Capital inflow to the peripheries

Reforms from above introduced some basic elements of the West's modern legal and institutional systems into the peripheral regions during the 1860s and 1870s. The enactment of a modern property law, and the possible estrangement of the noble land, the abolition of medieval monopolies (such as the archaic Spanish mining law), and several other reforms cleared the way for foreign investment in the peripheries. Guaranteeing interest for investors in railroads, issuing government and municipal bonds, and other important steps made investment attractive. These factors led to a major acceleration of capital inflow into the backward European regions. Capital exports became one of the prime movers of European economic integration and the mainspring of modernization in the Mediterranean region and Central and Eastern Europe beginning in the last third of the nineteenth century. (See Figures 10.1 and 10.2.)

Investments in the colonies and semi-colonies on other continents embodied naked economic expropriation and a monopolization of resources, but it was not exactly so in the European peripheries. The recipients’ governments and leading financial players performed an important mediatory role that prevented the capital exporters from holding absolute sway over the recipients’ economy or brutally subordinating it to their own interests. While the smaller and weaker countries (especially in the Balkans) had less power to intercede, the politically and militarily more important ones (especially Russia) were in a much better position to do so.