ABSTRACT
Economic theorists from Adam Smith to the present day have emphasized the importance of capital accumulation in the process of economic growth. For the importance of capital investment as a permanent influence on growth, the people must also consider its indirect or secondary effect, on what, in the nineteenth century, was called the 'State of the Arts', or in modern terms of education and technological change. While it is impossible to be certain of the interrelationship between home and foreign investment, the authoritative opinion is that this huge foreign lending was, in the long run, undertaken at the expense of domestic capital formation, which turned out to be inadequate to maintain the momentum of economic growth. As could be expected, the absolute contribution of investment to growth was smaller in Britain than in any other developed country apart from Belgium, though it turns out to be a big factor only in one country, Germany.
