32 Understanding Third World Politics
so were:
the interactions of the European alliance systems and nationalisms in
a framework dominated by balance of power thinking, security appre-
hensions generated by militarism and armaments competition, and the
conditions of international anarchy, that is, the absence of organisations
adequate to ensure peaceful settlement of disputes. (Dougherty and
Pfaltzgraff, 1981, p. 248)
Secondly, the direction of trade and investment throws doubt on the
importance of late nineteenth-century imperialism for European capitalist
development. After 1870 most international investment flowed between
European states or between Europe and North America or Australia.
Imperial investment from Britain in the 1880s and 1890s, for example, took
place mainly in Australia and Canada. Two-thirds of the great boom in
British overseas investment between 1900 and 1913 went to the Americas:
‘the new British colonial possessions in Asia and Africa, with the outstand-
ing exception of South Africa, hardly received any capital for their develop-
ment at all in this period, not 5 per cent of the total’ (Barratt Brown, 1963,
p. 94; Cohen, B. J., 1973, pp. 63–5). Between 1870 and 1914 the income
from overseas investments received by Britain was greater than the capital
exported, and most of what was sent overseas was in the form of loans to
governments and public utilities and not transfers from banks or monopo-
listic companies to their subsidiaries (Barratt Brown, 1972, pp. 54–5).
Before 1914 only 10 per cent of overseas investment from France went to its
empire (Aron, 1968, p. 261). Few of the territories that were acquired in the
wave of imperialism at the end of the nineteenth century were the best areas
for capital investment.
Similarly, trade with colonial dependencies constituted a small proportion
of European trade. The share of the colonies in markets for raw materials was
less than some of the theorists of imperialism would lead us to believe
(Cohen, B. J., 1973, pp. 60–2).
It is also significant that some non-imperialist countries experienced high
levels of economic growth, international trade and foreign investment without
imperialist acquisition. The Scandinavian countries are cases in points. Yet at
the same time countries such as Italy and Portugal were imperialistic despite
having relatively underdeveloped economies themselves and a scarcity of
capital. Schumpeter saw the finance imperialism thesis as undermined by the
fact that the United States, an increasingly powerful capitalist country in the
second half of the nineteenth century, did not annex Canada or Mexico, both
rich in resources but weak militarily (Schumpeter, 1951, p. 57). The USA was