Economic Growth and Development

facilitated by free movement of finance within the British Empire and through
treaties with other countries. Between 1870 and 1913 the growth of foreign
portfolio investment exceeded the growth of trade, FDI and GDP. Gross
foreign assets as a ratio of world GDP increased from 6.9 per cent in 1870 to
17.5 per cent in 1913. With the dislocations of World War I and the onset of the
world depression, by 1930 the ratio had collapsed to 8.4 per cent and the earlier
peak was not reached again until the 1970s (Crafts, 2003:46). There was a
looser relation between domestic investment and domestic savings (a measure
of capital market integration) between 1890 and 1910 than in all subsequent
periods up to 1990 (Wolf, 2004). This lending was funnelled to then-develop-
ing countries. As a share of GDP, capital outflow from the UK peaked at 9 per
cent of GDP between 1870 and 1913. In late nineteenth-century Argentina the
current account deficit was a huge 18.7 per cent of GDP which was largely
funded by lending from Britain. These massive flows have no contemporary
parallels. In the late nineteenth century half of all global lending went to Asia,
Latin America and Oceania-Africa and a further 25 per cent to the US (Bairoch
and Kozul-Wright,1996). This forms an interesting comparison with the
contemporary world, highlighted by the dependency theorists (see later in this
chapter), with Africa currently a capital exporter to the developed world
reversing this earlier pattern. By 1990 nearly 40 per cent of private wealth in
Africa was held abroad, including in 1998 an estimated $100 billion held
abroad by Nigerians (Collier, 2007).
International migration was important in the pre-World War I era and repre-
sented a degr ee of openness that has never been seen since. Between 1815 and
1915 about 60 million people left Europe for the Americas, 10 million migrated
to Russia from Siberia and Central Asia, 1 million from southern Europe to
Northern Africa,and 12 million Chinese and 6 million Japanese to East and
South-east Asia. The peak of this process occurred in the 1890s when migrants
totalled 26 per cent of the population of Argentina and 17 per cent of Australia;
and over the decade 5 per cent of the population of the UK, 6 per cent of Spain
and 7 per cent of Sweden migrated. By contrast during the 1990s immigration
into the US was equal to about 4 per cent of initial population (Wolf 2004).

International Trade, Openness and Integration 271

Table 13.1 Regional percentage shares of world exports, 1870–1998

1870 1913 1950 1998

Western Europe 64.4 60.2 41.1 42.8

Western offshoots 7.5 12.9 21.3 18.4

Eastern Europe and former USSR 4.2 4.1 5.0 4.1

Latin America 5.4 5.1 8.5 9.8

Asia 13.9 10.8 8.5 4.9

Africa 4.6 6.9 10.0 2.7

Source: Data compiled from Maddison (2006:127).