64 Joseph E. Inikori
owned a colonial empire (such as Great Britain, France, Holland and Spain), its
influence extended also farther to the east, to countries which had no colonies but
were able to send goods to America as re-exports from the colonial powers, especially
through Cadiz; so German linens, cutlery, and hardware reached the West Indian
and Spanish American markets.^23For North America in the colonial period, it has been shown that the propor-
tion of total economic activity devoted to production for overseas markets
was relatively large at the beginning of the eighteenth century, being about
one-fifth of total output, and that though that proportion declined over
the century, it still remained about one-sixth in 1768-72.^24 This was made up
of shipping and other commercial services sold by the north-eastern colonies
to the West Indian islands and southern Europe, export of foodstuffs, horses
and lumber from the middle and north-eastern colonies to the West Indies and
southern Europe, and the export of tobacco, rice and other minor crops from
the southern colonies to Great Britain and other European countries. From
this analysis of the colonial economy of North America, it is concluded :
While overseas trade and market activity may not have comprised the major portion
of all colonial economic activity, the importance of the market was that of improving
resource allocation.... We argue that while subsistence agriculture provided an impor-
tant base to colonial incomes and was a substantial part of average per capita income,
changes in incomes and improvements in welfare came largely through overseas
trade and other market activities. Not only did improvements in productivity occur
primarily through market activity, but the pattern of settlement and production was
determined by market forces. This pattern changed slowly and unevenly, spreading
from the waterways and distribution centres along the Atlantic seaboard into the
interior.^25
For the period, 1790-1860, Professor D. C. North has shown that the export
of raw cotton from the southern states was the most crucial factor in the growth
and development of the United States economy. As the southern states con-
centrated all their resources on the production of raw cotton for export, they
had to buy their foodstuffs from the producers in the west, and this stimulated
the settlement of the west and its specialization in foodstuff production. Also,
the south had to depend on the north-east for its transportation, financial and
other commercial services. Incomes earned from the production of cotton for
export and spent on western food and north-eastern services, provided the
base for the growth of import substitution industries in the north-east. And so
the north-east graduated from exporting southern cotton and supplying the
south and west with imported foreign manufactures, to the domestic production
of those goods for consumers in the south and west, as well as in the north-east
itself, using southern cotton as part of the inputs for the new industries. It was