Ilse Mintz, Capital Imports and the American Balance of Payments (1951)

Ilse Mintz’s journal book review assesses Arthur I. Bloomfield’s Capital Imports and the American Balance of Payments, 1934–39: A Study in Abnormal International Capital Transfers (1950). She praises its empirical thoroughness and monetary-policy analysis while questioning its central causal interpretation. The review proceeds from the exceptional character of the capital inflow through its effects on securities markets and international adjustment, then challenges Bloomfield’s explanation of gold imports and his predominantly adverse judgment of capital flight.

The historical anomaly is sharply defined: the United States exported capital in twenty-five of the thirty-one years following World War I, but received large inflows during 1934–1939. These transfers did not follow the conventional pattern of investment moving toward productive opportunities or higher interest rates. Funds came largely from countries with current-account deficits and interest rates above American levels, without financing substantial American development or income expansion. Bloomfield attributes the movement principally to fears of currency depreciation and political developments abroad. Mintz recognizes the value of his detailed treatment of the separate components of this unusual flow.

Her account of his securities-market findings also emphasizes restraint in causal attribution. Foreign investors generally did little to initiate major price movements. Their subsequent influence is harder to establish, but appears secondary during rising markets; during sharp declines, their trading often counteracted rather than reinforced the fall. These findings undermine contemporary fears that foreign activity dominated American market fluctuations. Mintz presents this as a particularly valuable result of Bloomfield’s empirical investigation.

The central explanatory issue concerns how the international accounts adjusted to capital entering independently of trade:

The autonomous character of capital imports implies that other items in the balance of payments had to adjust themselves.

In Bloomfield’s account, the usual income-mediated adjustment failed. Capital inflows did not appreciably expand American income, while their restrictive effects abroad were limited. Consequently, there was no corresponding movement of goods into the United States: its trade account retained an export surplus of three billion dollars over the six years. The simultaneous capital and current-account surpluses were balanced by gold imports of ten billion dollars. Gold accumulation thus becomes the principal undesirable consequence of the incoming funds.

Mintz’s objection turns on the distinction between an accounting balance and a causal explanation. Bloomfield expressly considers whether gold imports caused, rather than merely accommodated, the other surpluses, but she finds his rebuttal insufficient. Both net capital imports and net gold imports began with the dollar devaluation of 1934:

Would we not expect a large and protracted flow of gold into a country that raised its gold price by 75 per cent?

If the higher American gold price independently attracted gold, part of that inflow could have caused foreigners to acquire dollar balances. Capital transfers would then be partly induced by American monetary policy, rather than solely autonomous disturbances requiring adjustment. Mintz accordingly questions whether the transfers deserve the characterization of capriciousness, or whether criticism should instead fall on the policy that attracted them. She offers this as a serious alternative interpretation, not as a fully demonstrated replacement for Bloomfield’s analysis.

A related disagreement concerns how the transfers should be evaluated. Mintz objects that Bloomfield’s discussion can make European fears seem unfounded and that his sweeping condemnation overlooks the later usefulness of foreign balances. During the war, funds accumulated in the United States helped European governments purchase urgently needed imports. Their significance therefore cannot be exhausted by the monetary disturbances associated with their arrival.

The review nevertheless concludes with a strong endorsement. Bloomfield’s discussions of American and foreign policy, particularly the American Exchange Stabilization Fund, give the book a scope exceeding its title:

It is really a history and interpretation of monetary policies, 1934–1939, and will be widely used as an excellent source and textbook on this period.

Mintz’s distinctive contribution is to preserve that broad scholarly value while separating empirical findings from contestable causal and evaluative claims. Her review makes policy-induced flows, the direction of causation, and the changing usefulness of accumulated balances central to understanding the episode.