Chapter 4: Export of Capital

During the era of capitalism with free competition, there was the export of goods. During the era of capitalism with monopoly rule, is the export of capital.

As capitalism develops, corporations and countries alike grow unevenly, resulting in internal and international exchange; such as England during the mid-19th century, who reached industrial production first among the countries of the world. By the end of the 19th century, other European powers erected tariffs to encourage their own industries to develop, thereby no longer being mere suppliers of raw material. Now, there are monopoly capitalist associations throughout Europe, and particularly of the four aforementioned richest countries; they have produced large surpluses of capital.

A lack of internal development (e.g. through boosting agriculture) is no accident and is in fact a fundamental condition of capitalism; if surplus capital was used to raise the living standards of the masses, it would decrease their profits. This becomes a positive feedback loop: the poverty of the masses means they have less money, which means they cannot buy as many commodities, which means they generate less profit for the capitalists, which prompts the capitalists to find other profitable avenues rather than supporting the masses, causing further impoverishment.

The profitable avenue is to export capital abroad. Profits are higher abroad because capital is scarce, land and raw materials are cheap, and wages are low. Transportation lines are constructed and the basic conditions for industrial development are being created. As with other phenomena we’ve discussed so far, the export of capital began reaching major heights at the turn of the 20th century. Just before WW1, the capital invested abroad by Britain, France, and Germany was ~200 billion francs, providing ~10 billion francs per year of income, which allows them the money to further exploit the many nations of the world.

Naturally, Britain invests largely in their colonies in America, Asia, Africa, and Australia, but not so much in Europe. French investments are instead mostly in Europe, but also differ from British imperialism for being usurious capital gained from government loans, whereas Britain’s capital is largely colonial. Germany has few colonies and instead invests in Europe and America.

Exporting capital delivers and accelerates the development of capitalism to foreign countries; development is decelerated at home and in exchange, accelerated abroad. However, capital-exporting corporations obtain advantages, such as favourable treaties or ownership of some station or harbor. France, for instance, often stipulates that part of the loan be spent on French war materials or ships, to create a market for commodities. Or, British capitalists may stipulate that transportation links in the developing world use building materials bought from British corporations. The capital-exporting corporations and countries often look at each other with jealousy; particularly Germany’s poor colonial position compared to Britain.