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National and International Control of Foreign Investments

Published online by Cambridge University Press:  01 August 2014

Walter H. C. Laves
Walter H. C. Laves*
Affiliation:
Hamilton College
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Extract

In the course of the last eight years, economists and political scientists in the United States have become increasingly aware of problems created by government influence on private foreign investments. For an understanding of these problems, they have turned to an analysis of the experiences of England, France, and Germany before the World War and of the United States since. But little attention has been given to the implications of control of foreign investments for international organization. It is the purpose of this paper (1) to summarize the nature of the control in each country; (2) to outline the theory underlying government control; (3) to point to the international effects of this control; and (4) to propose certain changes which are necessary to bring this aspect of state policy into line with recent developments of international organization.

In a sense, it is inaccurate to speak of government control in England, because the influence exerted by the government there was not in the nature of regulation. The relationship between government and bankers was one as different from legal control as is the theory of the common law from that of the civil law. That is to say, there was no statute on the basis of which the government influenced the outward flow of capital. Such relationship as there was, such similarity of policy as existed between finance and government, depended upon the existence of an accord which was the result of a common heritage and a common purpose.

Type
International Affairs
Information
American Political Science Review , Volume 25 , Issue 3 , August 1931 , pp. 704 - 713
Copyright
Copyright © American Political Science Association 1931

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References

1 Feis, H., Europe; the World's Banker, 1870-1914 (New Haven, 1930)Google Scholar; Viner, J., “International Finance and Balance of Power Diplomacy, 1880-1914,” Southwestern Political and Social Science Quarterly, IX, 1Google Scholar, and “Political Aspects of International Finance,” Journal of Business, I, 141Google Scholar; Williams, B., “Capital Embargoes,” Political Science Quarterly, June, 1928Google Scholar; W. H. C. Laves, “German Governmental Influence on Foreign Investments, 1871-1915,” ibid., Dec., 1928; and Jenks, L. H., Migration of British Capital to 1875 (New York, 1927)Google Scholar.

2 Feis, op. cit., p. 83 ff., from which this summary is largely taken.

3 Feis, op. cit., p. 118.

4 “Above and beyond all other considerations which induced French official intervention with the movement of French capital abroad was the wish to make investments serve the political purposes of the state.” Feis, op. cit., p. 133.

5 See, for example, Bismarck's Reichstag speech of Dec. 5, 1876, in which he said of German interest in Near Eastern affairs: “I shall not recommend an active participation of Germany in Oriental affairs as long as I fail to see in the entire affair any German interest which is worth the bones of even a single Pomeranian grenadier.” Helfferich, K., Georg von Siemens (Berlin, 1923), Vol. III, p. 16CrossRefGoogle Scholar. As late as 1888, Bismarck wrote on a Foreign Office document: “In those matters it will be our problem to let the rivalries of France and England continue just as in Egypt. England's anti-French interests are beneficial to us.” Helfferich, op. cit., III, p. 28.

6 Cf. Wilhelm, Kaiser II, Ereignisse u. Gestalten 1878-1918 (Berlin, 1922), p. 45Google Scholar; Meyer, Oscar, Die Boerse (Berlin, 1907), p. 3 ffGoogle Scholar; Nussbaum, A., Kommentar zum Boersengesetz (Muenchen, 1910)Google Scholar, for the influence of the agrarians in drafting the stock exchange law; “Kapitalanlagen im Auslande und Agrarpolitik,” Deutsche Wirtshaftszeitung, 1914Google Scholar.

7 Cf. Townsend, Mary E., The Rise and Fall of Germany's Colonial Empire, 1884-1918 (New York, 1930)Google Scholar, Chap. 7.

8 K. Helfferich, op. cit., III, 224 ff; Huldermann, B., Albert Ballin (Berlin, 1922), p. 280 ff.Google Scholar

9 W. H. C. Laves, op. cit., pp. 506, 508. See also the pressure brought to bear upon the Deutsche Bank in the Bagdad Railway negotiations. Helfferieh, op. cit., 58-62 and 78-84.

10 W. H. C. Laves, op. cit., p. 502 ff.

11 Ibid., p. 508.

12 Summarized from current newspapers and from B. Williams, op. cit.

13 See especially J. Viner, “International Finance and Balance of Power Diplomacy,” loc. cit.

14 Empire and Commerce in Africa (London, no date), p. 16Google Scholar.

15 “The state has, however, in international law, a right as against other states to protect its citizens abroad.” Borchard, E. M., The Diplomatic Protection of Citizens Abroad (New York, 1916), p. 29Google Scholar.

16 Cf. Sir Edward Grey in House of Commons, July 10, 1914 (cited by Feis, op. cit., p. 97.)

17 Slaughter House Cases, 16 Wall. 36, 79, 80, cited in Moore, , Digest of International Law, Vol. VI, p. 248Google Scholar.

18 “Dem Ausland gegenueber haben alle Reichsangehoerigen innerund auszerhalb des Reichsgebietes Anspruch auf den Schutz des Reiches.” Art. 112, Par. 2. Quoted in Lippert, G., Handbuch des Internationalen Finansrechts (Vienna, 1928), p. 124Google Scholar.

19 W. H. C. Laves, op. cit., p. 501, and Feis, op. cit., Chaps. 9 and 10.

20 See the series of articles by Dennis, Lawrence in The New Republic, beginning with the issue of Nov. 19, 1930Google Scholar.

21 “The United States Navy as an Industrial Asset,” published by the Office of Naval Intelligence (Washington, 1924)Google Scholar.

22 Amt, Reichs Marine, “Die deutschen Kapitalanlagen in ueberseeischen Laendern” (Berlin, 1900)Google Scholar; “Entwickelung der deutschen Ueberseeinteressen in letzten Jahrzehnt”(Berlin, 1905)Google Scholar.

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