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FEDERAL RESERVE BANK OF RICHMOND

MONTHLY
REVIEW
Population is People
International Trade Policy
Peanuts: A Brief Biography
Charge A ccount Banking




POPU

I O

On November 20, 1967, at 11 :03 a.m., the Govern­
ment’s “ census clock” located in the lobby of the
Commerce Department registered the birth of the
200 millionth living American. The incident was
merely the result of the Census Bureau’s statistical
average of net population increase which places one
new birth every 14.5 seconds, and although no one
knows exactly who the lucky baby was, his ap­
pearance has become one of the most talked about
events in 1967. Newspapers around the world gave
front page coverage to the new arrival while radio
and television brought the news to homes everywhere.
The notoriety received by this anonymous American
citizen focused additional attention on population de­
velopments not only in the United States, but
throughout the world.
W hen the population of the United States reached
the 200 million mark, new emphasis was placed on
the problems that undesirable population trends can
cause. Man has always been faced with demo­
graphic difficulties: the need for more people, the
threat of too many. Modern man is no exception,
but he has the advantage of relatively reliable census
figures and projected data that give him meaningful
guidelines to use in solving his problems. For this
valuable information tom orrow’s planners can rely
on today’s statisticians.
Population Projections: Difficult But Essential
Estimating and projecting population figures is per­
haps one of the most difficult tasks statisticians face.
In their attempt to gather and process population
data, they must overcome innumerable obstacles.
For example, the national census occurs only every
ten years, an interval much too long to detect short­
term changes for estimating purposes.
data on local population are sparse.
Digitized for2
FRASER


Frequently,
The nebulous

l\|

methods of estimating migration and fertility have
to be defined and considered.
There are many
problems requiring special attention: the position of
military personnel, crews on American ships, and
college students have to be accounted for. In less
literate and industrial countries than the United
States the problems become even more numerous.
Population projection, then, is a challenging and
complicated assignment— but one of the most sought
after commodities of the mathematical statistician.
The difficulty in gathering and assimilating data on
population has nothing to do with its popularity.
Outside the circles of the professional demographers,
guessing, projecting, and even prophesying popula­
tion developments have reached the popularity of a
parlor game. People are always curious about their
numbers. They want to know how many people
there are now, where they are, and what can be ex­
pected for the future. Population troubles make the
topic even more vital.
Statistics on the highly
publicized population explosion are discussed every­
where from conference rooms in the United Nations
to crowded booths at the corner drug store. But
possibly the prime reason for the attention given to
population figures is that they are widely used in
political, social, and economic planning.
Changing population patterns are used by both
Government and industry for making decisions and
taking actions. Long-range plans by educators and
businessmen depend on the population trends of their
areas. Solutions to the problems of physical ex­
penditures, inventories, and location of new facilities
can be reached more profitably and beneficially if
the planner has accurate population projections on
which to depend. Even developing cultural institu­
tions— museums, symphonies, and theaters— rely on
statistics denoting demographic fluctuations. Prog-

OPL
ress in all facets of society can be more easily achieved
if planners for the future make use of statistics de­
noting population shifts and trends.
C onsidering the value
of knowledge of population changes, it should prove
interesting to see what lies ahead for the United
States. The figures to be used are taken from
Population Estimates, an October 1967 publication
of the U. S. Department of Commerce. In the
booklet, projected figures are divided into four series
based on two underlying assumptions: national
fertility and interstate migration. The following data
are based on Series I-D , which assumes the con­
tinued decline of fertility from present levels, and
migration rates which will continue within the range
A L o o k a t W h a t ’s A h e a d

observed in 1955-60 and 1960-65.
According

to

Census

Bureau

Greeley’s advice of “ Go West, young man, go W est”
may still prove valid.
Both the Northeast and the North Central regions
can expect population increases by 1985, although
the rise will be below that of the nation as a whole.
Projections indicate that by 1985 New England and

calculations

on

April 1, 1960, there were approximately 179 million
people in the United States.

to 241 million by 1985. This represents an increase of
24.2% and a projected annual growth rate of 1.1%.
Looking at a regional breakdown of the country,
the South is expected to claim around 75 million
people by 1985— an increase of 2 5% . The South
Atlantic area, which includes all Fifth District states
plus Delaware, Florida, and Georgia, will increase
31.2% , and will account for 15.7% of the total num­
ber of people living in the United States. Although
the South will have more people by 1985 than any
other region, the W est will show the greatest per­
centage increase in population. W ith a sizable jump
of 46.3% , the W est will be well ahead of the national
increase of 24.2% . A further breakdown of the
area shows the Mountain states with an expected in­
crease of 38.4% , and the Pacific states registering
the largest gain of any of the areas with 48.8% .
Although the W est will experience a substantial e x ­
pansion in population during the next 17 years, it
still will have the smallest percentage distribution of
any of the four regions. The eight Mountain states
will account for only 4.4% of the population, while
the five Pacific states will claim 15.0% of the U. S.
populace. Most of this increase will be centered
in the state of California, the one exception to
the rule of scarcely populated Western states. W ith
sparse population projected for this area, Horace

the Middle Atlantic states should have around 56
million people, while the industrial states of the East

The 1965 estimates

North Central and the agricultural states of the West

place total population for the country at 194 million,

North Central can expect around 63 million by

and projections show that the figure should jump

that year.

P O PU L ATIO N OF UNITED STATES A N D

REG IONS
Projected

April

Projected

1965-1985

1960

1965

(census)

Estimates

1970

1975

1985

percentage

Projections

percentage

1980

1985

increase

distribution

226,681

240,747

24.2

100.0

(thousands of persons)
United States

179,323

193,795

203,940

214,384

Northeast

44,678

47,617

49,490

51,361

53,544

56,040

17.7

23.3

North Central

51,619

54,089

55,488

57,192

59,607

62,742

16.0

26.1

South

54,973

60,106

63,691

67,160

71,008

75,159

25.0

31.2

West

28,053

31,983

35,271

38,670

42,522

46,807

46.3

19.4




3

The State Scene P rojection s for individual states
offer further evidence of the country’s shifting popu­
lation distribution and expansion. Florida’s popula­
tion will increase by 66.3% , Arizona’s by 63.8% ,
and California’s by 57.6%. Migration will have a
great effect on the growth of these states: almost
six million people will move to California, around
three million to Florida, and half a million to Arizona.
Measured as a per cent of the 1965 population of the
states, these figures represent net migration rates of
over 50% for Florida, around 33% for California,
and 31% for Arizona. These states seem to offer
advantages that a great many people find inviting.
Perhaps some of the high migration rate is the result
of the increase in the number of older citizens who
seek the warm climates and easy living facilities that
these states are able to provide. There are, how­
ever, numerous younger people, especially the sportsminded, who are also participating in the trek to
the sun. The Western states of Nevada, New
M exico, Utah, and Colorado, where population is
relatively sparce will benefit too from a mobile
populace.
But even states with relatively high
population densities such as Delaware, Maryland,
and New Jersey will experience an influx of people
over the next few years. Projections show that ex­
panding populations, as a result of either migration
or birth rates, or both, will characterize every state
in the Union over the next 17 years, with the ex­
ception of W est Virginia. According to the esti­
mates, during the period from 1965-1985 W est V ir­
ginia will lose approximately 150,000 people, a de­
crease of 8.2% . On the list ranking the states by
the net migration rate, West Virginia appears in
fiftieth place, with an almost 20% decrease. These
projections, however, make no allowance for eco­

RE G IO N A L

PO P U L A T IO N

PROJECTIONS

Projected
1965-1985
percentage
increase

Projected
1985
percentage
distribution

19.1
17.2

5.5
17.8

18.7
9.4

18.9
7.2

31.2
14.2
23.1

15.7
6.1
9.5

Northeast:
New England
Middle Atlantic
North Central:
East North Central
West North Central

West:
Mountain
Pacific

Digitized for4
FRASER


Projections Reviewed A look at p rojections of
the overall U. S. population picture for the next 17
years reveals a pattern of growth and expansion.
The trend toward a national increase in population
will persist in spite of a decline in the birth rate,
which began decreasing as early as 1957. W ith the
exception of W est Virginia, every state will be
characterized by an increased populace. Migration
will continue to be predominantly westward, but
Florida will still attract large numbers of migrants.
The distribution of the population will be heaviest in
the East North Central and Middle Atlantic sec­
tions, but will remain relatively light in the West.
Even with this panorama of continued growth, by
1985 the U. S. still will be lightly populated com ­
pared with most other industrial nations of the world.
Growth, then, although not as rapid as it was in
the 1950’s and the early 1960’s will be the major
trend in U. S. population developments over the
next several years. There are many who find this
continuing expansion frightening. Fear of the lack
of space and the possibility of a scarcity of food lead
some Americans to believe that overpopulation is
one of the biggest problems facing the country today.
Unless measures are taken to reduce substantially

South:
South Atlantic
East South Central
West South Central

nomic development, or the demand for coal and other
W est Virginia resources that could stimulate growtli
for that state.
Although interstate mobility is expected to in­
crease, the distribution of the nation’s population is
projected to show little change from 1965 to 1985.
In contrast to the small percentage of people in most
of the Western states, California will remain the most
populous state with 12% of the U. S. population.
New Y ork is not far behind with 8.9% , and Texas
will continue in third place with 5.6% . The in­
dustrial and urban states of Illinois, Ohio, and Penn­
sylvania follow with 5.3% , 5.1% , and 5.1% re­
spectively. For those who feel threatened by the
overabundance of people, there is always the state of
Alaska, which in 1985 will claim a mere 0.1% of the
nation’s total population even though it is geo­
graphically the largest of the states. Vermont and
W yoming, each with only 0.2% of the population,
will also offer the crowd-conscious a less populated
escape. So despite the fact that population will con­
tinue to grow, there still will be areas within the
U. S., even in 1985, with relatively few people.

33.4
48.8

4.4
15.0

the growth rate, they conclude, the people boom will
eventually “ use up the earth.”

Others who are less

pessimistic feel that an increasing population is es­
sential to the country’s welfare and must be accepted
as a desirable challenge.

Carla W . Russell

A C e n t u r y of I n t e r n a t i o n a l T r a d e Policy

184 0-1940

During the one hundred years spanned by the
period 1840-1940 the weight of world opinion con­
cerning international trade swung repeatedly from
free trade to protectionism and back again. In the
middle of the last century broad internationalism
was widely evident in the commercial policies of
many governments. Led by Great Britain, a number
of countries substantially lowered their trade barriers
and reduced discriminatory practices. The seventies,
however, saw a reversal towards more protection.
Unfavorable economic conditions, increasing in­
dustrialization and an emerging political nationalism
all contributed to this shift in policy. After a
moderate swing back toward freer trade around the
turn of the century, the first W orld W ar considerably
reduced the volume of international trade, as it led
to many increases in direct and indirect controls.
During the 1920’s, sporadic efforts were made to re­
turn to prewar conditions. The crisis of 1929 and
the prolonged depression of the thirties not only off­
set what had been achieved in this direction, but
also induced many nations to impose the most e x ­
tensive trade barriers ever.
The U. S. raised a formidable tariff wall with the
Smoot-Hawley Act of 1930, but almost immediately
began to take steps to mitigate the impact of the
measure. The Trade Agreements Act of 1934 au­
thorized the President to negotiate with individual
countries on reductions of as much as 50% in
existing duties.
This article will discuss in broad outline the com ­
mercial policy of the leading trading nations in the
period between 1840 and 1940.
1840-1870: An Era of Free Trade D u rin g these
decades free trade philosophy made considerable
headway. The theories of such “ classical” eco­
nomists as Adam Smith, David Ricardo, and John
Stuart Mill induced many governments to strive
towards liberalization of their international trade.
Tariff walls were gradually lowered, the lists of
dutiable items were shortened and many kinds of
discriminatory practices were abolished.
Great Britain, the world’s leading trading nation



of those days, set the tone in this process. In 1846
Britain opened its markets to agricultural imports by
repealing the Corn Laws that had long brought pro­
tection to this sector. Three years later W est­
minster abrogated the A ct of Navigation that, for
almost two centuries, had protected the British
carrying trade. Most important for the liberaliza­
tion movement was, however, the negotiation in 1860
of the Cobden-Chevalier trade treaty between Great
Britain and France. The unconditional most favored
nation clause contained in that treaty, later on copied
by many other countries for their trade agreements,
set off a chain reaction that let to a decade of un­
precedented free trade.
A distinction should be made here between the
conditional and the unconditional variant of the most
favored nation clause (respectively c.m.f.n. and
u.m.f.n.). In the latter case partners in a trade
agreement pledge automatically to extend to each
other the more favorable terms of any new agreement
that either may enter with a third party. Suppose,
for example, the U. S. has a standing agreement
with France to levy a 5% import duty on French
wine and the U. S. thereafter negotiates a new agree­
ment with Italy levying a 4 % tariff on Italian wine.
France can then automatically claim the same treat­
ment for its product. Under the conditional form,
however, France does not automatically get the new
4 % tariff. It will only obtain such treatment if it
can give the U. S. an equivalent concession. The
inherent difficulty of this system is, of course, how
to determine what can be accepted as an “ equivalent”
compensation.
Following the 1860 Cobden-Chevalier treaty most
European nations inserted the u.m.f.n. clause in their
trade agreements. The U. S., however, continued
to apply the conditional variant. In fact, it was
this country which, at the conclusion of its first
commercial treaty in 1778 introduced this form of
the clause in international trade relations. The ex­
planation of this position may be found in the specific
trade circumstances at the time of the founding of
the nation. In those days tariffs tended in general
(Continued on page 8)

5

(

c

(

A Brief iography 4
HI

M

m.

*




Peanuts, the District's f o u r t h

m a j o r sou rce o f c ro p in c o m e ,

i m p o r t a n t to th e e c o n o m y o f this a r e a f o r m o r e t h a n a c e n t u r y .

h a v e be e n p r o d u c t i o n has in c r e a s e d .

Record p e a n u t c ro p s h a v e r e s u lte d in re c e n t

B r o u g h t to this y e a rs , w i t h th e a l l - t i m e h i g h o c c u r r in g in the D is tric t in 1 9 6 5 a n d in th e

c o u n t r y f r o m A f r i c a a l o n g w i t h th e s la ve s in c o l o n ia l d a y s , the p e a n u t w a s n a t io n in 1 9 6 7 .
f ir s t c u l t i v a t e d in o n ly a s m a ll a r e a o f e a s te r n V i r g i n i a .

D istrict p e a n u t y ie ld s a r e w e l l a b o v e tho se in th e o t h e r t w o

S o ld ie rs w h o a r e a s , a n d D istric t p r o d u c e r s h a v e a c c o u n te d f o r r o u g h l y 3 0 % o f t o t a l U n it e d

f o u g h t in the V i r g i n i a c a m p a i g n s o f the W a r B e tw e e n th e States d e v e l o p e d a States o u t p u t d u r i n g th e p o s t w a r p e r io d .
ta s te f o r p e a n u t s , c r e a t i n g a n in c re a s e d d e m a n d f o r th e m .

This p r o v i d e d has c o m e f r o m th e S o u th e a s t a n d th e r e m a i n i n g 2 0 % f r o m t h e S o u t h w e s t,

the f i r s t m a j o r im p e t u s f o r a n in c re a s e in p r o d u c t i o n , a n d c u l t i v a t i o n o f p e a n u t s
spread

ra p id ly

in to

o th er

S outhern

States.

|

D e v e lo p m e n t

of

P ea nu ts h a v e m a n y uses.

s h e lle r w e r e

of

m a jo r

im p o rta n c e

in

the

e x p a n s io n

of

C ity a n d in N o r f o l k , V i r g i n i a .

p ro d u c tio n .

V i r g i n i a a n d 16 in N o r t h C a r o l i n a .

■

The A lo w -c o s t, h i g h - p r o t e i n f o o d a n d

rich in e n e r g y , on e p o u n d

o f peanuts
1.5

O f the 111 S l i g h t l y m o r e t h a n t h r e e - f i f t h s o f the t o t a l d i s a p p e a r a n c e o f p e a n u t s in

14 a r e

lo c a te d in w a s in th e f o r m

o f e d ib le

p ro d u c ts , c h i e f l y

The m o s t r a p i d e x p a n s i o n o f p e a n u t p e a n u t s , a n d p e a n u t s r o a s te d in th e she ll.

p r o d u c t i o n o c c u r re d in th e C o tto n

Belt f o l l o w i n g

the fa s t m ig r a tio n

19 6 7

p e a n u t b u t te r , c a n d y , s a lte d
C r u s h in g s f o r oil a n d m e a l

o f a c c o u n te d f o r 2 4 % ; e x p o rt s , 9 % ; a n d seed, f e e d , a n d f a r m

loss, 6% .

Here the h e a v y loss o f c o tto n in c o m e ca u se d f a r m e r s to C o n s u m p t io n o f p e a n u t s ( f a r m e r s ' stock basis) has ris en f r o m 9 5 5 m i l l i o n p o u n d s

lo o k f o r o t h e r sources o f in c o m e .
acreage

in c r e a s e d

The

peanut

m a rk e d ly .

to o k p la c e d u r i n g W o r l d W a r II w h e n
to e n c o u r a g e

p r o d u c ts f r o m

A seco nd w a s b u i l t in N o r f o l k in 18 78 a n d p o u n d s o f C h e d d a r cheese, 9 p in ts o f m il k , o r 36 m e d i u m size eggs.

p e a n u t sh e lle rs a n d crush ers t h r o u g h o u t the c o u n t r y t o d a y ,

and

in d u s tria l

T o d a y , h o w e v e r , t h e y a r e used p r i m a r i l y f o r f o o d in th e U n it e d States,

18 7 6 in N e w Y o r k f u r n i s h e s a b o u t the s a m e a m o u n t o f e n e r g y as 2 p o u n d s o f b e e f,

a n o t h e r m u c h la r g e r o n e in S m it h f ie ld , V i r g i n i a , in 1 8 80 .

t h e b o ll w e e v i l .

The la te G e o r g e W a s h i n g t o n C a r v e r , in

m a c h i n e r y fa c t, is s a id to h a v e m a d e m o r e t h a n 3 0 0 f o o d a n d

f o r p l a n t i n g , c u l t i v a t i o n , a n d h a r v e s t in g a n d in v e n t i o n o f t h e m e c h a n ic a ^ *fh e m .

f ir s t p la n ts f o r c l e a n in g a n d s h e llin g p e a n u t s w e r e b u i l t in

H a lf o f t h e n a t io n 's p r o d u c t i o n

pro d u ctio n

o f peanuts

fo r

p r o m is e d

Still

a

good

a n o th e r w a v e

a l t e r n a t i v e ^ 1 9 5 5 to a n e s t im a t e d 1 ,5 5 0 m i l l i o n in 1 9 6 7 , a g a i n o f 6 2 % .

a c r e a g e a l lo t m e n t s w e r e t e r m i n a t e d o f th is w a s c o n s u m e d in th e f o r m
c o n v e r s io n

to oil.

O n a p e r c a p it a

o f e x p a n s i o n basis , the in c re a s e has be e n f r o m 5.8 p o u n d s t o 7.8 p o u n d s .

A creage

re a c h e d in c a n d y .

A lm o s t 7 p o u n d s

o f p e a n u t b u t te r , sa lte d p e a n u t s , a n d

The r e m a i n d e r w a s d i v i d e d a l m o s t e q u a l l y b e t w e e n c le a n e d

a p e a k d u r i n g th e w a r y e a r s , b u t w i t h th e d e c lin e in th e w a r t i m e d e m a n d f o r r o a s ti n g - s to c k p e a n u t s (the b a l l - p a r k t y p e ) a n d th o s e c o n s u m e d as f o o d
p e a n u t o il, a c r e a g e w a s a g a i n
1949 a n d

cut b a ck.

A llo tm e n ts w e re

h a v e be e n h e ld a t a p p r o x i m a t e l y th e

le g a l

1.6 m i l l i o n acres f o r the n a t io n , since 1 9 5 6 .
p ro d u ctio n
th e

fo r

many

decades

V irg in ia -C a ro lin a
e a s te rn

N o rth

has

area,

C a r o li n a ,

be e n

c o n c e n tr a te d

p rim a rily

th e

m in im u m

in o n f a r m s .

in

three

d i s tin c t

V irg in ia

la r g e - p o d d e d ,

and

fl|

R o u g h ly h a l f o f a ll e d ib le p e a n u t s used since 19 5 5 has g o n e in to

le vel, fhe m a n u f a c t u r e o f p e a n u t b u t te r , f ir s t p r o d u c e d c o m m e r c i a l l y in 1 8 9 0 as a

The n a t i o n s p e a n u t f 0 0 d f o r

s o u t h e a s te r n

p ro d u c in g

reim pose d

i n v a li d s .

S a ltin g ,

the second

la r g e s t o u t le t ,

has a c c o u n te d

fo r

a re a s : s l i g h t l y b e t te r t h a n o n e - f i f t h , w h i l e c a n d y m a n u f a c t u r e has used a r o u n d
n o rth -o n e -s ix th .

V irg in ia s

used in c le a n e d , u n s h e lle d

V i r g i n i a - t y p e h a v e c o m p r is e d a r o u n d 7% o f th e t o t a l.

r o a s ti n g - s to c k f o r m

M o s t o f th e R u n n e r a n d S p a n is h

v a r i e t ie s ; t h e S o u th e a s t, c h i e f ly s o u t h w e s t e r n G e o r g i a a n d s o u t h e a s te r n A l a b a m a , v a r i e t ie s a r e used in m a k i n g p e a n u t b u t t e r a n d m o s t s h e lle d V i r g i n i a t y p e s
w h e r e th e R u nn er, S p a n is h , a n d V i r g i n i a v a r i e t ie s a r e g r o w n ; a n d th e S outh- f o r s a l t i n g .
w e s t a r e a , m o s t ly s c a tte re d sections o f T e x a s a n d
m a in ly

th e

s m a ll- s e e d e d ,

S p a n is h

peanuts.

O k la h o m a ,
A creage

in

S p a n is h p e a n u t s a r e the m o s t w i d e l y used t y p e in c a n d y

p r o d u c in g m a n u f a c t u r e .
th e

S om e o f ea c h t y p e a re used in a ll th r e e o u tle ts , h o w e v e r ,

Fifth U t i l i z a t i o n o f a ll th r e e ty p e s o f p e a n u t s has ris en.

Use o f V i r g i n i a s , u p 7 2 % ,

District's a r e a o f p r o d u c t i o n , w h i c h c o r r e s p o n d s r o u g h l y to th e V i r g i n i a - has s h o w n th e b i g g e s t g a i n , f o l l o w e d b y S p a n is h , u p 5 5 % , a n d Ru nn ers w i t h
C a r o l i n a a r e a , has c o m p r is e d a b o u t 2 0 % o f t h e n a t i o n a l t o t a l f o r th e pa st ten a rise o f 4 9 % .
y e a r s a n d in 19 6 7 w a s e s t im a t e d a t 2 7 7 , 5 0 0 acres.

The n a t io n 's processors o f r a w

This is a 4 6 % d e cre a s e 2 9 o f the se lo c a te d in F if th D is trict states.

f r o m the a l l - t i m e h i g h o f 5 1 5 , 0 0 0 a cre s h a r v e s t e d in 1 9 4 5 .
d e c lin es h a v e be e n e v e n g r e a t e r in th e S o u th e a s t a n d S o u t h w e s t.

|

pean uts

now

to ta l

393, w ith

D e s pite in c re a s e d c o n s u m p t i o n

A c r e a g e i n ’ r e c e n t y e a r s , p e a n u t s u p p lie s r e s u lt in g f r o m th e g a in s in p r o d u c t i o n h a v e
T here has b e e n

la rg e r

been a s h a r p u p t r e n d in y ie ld s p e r a c re t h r o u g h o u t t h e c o u n t r y , h o w e v e r , a n d excess,

and

th a n
prices

e d ib le
to

r e q u i re m e n ts .

gro w e rs

have

The

CCC

ave rag ed

has

near

ac q u ire d
the

the

support

le vel.

A Century of International Trade Policy
(Continued from page 5)

to be low and of minor importance, but most Euro­
pean states applied a variety of discriminatory regula­
tions in their commercial policies. U. S. commerce
and shipping tended to be either excluded altogether
or discriminated against.
The use of the con­
ditional form of the clause gave the new nation a
strong bargaining position from which it could at­
tempt to improve its position. A more favorable
treatment of a certain foreign product in the U.S.
was not given automatically, but was made con­
ditional upon elimination of discriminatory rules ap­
plied by that country.
The continued use of the conditional form by the
U. S. after 1860 was a serious irritant to its trading
partners. These countries had gradually abolished
their discriminatory regulations and could offer the
U. S. little as an “ equivalent” concession. A situation
arose in which the U. S. could automatically claim
“ most favored nation” treatment for its products, but
in turn would refuse to automatically grant it. In
due time European nations reacted by discriminating
against the U. S. Nevertheless, this country con­
tinued to apply the conditional form till 1923.
Another source of irritation abroad was the conparatively high level of tariffs maintained by the
U. S. The Morrill Tariff A ct of 1861 had raised
duties about 150%. During the W ar Between the
States financial considerations spurred additional in­
creases in tariffs as well as a curtailment of the list
of non-dutiable goods. After 1865 the dominant
protectionist interest kept the U. S. on this course.
1870-1914 In the 1870’s and 1880’s the scene
gradually changed as an increasing number of Euro­
pean countries turned protectionist. Only Great
Britain and the Netherlands, both of whom had large
interests in world trade, remained true to the free
trade ideology. Various reasons can be pointed out
for the shift to protectionism.

A severe depression

in the agricultural sector hit hard at the basis of
most European economies.

Besides, improved in­

ternational transport facilities had raised the volume
of world trade, particularly in industrial products.
The resulting increase in international competition
had made the differences in industrial development
among the various nations painfully clear.
In 1879 Germany raised her duties on a variety
of products and in the series of new trade treaties
that were concluded in the early nineties a less liberal
tone was noticeable.



In France many commercial agreements that were
revised in the eighties manifested a more protec­
tionist trend, too. In 1892 a system of maximum
and minimum duties was introduced that was to
stand till the first W orld W ar. The maximum
rates could not be increased, but where agricultural
products were concerned they could not be lowered
either. The minimum rate could be conceded in
special treaties in return for equivalent concessions
from trading partners.
Following the W ar Between the States the tariff
question again became a major political issue in
the U. S. Frequently a change in the political party
in office would cause a change in duties, too. In the
long run, however, tariffs in this period tended to
rise and the free list tended to be curtailed. During
the first postwar decade the tariff system underwent
several revisions. Import duties on revenue articles
were abolished, while those that protected domestic
industries were maintained or increased. In 1890
the McKinley Tariff A ct raised rates on many
articles while at the same time adding a large number
of agricultural staples to the list of dutiable items.
Reductions enacted into law in 1894 brought only
a temporary reversal. Three years later, the Dingley
A ct reimposed many tariffs, often at an even higher
level. These lasted till 1913 when the Underwood
Tariff A ct introduced major reductions, the first in
half a century. Many raw materials were now put
on the free list and protectionist duties on semi- or
wholly-manufactured goods were markedly decreased,
sometimes from highs of 100% or 150% to 35% .
Besides, many complicated tariff rules were abolished.
Even so, the influence of the new law was never very
profound, as the outbreak of the first W orld W ar
frustrated its application.
Throughout this period the U. S. maintained its
strong negotiating position through use of the
c.m.f.n. clause. The McKinley Act consolidated this
position by introducing the concept of “ penalty
duties.” The President was authorized to impose
such duties whenever he felt that countries that ex­
ported a certain commodity to the U. S. levied duties
on U. S. goods that were “ reciprocally unequal and
unreasonable.” The threat that this power could be
applied quite often paved the way for a more favor­
able treatment of U. S. exports. In 1923 this au­
thority was abrogated.
1914-1940 T h e outbreak of the first W o rld W ar
brought some important changes in international trade

relations. Governments that so far had exercised
control over imports only through import duties now
took more drastic actions. Frequently, exports as
well as imports would be directly forbidden, while
duties on many items were raised considerably. As
a result the volume of international trade fell
markedly. During the early twenties many of the
direct controls were again abolished.
In the wake of the outbreak of the war Great
Britain abandoned its traditional free trade policy.
A t first this change seemed temporary and forced by
the emergency situation. A s the years went by,
however, it became apparent that protectionism was
here to stay. In 1915 Britain imposed a duty 011
imports of luxury goods and in 1921 stiff anti-dump­
ing measures were specified to safeguard its industry.
In postwar France the old, highly protective tariff
regime remained in force. Any liberalization was
subject to bargaining. In 1920 this situation came to
an end when the government obtained a free hand to
fix all duties via negotiation. The result was a very
complex system of agreements that showed the funda­
mental contrast between the two elements of France's
p olicy: the idea of bargaining and adherence to the
unconditional most favored nation clause. The use
of the clause in an important treaty with Germany
in 1927 seemed to settle the issue in favor of
the latter.
The peace treaty of Versailles obliged defeated
Germany to give most favored nation treatment to
the Allies. These countries, however, did not have
to reciprocate. After expiration of this provision
in 1923, Germany established her own tariff system.
W hile basically protectionist for both agricultural
and industrial goods, lower duties could be obtained
through negotiations. This regime was maintained
till the depression of the thirties.
In the postwar U. S., protectionist forces quickly
gained momentum. New industries that had led a
sheltered life during the preceding years now faced
increased imports and asked for support.
The

openly aimed at the use of import duties to equalize
foreign and domestic costs of production.
The general trend towards more trade restrictions
resulted in various attempts to reverse the movement.
The 1927 W orld Economic Conference urged coun­
tries to lower their tariffs and recommended multi­
lateral action to expand the volume of world trade.
Unfortunately neither this nor other similar con­
ferences achieved major successes.
Yet, the crisis of 1929 and the following depres­
sion manifested the need for concerted international
action even more. The 1930 Smoot-Hawley Act,
which raised U. S. tariffs to all-time highs, resulted
in a wave of widespread retaliation abroad which
brought about even more general trade restrictions.
Britain’s decision in September 1931 to devalue the
pound dealt a fatal blow to the existing international
monetary structure. Within three months fifteen
nations had followed the example. This led to an
atmosphere of uncertainty about the value of cur­
rencies which again hampered international trade.
In reaction to depressed economic conditions most
governments stepped up their intervention in foreign
trade. Soon a number of nations used quotas, ex­
change controls and export premiums besides the
traditional import duties. Although many warned
against such “ beggar my neighbor” policies, no means
for taking collective action against the deteriorating
situation was found. The volume of international
trade shrank further when nations adopted the policy
of maintaining a balance of trade with each partner
rather than an overall balance with all partners.
Inevitably the flow of goods tended in each case to
drop to the level of the weakest partner. By and
large, governments persisted in fighting the inter­
national depression with policies aimed at national
recovery. As regards the second half of the thirties
this attitude can partly be attributed to the mount­
ing political uncertainty 011 the European Continent.
During the same period, the U. S. followed a dif­
ferent course. The 1934 Trade Agreements Act

1920-21 depression and a new nationalism that had

authorized the President to negotiate with individual

emerged in reaction to the war strengthened the

countries on a decrease in duties of as much as 50% .

movement.

After a change in the party in office

By incorporation of the unconditional most favored

the 1921 and 1922 tariff acts reversed the liberaliza­

nation clause maximum cooperation could be reached.

tion trend set in by the Underwood Act.

Duties on

The clause, moreover, was to apply to tariffs as well

a large number of agricultural goods were reimposed

as to quotas and exchange controls.

or increased by substantial amounts.

decade of the program, agreements were signed with

Protection for

During the first

manufactured goods became more extensive than

28 different countries.

ever.

subject to the agreements, duties were cut by the

The newly created Tariff Commission was

For almost half of the goods

given certain powers to modify and adjust the tariffs.

maximum 50% .

The “ American Selling Price” which was used as a

was given similar powers.

basis for

customs

valuation




of certain

products

In 1945 and 1955 the President
Jan H. W . Beunderman

9

A"'

READY CASH

S fl0 P P [M

Ch
a rS e -A .C h e c k

CHARGE

CASH
It):

Mon.n

1ARGE I ACCOUNT
C h eck •

■><

A

'

C r e d i t S e r v i c e s on t h e cM o v e in t h e D i s t r i c t
/
charge plan

,o * e
CS-

" ° o , v?

■v
%

'V ,

B A N K CREDIT B'f CHECK

Check-Credit your Instant Money and Charg-It,
or Check-A-Loan to Cash-A-Matic for Sure Credit
on your Charge Plan . . . and the credit ball starts
rolling.

Commercial bankers appear to have focused

much of their ingenuity on plans to finance the con­
sumer, and on efforts to dress their plans in catchy
phrases.

The result of these efforts is that con­

sumers now have a variety of options for arranging
bank credit to cover virtually any kind of retail
purchases.

This array of options includes the check-

credit and overdraft plans,

and other

revolving

credit plans.
Opinions differ as to the origin of credit cards,
with some dating the origin from the first oil com ­
pany card issued in 1924.

Others trace credit card

ancestry to department store charge accounts.

R e­

gardless of its parentage, the credit card is rapidly
emerging as a new symbol of this consumer-oriented
economy.

About 12 million credit cards are issued

by the 1,100 banks active in this field.

In addition,

a number of banks are engaged in check-credit and
overdraft plans which extend loans to customers and
insure them against overdrawn amounts in their
checking accounts.

O f the $1,137 million outstand­

ing in credit plans reported by 848 insured com ­
mercial banks on October 4, 1967, Fifth District
banks held $46 million.

A number of District banks

are also among the 900 banks who participate in
these plans as agency banks through correspondents
on whose books the outstanding credit is carried.
Retail Credit Cards

T h e retail credit card is an

instrument through which a bank extends credit to
the consumer and takes over the collection function
Digitized for1
FRASER
■0


■ v -c ^
C > eC

of the merchant. Cards are issued to consumers
regardless of whether they are customers of the bank.
The cardholder then has the privilege of charging
purchases at any of the merchants subscribing to the
plan. A “ floor limit” setting the maximum amount
the cardholder may purchase without the bank’s ap­
proval is usually stipulated. This limit is customarily
within the range of $25-50, and approval for amounts
above this limit must be obtained at the time of sale.
The bank sends a statement of purchases to the
cardholder at the end of the month.

The charges

from the various merchants subscribing to the plan
are totaled, and the cardholder then makes one pay­
ment to the bank.

If the cardholder does not wish

to pay the full amount of the bill in 20 to 30 days,
he may use a revolving credit plan.

For most plans

there is a minimum payment of $10 or 10% of the
amount billed, whichever is greater.

A 1 to 1^2%

monthly service charge is added to

the unpaid

balance.
Merchants subscribe to the plan by paying an
initiation fee, usually under $100, to the bank. There
is also a fee for the use of the card imprinter.
Merchants participating in the credit card plan obtain
deposits to their accounts equaling the amount of
sales slips less a discount, usually in the range of
3 to 7 % .

This discount is a compensation to the

bank for assuming the collection function of the
merchant.

The discount is usually based on the

volume and average sales ticket size of the individual
merchant.

A

rebate reduces the discount if the

merchant’s volume or sales ticket size increases over
the expected amount for a certain period of time.
Am ong the pioneers in retail banking were two

Fifth District banks: The Bank of Virginia which

A s shown in the chart, these five plans had $29

started Charge Plan in February 1953, and First
National Bank and Trust Company of Western

million in credit outstanding as of October 4, 1967:
a 29% increase was shown by the end of December,

Maryland whose Shoppers Charge began in April

when outstandings of more than $37 million were

of the same year.

reported.

Although

Charge

Plan was

originally a local operation, the Bank of Virginia has
now become a member of Interbank Card.

W ith

Further growth is expected, because of

the addition of three other District banks to the
BankAmericard program.

First & Merchants Na­

operations beginning on March 1, 1968, cardholders

tional Bank, Richmond, announced in September

may use Interbank Card at business establishments

1967 that it would operate a BankAmericard fran­

subscribing to the plan in at least seven states.

The

chise, and later announced that it would license its

affiliated banks issue their own cards and enroll

correspondent banks in Virginia to offer the card.

merchants under their own terms, although they have

Distribution of the cards will begin in early spring.

now agreed to standardize their card size to permit

First National Bank of Maryland joined the pro­

use in a common imprinter.

gram in November, and South Carolina National

Essentially, each plan

will retain its local identity with only the Interbank

Bank, the fourth in the District to offer Bank­

symbol on the card to associate it with a larger

Americard, was licensed in January 1968.
Riggs National Bank in Washington is negotiating
to acquire the retail credit card system, Central

operation.
In keeping with the national trend, interest in
credit cards waned in the Fifth District during the
mid-1950’s.

In 1959 new plans sprung up across
CREDIT CARDS A N D RELATED PLANS
A T FIFTH DISTRICT C O M M E R C IA L B A N K S

the nation, and in July of that year, First Union
National Bank of North Carolina started its credit
card, also called Charge Plan.

Number

$ Million

This new interest

was short-lived, however, and only a few banks
throughout the country initiated credit card plans
in the following years.
Beginning in 1966 bank credit card activity again
picked up, and it is this “ phase three” that we are
now

experiencing.

The

Fifth

80

70

District’s entrance

into this phase was initiated by Maryland National
Bank and North Carolina National Bank, both be­
ginning plans in April 1967.

60

Maryland National

Bank purchased Charg-It of Baltimore, a plan which
had been in operation since April 1953.

Maryland

50

National is now an associate member of Interbank
Card.

North Carolina National Bank obtained a

license to offer BankAmericard. (The Bank America

40

Service Corporation, a subsidiary of Bank of America
N T & SA , San Francisco, began in November 1966

30

to issue licenses which allowed out-of-state banks to
participate in the BankAmericard program.)

North

Carolina National has licensed agency banks to offer

20

BankAmericard in areas where they have no branches.
BankAmericard is an all-purpose card which can
be used for airline travel, meals, lodging, and cash
advances, as well as for retail purchases.

10

A s in the

Interbank Card program, BankAmericard sponsoring
banks have an interchange agreement which allows
cardholders to use their cards at participating es­

Oct.

Dec.
1967
Bank credit cards ^

Oct.

Dec.
1967
Check-credit and other plans

tablishments across the country.



11

Central Charge operates in

up again in 1967 with five additional banks begin­

Virginia, Maryland, Delaware, and West Virginia,
as well as in the District of Columbia.

Charge Service, Inc.

ning programs. A s of the December 30, 1967 call
report, 27 District banks were offering check-credit

Check-Credit and

Other Plans

Prim arily

b e­

cause of the start-up costs, retail credit cards have
been confined mostly to the larger banks.

O f the

eight District banks which have credit card plans
announced or in operation, only one bank had de­
posits less than $50 million.

Five of the other

seven banks had deposits exceeding $500 million.
Smaller banks have entered the credit field, how­
ever, by offering check-credit and other revolving
credit plans.

On October 4, 1967, 32 banks in the

District were offering check-credit, overdraft, or non­
bank credit cards.

Twenty of these banks were in

the under $100 million deposit size class, with 13 of
the 20 having deposits of less than $50 million.
Credit outstanding at this time was over $17 million.
W ith the addition of two banks with deposits under
$50 million, outstandings at the end of December
rose to almost $20 million, an increase of nearly
15% in less than three months.

or overdraft plans.

Am ong the various names are

Ready ReservAccount, perma-Cash, and Sure Credit.
Eleven District banks feature plans with the Check Credit name.

Other plans are Snap Credit, Ready

Cash, Charge-A-Check, and Instant M oney/Checking
Plus.

Ready Credit, Check-A-Loan, Cash-A-Matic,

and Bank Credit By Check are also available to Fifth
District banking customers.

Bancardchek, a fram-

chised check-credit plan, is offered by two District
banks.
Seven banks within the District are offering a
non-bank credit card— the American Express, E xec­
utive Credit.

Each of these plans went into opera­

tion in 1967.

This card combines the travel and

entertainment advantages of the American Express
card with revolving credit plans offered by banks.
Possession of this card entitles the holder to obtain
cash, borrow money to pay regular American E x ­
press bills, and to purchase travelers checks from
American Express offices.

Under a check-credit plan, a customer is given a
book of special checks which, when cashed, act as a

Credit Cards and the “ Checkless Society" Credit

loan which has already been approved by the bank.

cards have been called “ stepping stones”

There is a fee for each check written, and interest

“ checkless society” .

of 1 to 1 ^2 % per month is charged on the unpaid

with this concept, saying that the speed of payments

balance.

to the

There are those who disagree

The customer has the advantage of being

is impeded when credit cards are used because

able to write a check, up to a predetermined amount,

former cash payments become credit transactions.

regardless of the balance in his checking account.

The use of credit cards, however, does help to pro­

Similar to the check-credit is the overdraft plan.

vide conditions necessary for a “ checkless society” .

Special checks may be issued, or the plan may be
operated in conjunction with a regular checking ac­

programs and thus may contribute to the establish­

count.

ment of automated central information files required

These checks, like the check-credit, activate

an approved loan when used.

The customer may

Computers are widely used in servicing credit card

in a “ checkless society” .

Credit cards bring banks

overdraw his regular checking account, and the bank

into close contact with merchants and require a

will transfer funds to his account to cover the check.

greater marketing effort on the banks’ part.

The amount of credit to be extended is determined

these plans educate the public to the use of cards

by prior agreement between the bank and customer.

or other identification forms for making purchases,

Finally,

There are monthly charges and checking account

rather than using cash or checks.

charges, and interest on unpaid balances.

acceptance of these various bank credit plans is evi­

Some

The increasing

plans incorporate features of both the check-credit

denced by the $57 million outstandings of Fifth Dis­

and the overdraft plans.

trict banks as of December 30, 1967.

If a time

capsule

year

Am ong

Fifth

District banks, check-credit

overdraft plans date from May 1959.

and

By the end

were

being

prepared

for

the

one

thousand nine hundred and sixty-eight, a credit card,

of 1960, 17 District banks offered variations of one

and most probably a bank credit card, would be in­

or the other plan.

cluded among the articles collected as an important

Operations slowed somewhat in

the following years, with only five banks initiating
programs from 1961 through 1966.

12


Activity picked

example of today’s economy.
Eunice R. Dougherty


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102