In the title of this paper readers will recognize a standard subject of theoretical discussion and practical concern. Yet the relationship in question is worth reexamining. Why exactly should two individual items—domestic investment and the balance of external payments—be picked out from the national income accounts and viewed as having some direct connection with each other? And why should this particular relationship be looked upon as one of rivalry? In the economy as a whole a given claim on resources competes with all other claims on resources, and any causal connection assumed between two particular groups of claimants must be a priori suspect. A peculiar link between home investment and external balance can nevertheless be said to exist on certain general grounds which will be considered later. The connection is especially close in the British economy because of some structural features of British trade and industry. In fact, a recurrent conflict between the needs of internal capital development and external trade balance has figured prominently in British experience during the ten-year period since the war. In this paper we start, then, with a discussion of the United Kingdom's economic structure and experience (sections I, II, and III), attempting thereafter to look at the matter in more general terms (sections IV and V). In a final section we return to consider the special case of the United Kingdom, with some reference to current economic developments and policies.