supported. With this sort of background came the Spanish-American War of 1898, and with it the annexation of Hawaii, and in its train the establishment of a protectorate over Porto Rico and the acquisition of the Philippines. For this sudden shift to a policy of territorial expansion economic conditions were largely responsible. By 1890 more manufactured goods were produced than were necessary for home consumption and the nation began to compete with European countries in the markets of the world. By 1898 the country was filled with capital, production was greater than consumption, and interest rates were falling. The leaders of industry were alarmed over the unrest in labour and intellectual circles; to them the remedy seemed to lie in a foreign policy which would encourage trade expansion. The argument for such a policy was ably presented by Charles A. Conant:
There are three important solutions of this enormous congestion of capital in excess of legitimate demand. One of these is the socialistic solution of the abandonment of saving, the application of the whole earnings of the labourer to current consumption, and the support of old age out of taxes levied upon production of the community. It will be long before this solution will be accepted in a comprehensive form in any modern civilized state. The second solution is the creation of new demands at home for the absorption of capital. This has occurred at several previous stages of the world s history, and is likely to continue as long as human desires continue expansible. But there has never been a time before when the proportion of capital to be absorbed was so great in proportion to possible new demands.
Aside from the waste of capital in war, which is only a form of consumption, there remains, therefore, as the final resource, the equipment of new countries with the means of production and exchange. Such countries have yet to be equipped with the mechanism of production and of luxuries which has been created in the progressive countries of recent generations. They have not only to obtain buildings and machinery the necessary elements in producing machine-made goods but they have to build their roads, drain their marshes, dam their rivers, build aqueducts for water supplies, and sewers for their towns and cities.
The United States cannot afford to adhere to a policy of isolation while other nations are reaching out for the commerce of these new markets. ... The interest rates have greatly declined