An unrecognised merit of Rosa Luxemburg's The Accumulation of Capital (London Routledge and Kegan Paul, 1951) is that its theory of international finance is of startling relevance today.

In this book, which could still be read with profit by many City economists, Rosa Luxemburg analysed the process of capital accumulation (i.e. economic development) in colonial territories around the turn of the century. Lacking their own sources of finance, the major capital projects of those times were paid for by floating shares and stocks on the London Stock Exchange or international loans.

Inevitably, the engineers and sponsors of the development schemes tended to be over sanguine about their projects' future profitability. Too often costs exceeded projected expenses and initial borrowings proved insufficient, so that, even if completed, the projects were over-loaded with debt repayments and interest. Non-payment of these would precipitate a financial crisis on the part of both lenders and borrowers. The resulting crash would so devalue the claims of the lenders on the project as to enable it eventually to be completed, or continue in operation. In this way, many banks and financiers were ruined, but the projects themselves (like railway construction in Britain) were rarely altogether abandoned. Thus, the accumulation of capital proceeded, developing the relatively backward parts of the world and the developed countries themselves, using the money hoards of rentiers to pay for investment, and then defaulting to avoid meeting the claims of those rentiers.