|b. ||Effect of the War--repayment of about 2½ billion dollars owed
to foreign investors (i.e., purchase of industrial securities from
foreigners); purchase of foreign securities at rate of about 1
billion a year; governmental loans of about 11 billions to Allies; U. S. suddenly transformed from borrowing nation to chief
money-lender of world.|
D. SOME ECONOMIC REASONS FOR THE GROWTH OF FOREIGN INVESTMENTS.
|1. ||"Over-saving"--tendency toward accumulation of capital by capitalists
(and small investors) more rapidly than it can be re-invested in
domestic industry at existing rates of interest or profit.|
|2. ||Possibility of investing this "surplus capital" at higher rates of
interest, or for larger profits, in colonies and relatively undeveloped
|3. ||Desire of capitalists, in some cases, to escape heavy taxation in their
own country by investing in other countries.|
|4. ||Desire of manufacturers, in some cases, to escape high tariff duties
of other countries by founding branch factories in such countries.|
|5. ||Desire of banks, manufacturers, or government, in making foreign
investments, to promote export trade by enabling borrowing
country to buy more.|
|6. ||Desire to obtain raw materials, by establishing plantations or opening
mines, which necessitate investment.|
|7. ||Theoretical necessity of maintaining balance of trade--if a nation
exports much more than enough to pay for its imports (including
shipping charges, tourist expenditures, immigrants' remittances,
interest on foreign debts, etc., as "invisible items"), it must export
capital or it will have an increased supply of money, tendency
toward "inflation," perhaps higher prices, unfavorable exchange
E. SOME POLITICAL ASPECTS OF FOREIGN INVESTMENTS.
|1. ||Use of loans for ulterior purposes.|
|a. ||To cement politico-military alliances--French loans to Russia before the War; French loans to Poland, Czechoslovakia, etc.,
since the War.|
|b. ||To acquire control over backward countries--American "dollar
diplomacy" in Central America; French loans to Morocco before
establishment of protectorate; Japanese loans to China during
War in return for concessions.|
|2. ||The withholding of loans as a political weapon.|
|a. ||Refusal of diplomatic recognition to a revolutionary government
as a form of financial boycott--reluctance of bankers to lend
money to an unrecognized government.
American non-recognition of the Obregon Government.
Allied non-recognition of Russian Bolshevik government.|
|b. ||Power of French minister of finance to exclude foreign securities
from quotation on Paris Bourse for diplomatic reasons--e.g.,
exclusion of Bagdad Railway bonds before War.|
|c. ||Somewhat similar negative control of loans in other countries,
for political purposes.|
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Syllabus on International Relations.
Contributors: Parker Thomas Moon - Author, Institute of International Education (New York, N.Y.) - OrganizationName.
Place of publication: New York.
Publication year: 1925.
Page number: 189.
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