Such investment abroad is not new. In the Middle Ages the bankers of Northern Italy, and later of Spain and Portugal advanced small sums to impecunious foreign sovereigns. But the thousand marks borrowed by Henry V from Genoese merchants, or the loans made by Holland in the 18th Century, did not compare with the vast sums invested by England since the Napoleonic Wars, nor by other countries since 1850. For, as in manufacturing, so also in the export of capital, France, Belgium, Holland, Germany and even the United States entered the field. The source from which capital could be obtained widened with the increase in the number of wealthy industrial nations, and the volume of investment expanded rapidly. The foreign investments of the United Kingdom, according to an estimate made by Dr. Bowley, amounted in 1854 to two and three-quarter billions of dollars. For 1914, sixty years later, these holdings were estimated at seventeen and one-half billions. It is believed that the French have invested some eight billions of dollars and the Germans four billions.[[5]] The entire foreign investment of capital by the industrial nations of Europe cannot have amounted (in 1914) to less than thirty-two or thirty-five billions of dollars.[[6]]
If this great investment were made solely in countries with a highly developed capitalism, with stable political conditions and strong economic ambitions, no imperialistic policy would be necessary. England need not "own" the United States in order to invest here safely or for purposes of trade. Nor is she under an economic compulsion to rule Canada or Australasia. Were these British colonies quite independent politically, Canadians and Australians would still endeavour to sell wheat and mutton to Europe and to attract and protect European capital. Their own self-interest, not any outside compulsion, makes them serve European, in serving their own interests. In Morocco, on the other hand, and in Tunis, Persia, Jamaica, Senegal and the Congo, the situation is different. The natives of these lands lack most of the elements which make for the ordered economic development demanded by Europe. Under native rule there is governmental incompetence and venality, disorder, revolt, apathy and economic conservatism. Foreign investment is impossible and trade precarious. It is here where the industrial system of Western Europe impinges upon the backward countries that economic expansion merges into modern imperialism.
[[1]] "Letters from a Chinese Official. Being an Eastern View of Western Civilisation." New York (McClure, Phillips & Co.), 1903, p. 13.
[[2]] See "Handwörterbuch der Staatswissenschaften," II, pp. 992, 993, Third edition, Jena, 1909-1911. Western Europe here includes all of Europe except Russia, Hungary, Bosnia and Herzegovina, the Balkan States and Turkey.
[[3]] The absolute increase in the population of western Europe is itself increasing. In the decade 1800-1810, the increase was 6.3 millions; in the nine succeeding decades it was 7.8; 13.5; 11.3; 9.6; 9.7; 11.5; 14.1; 14.5 and 19.0 millions. In the fifty years ending 1850 the population increased 48.6 millions; in the fifty years ending 1900, 68.7 millions.
[[4]] Not all foreign investment of capital results or is intended to result in stimulating agriculture and other extractive industries. Much of it is spent unproductively on guns, ships and royal and presidential luxuries, and much in stimulating manufacturing in agricultural nations, thus narrowing instead of widening the agricultural base of the capital-exporting countries.
[[5]] See Hobson, "Export of Capital."
[[6]] Moreover this investment, until the outbreak of the war, was rapidly increasing, amounting to no less than $1,500,000,000 a year.