Capital movements during 1875-1914. The opening- up of new lands to the world market brought into being vast investment opportunities. By the standards of what had gone before, enormous quantitites of capital crossed national and continental boundaries in search of gain. European political tensions guaranteed that foreign loans would be enlisted in the pursuit of national political goals. Bankers also tried to obtain state support for their projects, generally with less success.
There are 4 main idea in this chapter, the first one is national supplies and demands for capital, and the differences and similarities among source and donor countries. Second is about the capital exporters British and France, and to what determined the size and distribution of their foreign investment, third is the political impact of foreign investment on receiving countries which didn’t wholly share western institutions. Then the forth is analysis of the distinctive nature and problems of Froeign Driect Investment, as distinguished from portfolio investment.
The supply and demand for capital
There are three possible imbalance in aggregate spending giving raise to capital movements may be distinguished: domestic saving and domestic investment, Import and Export, Government taxation and spending. These three necessarily sum to zero. Countries with a strong demand for capital relative to their savings tend to receive capital from abroad. Urbanisation imposed great demands upon capital or immigration to the towns, usually received some foreign investment. InWARD FOREIGN INVESTMENT ALLOWED IMPORTS TO EXCEED exports by committing the economy to future payments servicing the foreign-owned assets. There was only one other dap which would allow domestic investment to exceed private domestic saving. If a government taxed more than it spent, and lent for investment or subsidised investment itself, it would have been saving on behalf of its population.
The supply and…