Published by EH.NET
Irving Stone, The Global Export of Capital from Great Britain, 1865-1914:
A Statistical Survey. New York: St. Martin’s Press, 1999. xii + 430 pp.
$75.00 (hardback). ISBN: 0-312-21845-1.
Reviewed for EH.NET by Michael Edelstein, Department of Economics, Queens
College and the Graduate School, City University of New York.
This volume makes available one of the most important data sets for nineteenth-
and early twentieth-century world economic history-the annual money calls for
overseas securities issued in Great Britain, aggregated and cross-tabulated by
receiving country, sector of borrower, and type of security. This new data set
provides significant new quantitative information regarding the financial
development, national capital formation, industrial development, and balance
of payments for the principal capital importers of this era. Displayed in
the production of these data combine the successive efforts of Leland Jenks,
Matthew Simon and
the present author, Irving Stone, Professor of Finance at Baruch College, City
University of New York.
To date, students of the massive long-term capital outflow from Great Britain
in the late-nineteenth and early-twentieth century have had to rely on a
diverse and incomplete set of sources. Building on the work started in the
1930s by Leland Jenks, Matthew Simon published in the late 1960s the first
comprehensive annual time series of British new issue calls for overseas
securities, 1865-1914. Specifically, Simon supplied annual time series for (a)
the total of British money calls for overseas securities,
with breakdowns by (b) continent, (c) political status (independent vs.
British Empire), (d) climate and ethnic group (regions of recent settlement
, tropics, others), (e) sector of issuer (social overhead,
extractive, manufacturing), and (f) type of issuer (private, mixed,
government). Before his untimely death in 1967, the only national annual time
series to emerge from Simon’s research efforts was
a brief study of British new issues on behalf of long-term Canadian borrowers.
The value of Simon’s contribution rested on his efforts to surmount important
analytical and data problems. In particular, Simon decided to collect data on
money calls, whenever they occurred, not the nominal totals announced at the
date of first issue. Thus, he produced time series that were consistent with
the flow-of-funds methodology. Second, although the principal source of British
new issue data, The Investors’ Monthly
Manual, was thoroughly mined, the IMM was subject to reporting
errors and incomplete coverage. By consulting a much wider set of periodical
and other sources, Simon and his assistant, Harvey Segal, were able to correct
and substantially augment Jenks’
s original efforts. Third, he offered a more comprehensive treatment of
conversions, including only the “export conversions,” the conversions that
involved new money called for overseas borrowers.
The situation improved dramatically when Lance E. Davis and Robert A.
Huttenback (hereafter D&H) published Mammon and the Pursuit of Empire: The
Political Economy of British Imperialism, 1860-1912 (New York, 1986).
Starting with many of the same primary sources as Jenks and Simon, D&H produced
a new data set
covering both home and overseas new issues in Great Britain, 1865-1914.
Their tables displayed the total capital called up, as well as the book’s
principal political divisions (home, empire,
foreign), the empire (responsible governments, dependent colonies, India),
and each of these divisions by private vs. government issuers. D&H also
presented breakdowns by industry and type of government issuer, and industry
and continent. The advantage of the D&H data over the Jenks-Simon data was
their parallel construction of home and overseas new issue data.
They were also able to revise and correct the Jenks-Simon first pass at the
primary sources. Finally, the D&H data were grouped so that questions of
political economy and empire might be raised. Notably, D&H
presented this data in five-year periods, 1860-1864, 1865-1869, …. ,
1910-1914. While quinquenial totals and averages are a good means to present
longer term trends, the absence of annual data meant it was not possible
to investigate longer
term trends with other statistical methods or shorter term (e.g., business
cycle) fluctuations, a fundamental characteristic of home and overseas new
issue behavior. Perhaps just as importantly, the D&H volume did not present
data by country.
The significant contribution of the statistical compendia under review here is
to present annual, country-specific money call data for the twenty-five
principal borrowing nations. Furthermore, the data are broken down by industry,
political status, climate and ethnic group, type of issuer, and type of
security. In an introductory essay Stone provides essential information on the
data sources and an excellent summary of the main patterns of money calls for
overseas borrowers. An appendix reprints Simon’s description of the key
analytical decisions that guided the data collection and aggregation procedures
employed by both Simon and Stone.
Note that the Jenks-Simon-Stone primary data sources have weaknesses-weaknesses
which Stone discusses in his highly useful survey of the rate and direction of
money raised for overseas borrowers. First, these data do not estimate the
amount of direct investment through retained earnings. Thus, only part of
overseas long-term financing is covered by the Jenks-Simon-Stone estimate s.
While this was not a major source of overseas funding for railroads and
utilities, it was not a trivial source of funding for foreign investment
businesses engaged in manufacturing, distribution,
finance, and other service sectors. Second, while these
data are an excellent estimate of monies raised from issuing securities, these
data do not give a precise estimate of the net value transferred abroad. Some
of the money raised stayed in Britain with vendors or the London accounts of
the borrowers. To date, in nearly all cases where independent balance of
payment data exist, the older Simon money call times series demonstrate similar
patterns in level and timing with estimates of net capital outflows derived
from the balance of payment data. Only research
with these new comprehensive Stone estimates will settle the extent of this
It is my belief that many economic and financial historians of the late
nineteenth and early twentieth century will find this volume highly useful.
Historians of each
nation now have comprehensive, consistent, and comparative data on the
character and extent of long-term international finance raised in Great
Britain. It is also my strongly felt belief that with so much information on so
many nations, this statistical survey will probably disappear from libraries
very quickly unless reference librarians are alerted and told to place it in
their non-circulating reference collection.
Michael Edelstein is author of Overseas Investment in the Age of High
United Kingdom, 1850-1914 (New York, 1982) and “Foreign Investment and
Accumulation, 1860-1914,” in R. C. Floud and D.N. McCloskey
(eds.), The Economic History of Britain since 1700. Vol. 2: 1860-1939,
Second Edition (Cambridge, 1994).