THE PIONEERS OF AMERICAN INDUSTRY 29 



So much for the extent and character of the demand for 

 capital which arose at this time. Let us see now what sup- 

 plies of capital were available for investment in these enter- 

 prises. There were of course but two sources of supply — the 

 savings of our own people and such surplus capital as foreign- 

 ers could be induced to lend us. Regarding domestic capital 

 the situation had greatly improved during the generation prior 

 to 1815. In the colonies, as in all new countries, there was no 

 considerable fund of loanable capital. Such capital as existed 

 was chiefly in the form of trading capital or shipping, and was 

 used by its owners themselves rather than lent out by them 

 to other persons. But even the trading capital of the colonies 

 was by no means all owned by Americans. Adam Smith says 

 that the greater part of the exports and coasting trade of the 

 colonies was carried on by capital of merchants residing in the 

 mother country; and even the warehouses and stores from 

 which goods were retailed in some colonies, particularly in 

 Virginia and Maryland, were owned by the same parties. 

 The complete lack of commercial banks in the colonies goes far 

 to confirm the truth of this statement. Goods were sold on 

 long credits of a year or more by English merchants, and the 

 bills either carried by them until collected or else discounted 

 by bankers in England. There was thus no basis for commer- 

 cial banking in the colonies. It was estimated that Americans 

 owed English merchants $28,000,000 for goods at the outbreak 

 of the revolution. After the revolution English merchants 

 relied upon their ability to grant longer credits than the 

 merchants of other countries could give, to secure control of 

 our trade; and the conditions which had preceded the war 

 were promptly re-established. Madison declared in 1785 that 

 England had never monopolized the trade of Virginia more 

 completely than she did at that time. The events which 

 changed this situation were the outbreak of the wars in Europe 

 and the rise of the cotton industry. By throwing into our 

 hands a vast carrying trade, and by supplying us with markets 

 for cotton and foodstuffs, these events furnished Americans 

 an opportunity to accumulate capital, which they eagerly em- 

 braced. The trading capital of the country now for the first 

 time passed into the ownership of our own citizens, and it is 



