Point Four Background: A Decade of Income From British Overseas Investment

Abstract

EXCEPTING such global data as those ~presented by C. K. Hobson in his ~L~s Export of Capital, readily available statistics on income derived from investments made by Britishers overseas have been scanty until very recently. Among the compilations that have appeared in print since the termination of World War II, the most comprehensive is the one published in 1950 by the Bank of England under the title United Kingdom Overseas Investments, 1938 to 1948. Although this compilation does not include rates of return, it does present data from which such rates can be ascertained by means of patient and persistent calculation, and it not only classifies the in considerable detail, according to both its nature and its geographical distribution, but takes account of companies registered abroad as well as at home, separating the investment in government securities from the investment, usually more profitable, in business enterprises, and listing the latter under two headings, namely, capital, customarily more remunerative, and loan capital (debentures and bonds). It is the purpose of this essay, which is based upon the data supplied by the Bank of England and has involved an almost incredible number of computations, to summarize British overseas investment during the decade starting with 1939 and ending with 1948, emphasizing rates of return, in the hope that a summary of this kind may have significance for the current program of stimulating the economic development of the underdeveloped (or, perhaps, improperly developed) countries of the world. A few comments on the nature of the data dealt with must be made at the outset. The figures presented for the investment represent par values and not market values and are somewhat incomplete (only some three-fourths of the total), insurance companies, maritime shipping companies, some private firms, and several other enterprises of minor importance being omitted. Moreover, aggregates are given in round numbers, and figures for rates of return take no account of share bonuses or losses and represent the approximate income actually received in the United Kingdom, whether by the investors or by the commissioners of inland revenue. Capital losses, however, were by no means as great as the contraction of the investment over the decade might suggest, since the was reduced mainly by the sale of assets. Capital statistics refer to the end of the years specified. This large segment of the overseas investment of residents of the British Isles shrank from ?3,490 million in 1939 to ?1,960 million in 1948, and income actually received declined from ?143.8 million to ?116.4 million. The average nominal rate of return for the decade was approximately 4.4 per cent annually, *Professor of American history, University of Chicago.