120 International Investment and Colonial Control: A New Interpretation
to governments comprise only 27 percent of British investment in these regions.
Of private-sector investment in the dependent colonies, primary production
accounted for an enormous 74 percent of the total. This is a very substantial
overrepresentation of (that is, bias toward) primary investment in the dependent
empire. Public utilities are slightly overrepresented, while manufacturing and
transport are underrepresented. In fact, taken as a whole and expressed slightly
differently... government loans, railroads, manufacturing, and utilities combined
made up 45 percent of British investment in the dependent colonies, compared
with 86 percent in noncolonial LDAs.
[Looking at the empire’s share of each sector’s investment] shows the heavy
concentration of primary investment in the empire and especially in the dependent
colonies. In other words, while the dependent colonies accounted for just 11.3
percent of all British private investment in the developing world, they took 27.2
percent of all primary investment....
The overrepresentation of extractive and agricultural investments in the dependent
colonial areas is striking and tends to confirm my hypothesis about the correlation
between colonialism and primary investment....
[Data on the sectoral breakdown of British investment in Latin America in
1913 indicate,] again as expected and in many ways contrary to received wisdom,
that in these independent countries raw materials investments were quite
insignificant, while British investments were concentrated in government loans,
railroads, and utilities.
... During [the interwar] period colonial governments...borrowed substantially
more than independent states; the proximate reason was that the British government
restricted borrowing by nonsterling areas in order to defend the pound. Looking
at private investment alone, we continue to see a substantial colonial preference
for primary production and a foreign preference for utilities and railroads. Oil is
treated separately here, since much British oil investment was in areas under
semiformal British control (such as League of Nations mandates).
Although there are many problems with the statistical data at our disposal,
they do indicate the systematic bias expected by my analysis. That is, colonialism
was strongly associated with foreign investment in primary production. It is not
possible to determine from these data which way the causal arrow may have run,
for time series are sorely inadequate. Only qualitative evidence, if that, can help
clarify the direction of causation in particular cases. Nonetheless, it does appear
that British overseas investment in manufacturing and utilities was correlated with
independent status, and investment in primary production, with colonial rule.
Other Evidence
Quantitative evidence on the British case, which is suggestive but hardly
conclusive, can be supplemented with other evidence, especially that based on
historical case or country studies. It is useful to discuss this by sector, to parallel
the analytical predictions presented above. Of course, this information is at best
impressionistic.