After the Civil War, the United States economy changed significantly. With a boost in industrialization, an ever-growing system of railroads, and western expansion, the newly unified nation enjoyed post-war prosperity. But by the 1870s, farmers and businessmen began to see just how vulnerable the United States economy was to depression. As factories spewed more and more manufactured products, the agricultural industry began to suffer. As conditions in farming regions began to worsen and fewer Americans were unable to afford all those manufactured goods, industrialists saw their own profits decline.
The economic downturn of the 1890s devastated agricultural business and depleted industrial profits, but factories continued to generate goods, far too many to be consumed by Americans strapped by unemployment. New waves of immigration exacerbated pressures on the economy and contributed to social strife, particularly in urban regions in the Northeast. But these newcomers provided factory employers with cheap labor that helped big industry maintain its rapid pace of production.
Business leaders, then, refused to reduce factory output. They proposed that the way to strengthen United States industry was not to produce less but to find more customers to buy goods. For this reason, many called for greater access to foreign markets, fewer restrictions on exports, and aggressive foreign policy in "underdeveloped" regions in which civilians, if educated, could become consumers.
This idea was in no way novel. Throughout the nineteenth century, many European nations sought to sell goods beyond their borders to maximize profits, create new jobs, and enhance national power abroad. The United States, until the 1890s, had expanded only within the North American continent. Foreign policy prescribed isolation from any and all turmoil abroad, but by the end of the century the U.S. federal government began to change its tune. A State Department memorandum in 1898 declared, "We can no longer afford to disregard international rivalries now that we ourselves have become a competitor in the world-wide struggle for trade."23 Such concerns laid the foundation for the marriage between business interests and U.S. foreign policy.
By 1900, the value of American exports was three times greater than it had been in the years following the Civil War. Exports only increased, and by World War I, the value of all goods shipped abroad was 67% greater than the value in 1900. Investments also ballooned. After the Spanish-American War, American investors poured billions into various projects in Latin America, Eastern Asia, and in the Philippines, including mines, railroads, and sugar, banana, and coffee plantations. Multinational corporations sprouted in the United States and supported federal expansionist or, as some historians have called it, imperialist foreign policy.24