The nature of modern imperialism
As of right now banks and companies are hoarding money instead of loaning it out, and this can only hurt industry and brings us to the true cause of the decline of Brittan as a great industrial power. It was not the export of capital as much as the not investing it in domestic industry. Possibly the exports of capital was not the cause of the decline of the British economy it was a result of a fundamental flaw in the system the starved home investment. Notice with the London Stock Exchange these articles talk about how it was used to support government projects and government debt and became more and more isolated from the provinces.
Please see the example of Fred Hopper at the bottom of this page bicycle manufacturer who had a hard time getting investment. Even the capital invested in home very little of it went to industry. The not investing in industry part is probably more of a problem than capital exports which would make all the below relevant to today.
Watch this part up to 3:15 when banks make loans it dilutes the money supply and makes everyone else's money less valuable. So the theme here is actually the problem of new money being made to support activities that are not productive to society, but this new money means diverting capital away from activities that can be more productive. This diversion of capital is intentional as a way to make the common people poorer so there will remain a sharp division between the super rich and everyone else. Adam Smith in his book "The Wealth of Nations" states several times that capital is diverted so that the returns are less frequent, I believe that this is a way to keep capital in the hands of a smaller number of people because there is less chance of it being spread throughout society and create jobs. Obviously frequent and near returns on capital would also mean more industry
"Money as Debt II Promises Unleashed" (3 of 8)
http://www.youtube.com/watch?v=lG7Jjb0cw9o&feature=related
Adam Smith talks about the diversion of capital from near and frequent returns to that of what is distant and slow
The effect of the monopoly has been, not to augment the quantity, but to alter the quality and shape of a part of the manufactures of Great Britain, and to accommodate to a market, from which the returns are slow and distant, what would otherwise have been accommodated to one from which the returns are frequent and near. Its effect has consequently been, to turn a part of the capital of Great Britain from an employment in which it would have maintained a greater quantity of manufacturing industry, to one in which it maintains a much smaller, and thereby to diminish, instead of increasing, the whole quantity of manufacturing industry maintained in Great Britain. (can click here)
As seen in Concerning Afghanistan and Pakistan (click here) and World Trade Barriers (click here) trade and industry is suppressed, exploitation comes from wastefully and recklessly using some of the resources of these countries but overall the resources of these countries are under utilized. Agricultural subsidies from developed nations that lower price are worse than debt because these subsidies suppress the capacity of these countries to even pay off that debt or to invest and develop roads and infrastructure or often to even feed themselves
“China's chief auditor warns mounting local government debt a risk to economy” 24 Jun 2010
http://www.telegraph.co.uk/finance/china-business/7851504/Chinas-chief-auditor-warns-mounting-local-government-debt-a-risk-to-economy.html
China's chief auditor has warned that high levels of local government debt could derail the country's economy, with some observers suggesting that a number of Chinese provinces are even more fiscally-troubled than Greece.
"Property bubble threatens China rally" By Emma Wall May 2010
http://www.telegraph.co.uk/finance/personalfinance/investing/7691874/Property-bubble-threatens-China-rally.html
Mr de Blonay said the culture in China was to invest in property, rather than put savings in the bank or stock market. People tend to buy multiple properties off-plan, taking two or three mortgages out at a time. The total area under construction in China, for residential property and its infrastructure, is three times the size of Greater London. The worry is that the real demand will not meet the speculative building, said Mr de Blonay.
"The increasing risk of a bubble in Chinese property is the key factor behind the current policy tightening cycle in China,'' he said.
Investment Outlook Bill Gross | February 2010 "The Ring of Fire"
(In this article you can find the graph as shown at the top of this page)
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/February+2010+Gross+Ring+of+Fire.htm
Both Japan and China are having debt problems just like the United States and European Union countries. But the true crisis comes from the stifling of productivity in the real world, more world trade would greatly increase the need and use for building in China. However supply of new buildings seems to be out pacing demand. What the world needs is for capital to be used productively and economic growth in any country should help the world because of more trade. If energy was not put into suppressing the economies of other countries (example agricultural subsidies) the United States and all other countries would benefit too. As this suppression of world trade stems from modern imperialism it is not an accident it is on purpose so all of the waste will be beneficial to a few people. But remember that a better world economy will mean more use for Chinese buildings which would be good for China
The problem now is that productive businesses will not get access to loans. One major problem with agriculture is that this would normally give people an opportunity for income, but as it stands agriculture is actually eating up capital since the produce is often sold at below the cost of production. Agriculture then in many parts of the world would actually be more of a drain on the economy also see concerning bananas (click here) where we find that producing more of the product lowers prices and makes it unprofitable to produce
Also:
"US AND EU COTTON PRODUCTION AND EXPORT POLICIES AND THEIR IMPACT ON WEST AND CENTRAL AFRICA:" from the ethical global association May 2004
see page electronic page 7
http://www.3dthree.org/pdf_3D/1404-EGICottonBrief_FINAL.pdf
Because of dumping from the United States and the resulting fall of prices growing cotton becomes a burden on the economy of African nations rather than something that helps boost the economy
To prevent a collapse of their cotton sectors, WCA governments have been forced to divert limited financial resources away from other critical areas such as education, delivery of health services and development of rural infrastructure. 15 Access to food is also threatened by low cotton prices because many WCA countries rely on export revenue from cotton to purchase food imports. This is particularly important for countries such as Togo, Benin, Chad, Burkina Faso and Mali where the export revenue of cotton accounts for more than 10% of total national export revenue.
Now some information on the London Stock Exchange and the diverting of capital away from productive activities and creating a situation so there is overall less capital and wealth. In a similar way that African governments were forced to divert capital from other areas in order to support cotton production the governments of the United States and European countries divert resources that could have been used in other areas. However in order to lower the price on cotton the United States had to divert capital to support it's own cotton production in the first place. This also explains the mystery of why developing nations have trouble developing capital (The Mystery of Capital) can click here
"Did Victorian Brittan Fail?" By Donald N. McCloskey
The Economic History Review 1970 (this article disagrees with my thesis but the facts given in the article I believe support what that home investment was starved)
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/did_victorian_brittan_fail.pdf
Electronic Page 6
“The City, the story goes, was expert at channeling British savings into foreign trade credit and railway bonds, but inexpert at serving the industrial hinterlands of Britain itself. Keynes, for example, emphasized the Colonial Stock Act of 1900 and similar Acts before it which permitted British trust funds to be invested in colonial railway and governmental bonds, giving, he claimed, an artificial incentive to investment abroad. The effect was "to starve home developments by diverting savings abroad and, consequently, to burden home borrowers with a higher rate of interest than they would need to pay other-wise"...”
Electronic page 7
…”The qualification “with the same risk” requires emphasis. In 1911-13 the average return on all capital at home was more than 10 per cent, while the return on capital abroad was less than 5 per cent. The capital abroad, however, was held in safe bonds, while the capital at home had to be held on balance in equity.
Page 9
It has been argued that "the City of London and its financial insitutions... were the greatest single threat to the prosperity of England" (But the author of the article argues against this hypothesis)
"The British Stock Market and British Economic Growth, 1870- 1914" by Richard S. Grossman Wesleyan Univesity J. Bradford De Long U.C. Berkeley
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/stock_market.pdf
page 6
The British financial system—the City of London—has always been a prime suspect accused of the crime of having failed to fulfill its role of channeling capital from British savers to British firms. The accusation has been that the institutions and biases of the City of London channeled British capital overseas, into risky but relatively low-yielding colonial investments, bypassing higher yielding investments in domestic industry that would have produced higher expected returns and boosted British economic growth.
"The London Stock Exchange and the British Securities Market, 1850-1914" By R. C. MICHIE
The Economic History Review Vol. 38, No. 1 (Feb., 1985), pp. 61-82
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/london_securities.pdf
page 20
The final level of this national securities market concerned the huge consolidations issues of governments, such as the British National Debt. Though this was quoted on other domestic exchanges, the only market was to be found on the London Stock Exchange, to which all orders were directed. Such was the volume of turnover there, that no other centre in Britain could rival London’s ability to buy and sell immediately any amount of government stock at close to the current price. The London Stock Exchange's success in doing this enabled it to attract all the business in government stock, which gave it the turnover that allowed it to be the unrivalled market in governments stock, and so perpetuated its position.
page 22
It was this market which was undermined by the action taken by members of the London Stock Exchange in banning dual capacity in 1909 and implementing minimum commission rates in 1912. These measures meant that the domestic market for securities was beginning to operate less efficiently, because the unrestricted communication between London dealers and provincial brokers had been replaced by one which had to go through London brokers and bear commission charges. Provincial brokers, therefore, not only found it more expensive to use the London market, but the provincial exchanges as a whole were discouraged from using the services provided by London dealers which had become such a vital part of their operation
"The Decline of the British Economy: An Institutional Perspective" by Bernard Elbaum and William Lazonick Organization and Technology in Capitalist Development
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/decline_of_brit_economy.pdf
End of electronic page 2 and beginning of electronic page 3
Up to the 1870s the long-term financing for these businesses ventured came from country banks, personal family fortunes, and retained earnings. After the collapse of the country banks in the Great Depression of the 1870s, the financial institutions had little involvement in the long finance of British industry..... But industrial firms were reluctant to risk loss of control by issuing equity on the national market… Instead they exported most of their capital, usually in exchange for fixed-interest bonds, to finance large-scale (typically government-backed) foreign projects such as railroads. A consequence of these arrangements was the separation of provincial industrial enterprise from national financial institutions based in the City of London, a characteristic feature of the British economy well into the twentieth century
"SURVEYS AND SPECULATIONS Capital Exports, 1870-1914: Harmful or Beneficial?" By SIDNEY POLLARD The Economic History Review, New Series, Vol. 38, No. 4 (Nov., 1985), pp. 489-514
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/capital_export.pdf
Page 13
All of it agrees that the City of London had developed into a highly efficient and smooth mechanism for channeling capital abroad; "the main business of the London new issue market", according to F. W. Paish, "was foreign investment. "In consequence, as the Economist wrote in 1911, London was often more concerned with the course of events in Mexico than with what happened in the midlands, and was more upset by a strike on the Canadian Pacific than by one in the Cambrian collieries. Of some £200 million of new issues in 1911-13 studied by Lavington, only a paltry 17.9 per cent was for the United Kingdom and very little of that for industry; conversely, only 10 per cent of the capital needed for the expansion of manufacturing capacity, or £5 million a year, was raised through the London capital market at the time: this represented less than 3 per cent of what as sent abroad. Such capital as British industry needed, beyond what could be raised among the owners out of own or ploughed-back savings, had to come mainly room the limited regional resources of the provincials tock exchanges.
Page 14
Occasionally a single flash may light up a whole scene. Such may be the case of , bicycle manufacturer of Barton in Lincolnshire. His is was a highly successful firm founded in 1896, which kept technically up-to-date in its equipment as well as its product, employing 400 in 1905 and 800 in I912, capturing important export markets and developing from pedal to motor cycles and, in 1912-13, to a cycle car. More remarkably still in such a volatile industry, it paid steady dividends of 7 1/2 per cent a year or more. Here, if anywhere, was an object within a growth industry worthy of support by a capital market interested in British prosperity. Yet, once it had exhausted the partners' own and the company's ploughed-back savings, the firm was in constant financial difficulties for lack of capital for expansion; no financier was willing to provide it with funds. Successive attempts to obtain capital from the London capital market, from the bank, bank, from insurance companies and building societies all failed, and by 1913 the firm had to go into liquidation.
Please see the example of Fred Hopper at the bottom of this page bicycle manufacturer who had a hard time getting investment. Even the capital invested in home very little of it went to industry. The not investing in industry part is probably more of a problem than capital exports which would make all the below relevant to today.
Watch this part up to 3:15 when banks make loans it dilutes the money supply and makes everyone else's money less valuable. So the theme here is actually the problem of new money being made to support activities that are not productive to society, but this new money means diverting capital away from activities that can be more productive. This diversion of capital is intentional as a way to make the common people poorer so there will remain a sharp division between the super rich and everyone else. Adam Smith in his book "The Wealth of Nations" states several times that capital is diverted so that the returns are less frequent, I believe that this is a way to keep capital in the hands of a smaller number of people because there is less chance of it being spread throughout society and create jobs. Obviously frequent and near returns on capital would also mean more industry
"Money as Debt II Promises Unleashed" (3 of 8)
http://www.youtube.com/watch?v=lG7Jjb0cw9o&feature=related
Adam Smith talks about the diversion of capital from near and frequent returns to that of what is distant and slow
The effect of the monopoly has been, not to augment the quantity, but to alter the quality and shape of a part of the manufactures of Great Britain, and to accommodate to a market, from which the returns are slow and distant, what would otherwise have been accommodated to one from which the returns are frequent and near. Its effect has consequently been, to turn a part of the capital of Great Britain from an employment in which it would have maintained a greater quantity of manufacturing industry, to one in which it maintains a much smaller, and thereby to diminish, instead of increasing, the whole quantity of manufacturing industry maintained in Great Britain. (can click here)
As seen in Concerning Afghanistan and Pakistan (click here) and World Trade Barriers (click here) trade and industry is suppressed, exploitation comes from wastefully and recklessly using some of the resources of these countries but overall the resources of these countries are under utilized. Agricultural subsidies from developed nations that lower price are worse than debt because these subsidies suppress the capacity of these countries to even pay off that debt or to invest and develop roads and infrastructure or often to even feed themselves
“China's chief auditor warns mounting local government debt a risk to economy” 24 Jun 2010
http://www.telegraph.co.uk/finance/china-business/7851504/Chinas-chief-auditor-warns-mounting-local-government-debt-a-risk-to-economy.html
China's chief auditor has warned that high levels of local government debt could derail the country's economy, with some observers suggesting that a number of Chinese provinces are even more fiscally-troubled than Greece.
"Property bubble threatens China rally" By Emma Wall May 2010
http://www.telegraph.co.uk/finance/personalfinance/investing/7691874/Property-bubble-threatens-China-rally.html
Mr de Blonay said the culture in China was to invest in property, rather than put savings in the bank or stock market. People tend to buy multiple properties off-plan, taking two or three mortgages out at a time. The total area under construction in China, for residential property and its infrastructure, is three times the size of Greater London. The worry is that the real demand will not meet the speculative building, said Mr de Blonay.
"The increasing risk of a bubble in Chinese property is the key factor behind the current policy tightening cycle in China,'' he said.
Investment Outlook Bill Gross | February 2010 "The Ring of Fire"
(In this article you can find the graph as shown at the top of this page)
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/February+2010+Gross+Ring+of+Fire.htm
Both Japan and China are having debt problems just like the United States and European Union countries. But the true crisis comes from the stifling of productivity in the real world, more world trade would greatly increase the need and use for building in China. However supply of new buildings seems to be out pacing demand. What the world needs is for capital to be used productively and economic growth in any country should help the world because of more trade. If energy was not put into suppressing the economies of other countries (example agricultural subsidies) the United States and all other countries would benefit too. As this suppression of world trade stems from modern imperialism it is not an accident it is on purpose so all of the waste will be beneficial to a few people. But remember that a better world economy will mean more use for Chinese buildings which would be good for China
The problem now is that productive businesses will not get access to loans. One major problem with agriculture is that this would normally give people an opportunity for income, but as it stands agriculture is actually eating up capital since the produce is often sold at below the cost of production. Agriculture then in many parts of the world would actually be more of a drain on the economy also see concerning bananas (click here) where we find that producing more of the product lowers prices and makes it unprofitable to produce
Also:
"US AND EU COTTON PRODUCTION AND EXPORT POLICIES AND THEIR IMPACT ON WEST AND CENTRAL AFRICA:" from the ethical global association May 2004
see page electronic page 7
http://www.3dthree.org/pdf_3D/1404-EGICottonBrief_FINAL.pdf
Because of dumping from the United States and the resulting fall of prices growing cotton becomes a burden on the economy of African nations rather than something that helps boost the economy
To prevent a collapse of their cotton sectors, WCA governments have been forced to divert limited financial resources away from other critical areas such as education, delivery of health services and development of rural infrastructure. 15 Access to food is also threatened by low cotton prices because many WCA countries rely on export revenue from cotton to purchase food imports. This is particularly important for countries such as Togo, Benin, Chad, Burkina Faso and Mali where the export revenue of cotton accounts for more than 10% of total national export revenue.
Now some information on the London Stock Exchange and the diverting of capital away from productive activities and creating a situation so there is overall less capital and wealth. In a similar way that African governments were forced to divert capital from other areas in order to support cotton production the governments of the United States and European countries divert resources that could have been used in other areas. However in order to lower the price on cotton the United States had to divert capital to support it's own cotton production in the first place. This also explains the mystery of why developing nations have trouble developing capital (The Mystery of Capital) can click here
"Did Victorian Brittan Fail?" By Donald N. McCloskey
The Economic History Review 1970 (this article disagrees with my thesis but the facts given in the article I believe support what that home investment was starved)
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/did_victorian_brittan_fail.pdf
Electronic Page 6
“The City, the story goes, was expert at channeling British savings into foreign trade credit and railway bonds, but inexpert at serving the industrial hinterlands of Britain itself. Keynes, for example, emphasized the Colonial Stock Act of 1900 and similar Acts before it which permitted British trust funds to be invested in colonial railway and governmental bonds, giving, he claimed, an artificial incentive to investment abroad. The effect was "to starve home developments by diverting savings abroad and, consequently, to burden home borrowers with a higher rate of interest than they would need to pay other-wise"...”
Electronic page 7
…”The qualification “with the same risk” requires emphasis. In 1911-13 the average return on all capital at home was more than 10 per cent, while the return on capital abroad was less than 5 per cent. The capital abroad, however, was held in safe bonds, while the capital at home had to be held on balance in equity.
Page 9
It has been argued that "the City of London and its financial insitutions... were the greatest single threat to the prosperity of England" (But the author of the article argues against this hypothesis)
"The British Stock Market and British Economic Growth, 1870- 1914" by Richard S. Grossman Wesleyan Univesity J. Bradford De Long U.C. Berkeley
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/stock_market.pdf
page 6
The British financial system—the City of London—has always been a prime suspect accused of the crime of having failed to fulfill its role of channeling capital from British savers to British firms. The accusation has been that the institutions and biases of the City of London channeled British capital overseas, into risky but relatively low-yielding colonial investments, bypassing higher yielding investments in domestic industry that would have produced higher expected returns and boosted British economic growth.
"The London Stock Exchange and the British Securities Market, 1850-1914" By R. C. MICHIE
The Economic History Review Vol. 38, No. 1 (Feb., 1985), pp. 61-82
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/london_securities.pdf
page 20
The final level of this national securities market concerned the huge consolidations issues of governments, such as the British National Debt. Though this was quoted on other domestic exchanges, the only market was to be found on the London Stock Exchange, to which all orders were directed. Such was the volume of turnover there, that no other centre in Britain could rival London’s ability to buy and sell immediately any amount of government stock at close to the current price. The London Stock Exchange's success in doing this enabled it to attract all the business in government stock, which gave it the turnover that allowed it to be the unrivalled market in governments stock, and so perpetuated its position.
page 22
It was this market which was undermined by the action taken by members of the London Stock Exchange in banning dual capacity in 1909 and implementing minimum commission rates in 1912. These measures meant that the domestic market for securities was beginning to operate less efficiently, because the unrestricted communication between London dealers and provincial brokers had been replaced by one which had to go through London brokers and bear commission charges. Provincial brokers, therefore, not only found it more expensive to use the London market, but the provincial exchanges as a whole were discouraged from using the services provided by London dealers which had become such a vital part of their operation
"The Decline of the British Economy: An Institutional Perspective" by Bernard Elbaum and William Lazonick Organization and Technology in Capitalist Development
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/decline_of_brit_economy.pdf
End of electronic page 2 and beginning of electronic page 3
Up to the 1870s the long-term financing for these businesses ventured came from country banks, personal family fortunes, and retained earnings. After the collapse of the country banks in the Great Depression of the 1870s, the financial institutions had little involvement in the long finance of British industry..... But industrial firms were reluctant to risk loss of control by issuing equity on the national market… Instead they exported most of their capital, usually in exchange for fixed-interest bonds, to finance large-scale (typically government-backed) foreign projects such as railroads. A consequence of these arrangements was the separation of provincial industrial enterprise from national financial institutions based in the City of London, a characteristic feature of the British economy well into the twentieth century
"SURVEYS AND SPECULATIONS Capital Exports, 1870-1914: Harmful or Beneficial?" By SIDNEY POLLARD The Economic History Review, New Series, Vol. 38, No. 4 (Nov., 1985), pp. 489-514
http://aviewofhistory.weebly.com/uploads/4/4/1/8/4418968/capital_export.pdf
Page 13
All of it agrees that the City of London had developed into a highly efficient and smooth mechanism for channeling capital abroad; "the main business of the London new issue market", according to F. W. Paish, "was foreign investment. "In consequence, as the Economist wrote in 1911, London was often more concerned with the course of events in Mexico than with what happened in the midlands, and was more upset by a strike on the Canadian Pacific than by one in the Cambrian collieries. Of some £200 million of new issues in 1911-13 studied by Lavington, only a paltry 17.9 per cent was for the United Kingdom and very little of that for industry; conversely, only 10 per cent of the capital needed for the expansion of manufacturing capacity, or £5 million a year, was raised through the London capital market at the time: this represented less than 3 per cent of what as sent abroad. Such capital as British industry needed, beyond what could be raised among the owners out of own or ploughed-back savings, had to come mainly room the limited regional resources of the provincials tock exchanges.
Page 14
Occasionally a single flash may light up a whole scene. Such may be the case of , bicycle manufacturer of Barton in Lincolnshire. His is was a highly successful firm founded in 1896, which kept technically up-to-date in its equipment as well as its product, employing 400 in 1905 and 800 in I912, capturing important export markets and developing from pedal to motor cycles and, in 1912-13, to a cycle car. More remarkably still in such a volatile industry, it paid steady dividends of 7 1/2 per cent a year or more. Here, if anywhere, was an object within a growth industry worthy of support by a capital market interested in British prosperity. Yet, once it had exhausted the partners' own and the company's ploughed-back savings, the firm was in constant financial difficulties for lack of capital for expansion; no financier was willing to provide it with funds. Successive attempts to obtain capital from the London capital market, from the bank, bank, from insurance companies and building societies all failed, and by 1913 the firm had to go into liquidation.
