To many Americans to-day the problem of international investment is doubtless a source of perplexity and even of some irritation. Ever since the last world war great expectations have been placed on the export of private American capital as a means of bridging the dollar gap as well as financing world economic development. In reality, private foreign investment throughout the period since 1945 has fluctuated at a low level and without any sign at all of an upward trend. This is most disappointing. We suspect that the export of capital from Great Britain was one reason why the international economy of the Victorian era did not know of a chronic sterling shortage. We recognise, above all, that foreign investment was associated during that era with a tremendous spurt in world production and trade. There is in America a feeling of nostalgia for the nineteenth-century environment that made this flow of capital possible. The question is: why can we not re-create that environment?

The answer, I submit, must start from the fact that the circumstances in which overseas investment, and more especially British investment, went on in the nineteenth century (which I take to have ended in 1914) were in some ways quite exceptional. To realise this is of more than historical interest. So long as the peculiar features of that experience are not fully appreciated, memories of wonders worked by foreign investment in the past can only lead to false hopes and frustration.