The tenth annual meeting of the Economic History Association was devoted to the roles of government and business enterprise in the promotion of economic development. The question was applied to cases of rapid economic growth in the past—the creation of oceanic commerce, the building of the American railroads, the rise of modern industry—and to current attempts to promote the recovery of western Europe and the economic progress of the underdeveloped countries.

When it is the custom of the day to put its questions in terms of dimension and proportion, it is hardly necessary to argue that measurement can contribute to their solution. With that granted, our attention can be devoted to the problems that arise when attempting measurement. We could list these formally, but it may be more instructive to let the problems crop up in the course of a brief review of some recent work on trends in government activity during the past half century, and also to note possible applications to this field of some ideas developing in other work in economic statistics.

Among the other excellent and extraordinary gifts that God has given to human kind is the knowledge of the motion of the spheres, the course of the planets and stars, and of the climatic zones under which is placed this marvelous world machine. With this knowledge we furrow that very great element, the water, and betake ourselves into almost any part of the world that we wish, with the same facility as if there were in the wide ocean a fixed road showing signs of its use, and a through highway.

The development of rationality in economic life, according to Werner Sombart and Max Weber, is one of the most important aspects of modern economic history. Gradually, religious and ethical considerations lose dieir influence in commercial behavior; finally, in the nineteenth century, economic judgment proceeds on the basis of its own logic. Business is liberated from noneconomic sanctions.

The paper is based upon research over a rather long period into the public activities in railroad construction in the southern states. Table I-A presents a quantitative summary of public contributions in cash, bonds, and other securities; government-endorsed bonds; remission of Federal import duties; and estimated realized values of Federal land grants prior to 1861. It represents an attempt to give a preliminary summary of the public effort. The estimates on public land grants are tentative, and other items are subject to further refinements through additional studies. It does not represent the total of the public effort, since no account is taken in this summary of the investment values of the many important public and quasi-public contributions in services, the uses of public streets and other properties, tax exemptions, and banking privileges. An adequate appraisal of these must await further research. The summary does reflect, however, some of the outstanding features of the public railroad-building effort, which will supply a useful background for the consideration of the main problem of this paper.

The effects of Federal and state land-grant policies on railroad investment, railroad policy, and regional economic development are too varied to be treated in less than a volume. And such a book would require much research that has not as yet been attempted. The following discussion presents only brief notes on a few of the reactions of railroad entrepreneurs to land-grant policy. These notes were accumulated in the course of research on other problems and are in no instance complete enough to warrant broad generalizations.

The problem to which this paper addresses itself may be posed as follows: What part in bringing about the phenomenally rapid industrial growth of Germany between about 1890 and 1914 was played by governmental activities; what part was played by the private enterprise of businessmen; and what was the relative importance of each?

Any attempt to analyze fully this comprehensive and extremely complex subject would require at least a book, not a short paper. Businessmen in the American petroleum industry came face to face with governmental institutions in the United States on every plane from townships, counties, towns, and cities to states and the Federal authority. Since petroleum products entered into American trade with practically every national entity on the globe, producers, manufacturers, and marketers of oil were vitally affected by foreign legislation and administration of the laws in the various lands. No scholar has ventured as yet to investigate fully and evaluate carefully the historical relationship between government and oilmen on a local or state level, much less on a national or world-wide basis. This paper can only show the breadth of the subject and the size of the task presented to the historian.

The financing of economic development became a major concern of governments in liberal societies and economies largely during or after the Great Depression of the early thirties and the economic debates of that period. At first the state was assigned the role of minimizing or eliminating economic cycles. Later this role was enlarged to include the guiding and promotion of national economic activities toward progressive económic growth. The instruments advocated and used for these purposes have been mainly financial. The revolution which has occurred in the nature and scope of these instruments is far from complete, especially in the underdeveloped areas of the world.

I take it as a truism that for at least the past half century the relations between government and private enterprise in Europe have irregularly evolved in such a manner as to expand the role of government policy and action. Leaving aside the European countries which now have Communist governments and almost wholly socialized economies, this trend has been, in only small part, a matter of conscious or ideological development. Primarily, it has been the consequence of piecemeal adaptation of societies to the specific pressures and problems with which they have been confronted, latterly the problems of world depression, of war, and now of postwar adjustment.