Introduction

When World War I broke out, Britain and the four frontier countries were among the richest in the world. Britain was the most fully developed, had the best articulated and most comprehensive set of financial intermediaries, and was the world's leading creditor. Per capita income was at least as high in the United States as in Britain, and the American economy was very much the larger – in fact, the largest in the world. The financial system was also well developed; American savings had begun to exceed domestic investment requirements; and the United States had taken up the role of an international lender. Canada had experienced an exceptionally high rate of growth in the two decades before the war, a rate sustained by an unusually large Canadian capacity (and willingness) to save and invest, and by a steady inflow of foreign capital. The Canadian economy was much smaller than the American, but per capita income was gaining on that of the United States. The banking system was strong; the securities markets were small, but effective and growing; and in other respects the system of intermediation was gaining in depth and strength. These countries seemed set on a course of successful modern economic growth.