Iron Curtain Countries Research Articles

Investment Security in an Uncertain World

THE RACE BETWEEN investment risk and security, between hazard and safety, has been going on since the dawn of time. And, like the twin emotions of love and hate, the urge to venture and the quest for security blossom eternally in the human breast. Each age has its peculiar risks and rewards. Witness, in earlier times, the loans to impecunious kings, that history records of the Lombards, the Flemings, the London merchants, and the banks of Florence. Consider the great trading, colonization, and plantation operations of the Society of Merchant Adventurers, the American Adventure Company, the Russia Company, and the Levant Company. Even such vast investment empires as Hudson's Bay Company and the fabulous East India Company found their enormous profits attended by risks peculiar to their time and their special operations. By the nineteenth century, investment opportunities had grown somewhat less risky, less colorful and dramatic. They were gradually assuming a somewhat more prosaic commercial character investments in government securities, industries, railways, and other public works and commodities. Investment managers were learning to spread the risks by diversification of investments, so that losses in one quarter were balanced off by gains in others. The large investment trusts which emerged during this period thus sought to narrow the gap between risk and security. Though the danger of loss was diminished, it was not wholly eliminated; in the nineteenth century the risk was still there, and large companies were still undergoing difficulties, as the failure of Baring Brothers proved. And, for the first time since Europe has been shaken by the fall of a famous Florentine banking house, a business failure in one country (Overend, Gurney and Company) had serious reactions. Kreuger & Toll and the decline of the modern international banking houses were to come later. With the arrival of modern industrialization, investors had other things to worry them than the sly designs of capricious kings. These were the risks of technological change, competition, loss of important markets, war, and natural catastrophes. And, of course, there were always the risks of bad management and fraud. But, though the risks were great, the profits were greater, especially for those whose ingenuity met the age-old challenge of nothing hazarded, nothing gained. Although the event is still too recent in time to be placed in proper perspective, there is much reason to believe that the world depression of 1929-32 marked the end of an era in private investment. Investors have proved through the centuries that they can live and prosper, despite risk and loss, if only the conditions and opportunities of fresh investment remain open. Risks can be calculated and counterbalanced. Losses can be minimized by diversification. But, if opportunities for investments are choked off, the investor has no place to go. With the active intervention of governments in economic life which set in after the world economic collapse in 1932, the whole character of investment changed. To all the common risks that beset investment capital, there was added a sharp limitation on the opportunities for investment that might still remain open. Never in all history has there been such a widespread assault on investment capital as there is today. Within our Nation, investors are sorely beset by depreciation of the dollar, by high and multiple taxation, by Government's deliberate depression of interest rates, by Government competition with private capital in financing the economy, and by powerful forces bent on narrowing the profit margin between costs and prices. The hazards are even greater in the field of foreign investment. They include outright confiscation of all private holdings as in Russia and other Iron Curtain countries, compulsory nationalization of whole industries as in Great Britain, demands for a greater share in the management and profits of enterprise as with Iranian oil wells, recapture of control over natural resources by former colonial dependencies, and everywhere confiscatory taxation, manipulated exchange rates, prohibitions on the transfer of funds, control of raw materials and trade by international action, and the use of a variety of devices aimed at making the owners of a business stand the costs of social services and increasing benefits for employees. Whether the investor loses his capital outright, or is forced to take something in exchange that he does not want, or is otherwise deprived of the fruits of his investment, the result is the same: His investment faces the increasing risk of becoming worthless, and his sense of security is destroyed.

Resistance in the Iron Curtain Countries

Resistance in the Iron Curtain Countries

Political Emigration from Iron Curtain Countries

Political Emigration from Iron Curtain Countries

The Changing Role of Iron Curtain Countries

The Changing Role of Iron Curtain Countries