital; the same is also true to a greater or less degree of many of our other industries. What England has done in North America without governmental control, we can do in Central and South America when our industrial condition demands new areas to work over. By the modernized Monroe doctrine our supremacy in this hemisphere is assured, and we have the guarantee of a clear field. Our interests are also furthered by our friendly relations with the American peoples and by our nearness to them.
The American policy of our forefathers is the one for us, even from the industrial point of view. America is an industrial unit, an economic unit, full of undeveloped possibilities that await the hand of American enterprise. Our resources can abundantly provide for our material needs. The continent is controlled by the most ingenious of all the races, and is dominated by the highest political ideals known to man. What need have we to reach out across seven thousand miles of ocean to take lands populous with millions of barbarians?
* ↑ The last United States census puts our coal lands at something more than 225,000 square miles.
* ↑ "This deposit occurs as far north as the southern shores of Lake Ontario, and thence extends in an almost continuous manner through Pennsylvania, Virginia, Kentucky, and Tennessee to central Alabama."—N. S. Shaler's The United States of America, vol. i, p. 432.
* ↑ If we accept the reclaimable area given above as approximately correct, and apply a system of irrigation, it can be cultivated, "and made the happy home of an industrious people more than equaling in number the inhabitants of the United Kingdom of Great Britain and Ireland."—J. N. Irwin, in Forum, vol. i, p. 742.
* ↑ Forum, vol. xii, p. 750.
* ↑ Report of the Secretary of the Interior, 1891.
* ↑ The United States of America, vol. i, p. 382.
* ↑ United States Report on Commerce and Navigation for 1897.
* ↑ Ibid.
* ↑ W. Allyne Ireland, in an address before the University of Pennsylvania.
* ↑ See Coffee and India Rubber Culture in Mexico. By Matias Romero, late Mexican minister to the United States.
* ↑ The average yields of tropic produce were made out with the assistance of the Cyclopædia Britannica, Coffee and India Rubber Culture in Mexico (Romero), and statistics obtained at the Philadelphia Commercial Museums. The amounts of the imports were taken from the United States Report on Commerce and Navigation for 1897.