A Velvet Empire: French Informal Imperialism in the Nineteenth Century by David Todd

Author:David Todd [Todd, David]
Language: eng
Format: epub
Tags: History, Europe, France, Modern, 19th Century, Political Science, Imperialism
ISBN: 9780691171838
Google: WIbxDwAAQBAJ
Amazon: 0691171831
Publisher: Princeton University Press
Published: 2021-01-12T06:00:00+00:00

The Global Scale of French Foreign Lending

The great surge of European capital export after 1850 was a French affair, as well as a British one, at least until the 1870s. Contemporaries were well aware of the fact, as shown by the quotation of George Goschen, banker and later chancellor of the exchequer, that opens Cain and Hopkins’s pivotal chapter on the role of financial services in powering British expansion: “English and French banking principles,” Goschen stated in 1865, “are on a crusading tour throughout the world.”16 According to available estimates, between 1850 and 1869 France’s total capital exports even slightly exceeded Britain’s (13 billion francs versus 11 billion; see figure 4.1).17 This French lead vanished after 1870. By 1914 Britain’s stock of foreign investment was approximately twice that of France, at 90 billion francs versus 45 billion.18 Despite this relative decline, however, France continued to export far more capital than economic theory would predict, given its relatively low level of industrial development (capital exports should be inversely correlated with the potential returns of domestic investment), leading numerous observers, then and in subsequent decades, to puzzle over this seemingly irrational behaviour.19

FIGURE 4.1. French and British exports of capital, in millions of francs, 1821–1869. Source: Based on Imlah, “British Balance of Payments” and Lévy-Leboyer, “La balance des paiements,” using a three-year moving average and a conversion rate of £1 = 25 francs.

The perception of nineteenth-century French foreign investments as being irrational was compounded by the eventual default of several major borrowing governments after the First World War, the Soviet Union’s repudiation of Czarist Russia’s foreign debt being the most famous example.20 Yet recent econometric research has suggested that French investors, at least between 1880 and 1914, were as sensitive as their British or German counterparts to the perceived level of risk and anticipated returns.21 The dismissal of the French propensity to export a large amount of capital as irrational is therefore unjustified, and overly informed by the benefit of hindsight: few, if any contemporaries could have predicted the scale, horror and enormous consequences of the Great War. Instead of condemning the French predilection for foreign investment, especially under the form of foreign state bonds, one should elucidate its main economic and political causes.

Two macroeconomic factors stand out. First, the French specialization in the provision of luxury or semi-luxury commodities, examined in the previous chapter, implied limited needs in physical capital, because these industries relied more on skilled labour and other immaterial factors such as the foreign appreciation of French quality; limited domestic investment opportunities meant that a greater share of savings was available to be exported. Second, France enjoyed a relatively high savings rate, not least thanks to a precocious decline in the birth rate that resulted in quasi demographic stagnation after 1850. Given that life expectancy remained slightly below average by contemporary western European standards, French households enjoyed a low dependency ratio and a greater capacity for saving.22 These observations echo those made at the time by two influential commentators of

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