229Information and investment was more common among colonists than peoples from elsewhere in the world. Such a preference for colonial investments was further reinforced by the provision passed by the firm’s shareholders in July 1891 that permitted it to acquire debentures and preference shares, but only, it went on to stipulate, from companies located in the ‘United Kingdom, India, or any British Colony or Dependency’. Later the provision was extended to include the United States and a number of other foreign countries, but the way ‘reliable’ investments were identified continued to afford distinct advantages to colonial assets.163 Like the commercial banks, therefore, Britain’s insurance companies maintained a strong and active interest in colonial securities right up until the First World War.
Conclusions
This chapter has examined the pattern and behaviour of British overseas investment between 1870 and 1914. Most historical analyses of investment behaviour take it as given that capital markets function purely on the basis of a hard-nosed rationality that leaves little scope for either sentimentality or imperial piety. At first sight, the data appear to back up this view. As we have seen, the geographical distribution of British capital in the later Victorian and Edwardian era did not map neatly at all onto imperial boundaries. The United States, after all, was the biggest recipient of British funds, with Latin America not far behind. Nor can it be accurately claimed that access to the financial resources of the City was in any way contingent upon acceptance of British-style political and economic institutions. China and Japan, for example, were granted entrance on far less exacting terms. Finding an imperial dimension to Britain’s investment history is not therefore a straightforward task. We have argued that attention should focus less on formal institutions and political boundaries and more on the substance that underpinned these things; that is, for guidance, one should look first and foremost to the behaviour of those directly engaged in the investment of capital overseas. Consequently, the focus of our enquiry has been on the informal aspects of the British World economy, the social and organisational networks (that thickened and multiplied during the later Victorian and Edwardian era), and the quality and
163 Moss, Standard Life, pp. 116–19; Treble, ‘Pattern of Investment’, p. 179. Standard Life’s
investment in the USA was delayed by its negative experiences there earlier. In the
1870s, it had lent money on some high-quality property in New York, only to find itself
subjected to fraudulent behaviour from its American solicitor that cost the company
over £30,000 in losses. It was an episode that deterred Standard Life from investing in
the USA for a generation. For details, see Treble, ‘Pattern of Investment’, pp. 180–1.
230quantity of information flowing through them. These networks afforded Britain’s colonies, and especially the dominions, informational advantages that enhanced their attractiveness to British investors; at any rate at least until better information about the investment opportunities on offer elsewhere in the world became more readily available. Positive British press coverage vis-à-vis the rest of the world reinforced this advantage.
Another key, albeit less apparent, component of the British World’s informational advantage was cultural. This is not to proffer a culturally deterministic approach. Culture was one of several factors determining how knowledge was created, disseminated and consumed. Thus, perceptions of the inherent ‘Britishness’ of the dominions, actual or imagined, are regarded here as something that played favourably ‘back home’ with British savers. A combination of rich, context-specific and project-specific information, provided to investors by personal and coethnic networks, made the security offered by the dominions appear all the more safe a bet. Yet the benefits of dominion status for borrowers proved transient. With time, the British World’s informational advantages in London subsided. As the nineteenth century approached its end, the knowledge and information available to the typical investor was in the process of expanding rapidly, and in its wake both the variety of outlets and intensity of competition for British capital increased. At any rate, by the early 1900s the global integration of capital markets had progressed sufficiently to ensure that the dominions could not monopolise the British investor’s attention. None of this, of course, means that imperial considerations ceased to figure – right through to the First World War they still made their presence felt, as this chapter has shown – but, as the decades passed, the frequency and extent with which the British World impinged on investment decisions declined. Economists typically view informational asymmetries unfavourably. Markets with informational deficiencies, we are told, work badly. Yet, it is worth pausing here to contemplate in what sense these information- deprived markets ‘underperform’. Economics provides a clear answer: analytically speaking, it is only relative to markets that have no (or significantly fewer) informational deficiencies that asymmetric ones are seen to be poorly performing. But beyond showing the existence of a hypothetical optimal, how useful is such abstract analysis to the explanation of actual historical events? No doubt, it would be convenient to live in a world of complete or near-complete information. The reality, however, is that past worlds, even more so than our own, were not so information-rich.
231Information and investment Taking a broader historical perspective, informational asymmetries may be seen as a positive, rather than negative, force that promoted global integration: an early, certainly partial, yet nonetheless still crucial, step towards full globalisation. Modern globalisation, of course, had to start somewhere. That its first phase was nurtured within the confines of the British World does not necessarily imply that the forces that drove those events must have been morally benighted. That said, the flow of British capital to the dominions did play an instructive role by accustoming British savers to take a more global perspective, to perceive the bene fits of overseas investments, and thereby gradually to open their minds to the prospects of even more ‘alien’ or ‘foreign’ ventures. By exploiting their networks and aligning their institutions towards the needs of the British capital market before anyone else, Britain’s settler colonies from the mid century were able to engender – for a time – an ever-greater bias in the direction of international capital flows. Bias, of course, is a word heavily laden with negative, even pejorative connotations. Yet sometimes biases can yield positive results. Such was the case with much British investment in the dominions in the latter half of the nineteenth century, a period in which the only real alternative on offer was a choice between a world of informational asymmetry and one of virtually no information at all. Thus ‘imperial globalisation’, as presented in this analysis of capital markets, was not truly global in its reach. Rather, the British World economy, in the realm of finance, as in that of migration and trade, was strongly skewed towards Anglophone societies. The sense of connectedness that influenced the information flows that were so crucial to investor behaviour was not only present in the case of the dominions but also in the United States, and even perhaps in some Latin American societies, like Argentina, albeit to a lesser degree. Moreover, the way in which globalisation unfolded financially before the First World War may help to explain why Britain’s imperial economic relationships sat relatively comfortably with its global economic relationships, and why the two sets of relationships could draw strength from each other. To be sure, the British World economy had its own (cultural) dynamic, yet this dynamic did not prevent Britain from expanding economically into a wider world.