ABSTRACT
The sharp increase in the share ofB ritish savings going abroad after 1850 was a response both to new demands created by a growing world econom y and to the pressures o f increased supply. Edelstein’s comprehensive survey o f fluctuations in British investment overseas suggests, firstly, that the upward trend in foreign in vestment from 1850 to the 1870s was due, in the main, to the demands o f countries such as the United States w ho were embarking on heavy infrastructural investments and lacked adequate savings o f their own. Foreign investment in the early part o f the period was, therefore, the result o f the ‘pull’ o f attractively high interest rates abroad. This influence was still felt after 1870: Australia, Argentina and the U nited States played the most prom inent role in the foreign investment boom o f the 1880s and Canada proved to be the most important market for British capital just before W orld W ar I. After 1870, though, the pull o f foreign dem and was supple m ented increasingly by changes in the structure and the grow th o f the British economy which tended to ‘push’ savings out into foreign fields. The general tend ency was for the weight o f savings to push dow n the rate o f interest in Britain and drive investors to look for more profitable opportunities abroad, as the economy adjusted after 1870 to a permanently lower rate o f growth. This latter phenom enon flowed from the convergence o f a num ber o f major influences, including the secular decline in the birthrate and the consequent slower growth in the demand for major population-sensitive investments such as housing.1 It was also very obviously connected w ith the fact that, as savings rose rapidly after 1870, industry did not change in ways that created a sizeable demand for new investment.
