Between Imperialism and Capitalism. European Capital Exports Before 1914

"This paper compares the patterns of foreign investment of two large capital-exporting coun- tries before 1914 - Great Britain and Germany. An original database of German capital exports, comparable to Stone’s (1999) data for British capital flows was compiled for the period 1883-1913. Three classes of variables were tested as determinants of capital flows: political conditions in recipient countries, long-term prospects of growth, and institutional characteristics. The empirical analysis supports the view that German capital flows re- sponded to long-term prospects of growth of recipient countries (“fundamentals”) as much as British investment. This conclusion is robust after controlling for political affiliation and suggests that the sharp distinction in the literature between “developmental” and “revenue” finances is probably a figment of the absence of detailed data on capital exports outside of Britain."