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British Foreign Capital Issues, 1865–1894*

Published online by Cambridge University Press:  03 February 2011

Harvey H. Segal  and
Matthew Simon
Harvey H. Segal
Affiliation:
New York University
Matthew Simon
Affiliation:
Queens College
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Extract

In the half-century before 1914 international capital movements Played a significant role in the development of the world economy. This paper—which is a prelude to a more comprehensive study—focuses upon the British experience. We will first present new annual series on British foreign capital issues for the period 1865–1894. Our analysis of their behavior is centered about the following questions. First, how did the volume of British foreign investment fluctuate during the latter part of the nineteenth century? Were there long swings in these capital movements? Second, how did the geographic distribution of British foreign investment change over time? Was there an increasing tendency to invest within the British Empire? How was the total volume of investment apportioned between the tropics and the temperate regions of recent settlement? Third, how was British foreign investment allocated among economic sectors? Did the industrial composition vary significantly among countries, continents, and climatic-ethnic regions? Finally, what types of enterprises were nourished by British capital? How did the shares vary among government, private and mixed—government and private—undertakings? We believe that our time series provide more reliable answers to these questions than do previously available data.

Type
Articles
Information
The Journal of Economic History , Volume 21 , Issue 4 , December 1961 , pp. 566 - 581
Copyright
Copyright © The Economic History Association 1961

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References

1 Schumpeter, Joseph A., History of Economic Analysis (New York: Oxford University Press, 1954). p. 14Google Scholar.

2 Hobson, C. K., The Export of Capital (New York: The Macmillan Company, 1914), chap. VIIGoogle Scholar; Imlah, A. H., Economic Elements in Pax Britannica (Cambridge: Harvard University Press, 1958), chap. IllCrossRefGoogle Scholar; Cairncross, A. K., Home and Foreign Investment 1870–1913 (Cambridge: Cambridge University Press, 1958), chap. VIGoogle Scholar.

3 Paish, Sir George, “Great Britain's Investment in Other Lands,” Journal of the Royal Statistical Society, LXXI (September 1909), 456–80Google Scholar; “Great Britain's Capital Investment in Individual Colonial and Foreign Countries,” ibid., LXXXIV (Jan. 1911), 167-200; “Exports of Capital and the Cost of Living,” The Statist, LXXIX (February 1914)Google Scholar, supplement; Feis, Herbert, Europe the World's Banker 1870-1914 (New Haven: Yale University Press, 1930), pp. 17–32.Google Scholar Feis revised Paish's original data.

4 For another set of stock estimates, obtained from contemporary and secondary sources, see , Cairncross, Home and Foreign Investment, pp. 183, 185. His table comparing 1870, a prosperity year with 1885, a depression year, illustrates the problem of establishing trends from stock dataGoogle Scholar.

5 Jenks, Leland H., The Migration of British Capital to 1875 (New York: Alfred A. Knopf, 1927). PP. 419–26Google Scholar.

6 It should be also borne in mind that some issues were floated by foreign enterprises that were already British-owned, and did not immediately affect the capital account in the British balance of payments.

7 , Cairncross, Home and Foreign Investment, p. 182Google Scholar.

8 The use of this source by other writers has a long history but none to our knowledge have utilized the total body of information for the period 1865-1894. Robert Giffen, the editor of the Statist, used the data for the years 1875-1885 without explicitly acknowledging The Investor's Monthly Manual, a supplement of the rival Economist. See Giffen, Robert, “On the Use of Import and Export Statistics,” Journal of the Royal Statistical Society, XLV (June 1882), 271–82Google Scholar; “Accumulation of Capital in the United Kingdom,” ibid., LIII (March 1890), 35. Hobson, C. K. in The Export of Capital, pp. 218–23Google Scholar, makes use of the summary totals but does not describe the methods employed to distinguish between foreign and domestic issues. A summary table, based on the above sources and on the annual issues of the Economist Commercial History and Review can be found in Robert Lichtenberg, M., Great Britain's Balance of Payments, 1868-1912 (Unpublished dissertation, Harvard University, 1952), p. 69.Google Scholar An annual series of Australian issues was compiled from the Manual by Hall, Alan Ross in The London Capital Market and the Flow of Capital to Australia (Unpublished dissertation, London School of Economics, 1951).Google Scholar For an enlightening discussion of some of the pitfalls encountered in working with The Investor's Monthly Manual and the shortcomings of the classifications employed by the Economist Commercial History and Review in designating capital issues as “domestic” and “foreign,” see the same author's “A Note on the English Capital' Market As a Source of Funds for Home Investment Before 1914,” Economica, XXIV (February 1957). 59–67Google Scholar; and “The English Capital Market Before 1914—A Reply,” ibid., XXV (Nov. 1958). 339-43.

9 The coding of the data for the years 1895-1914 is now in process.

10 This figure includes the £9.0 million adjustment for the incomplete data of July 1890.

11 , Hobson in The Export of Capital, p. 219Google Scholar simply adds one half of the partials to the all-British issues. For the period 1866-1876 Jenks estimates the British share of the partials from contemporary sources. See The Migration of Capital, p. 425Google Scholar.

12 The series on capital creations provide a rough indicator of the planned volume of foreign investment. However, the distinction between the calls and creations was blurred by the practice of borrowing on short term against the balance of uncalled installments on new issues. See , Hall, The London Capital Market and the Flow of Capital to Australia, p. 56Google Scholar.

13 These relationships will be analyzed when we have de-seasonalized our monthly data.

14 Our series moved in the same direction as Imlah's in nineteen out of twenty-nine years or 65.4 per cent of the time. When we lagged our series by one year the degree of congruence was about the same, the series turned in the same direction in eighteen out of twenty-eight years or 64.4 per cent of the time.

15 Saul, S. B., Studies in British Overseas Trade 1870-1914 (Liverpool: Liverpool University Press, 1960), p. 112Google Scholar.

16 For confirmation on this point see Butlin, N. B., “The Shape of the Australian Economy 1861-1900,” Economic Record, XXXV (April 1958), 10–29CrossRefGoogle Scholar, especially pp. 26-29.

17 , Cairncross, !Home and Foreign Investment, p. 88Google Scholar and the sources cited in footnote 2.

18 Feis, Herbert, Europe the World's Banker, p. 24Google Scholar; , Cairncross, Home and Foreign Investment, pp. 182–83Google Scholar; Saul, S. B., Studies in British Overseas Trade, p. 67Google Scholar.

19 The latter category includes Australia and New Zealand, the components of the modern Union of South Africa, the United States, Canada, Newfoundland, Argentina, Chile and Uruguay.

20 Nurkse, Ragnar, “The Problem of International Investment Today in the Light of Nineteenth-Century Experience,” Economic Journal, LXIV (December 1954), 750Google Scholar.

21 As a result of a program “bug”—happily the only undetected one—our data on the utilities industries were merged with finance and real estate group.