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2 - Foreign Capital Flows

from Part I - Cycles of Globalization

Published online by Cambridge University Press:  28 March 2008

Alan Taylor
Affiliation:
University of California, Davis
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Summary

To understand the impact of globalization on the developing countries of the periphery, one has to study Latin America. As historians of the area understand, this is the region whose economic fortunes have been most significantly shaped by external forces in the five centuries since the voyages of discovery first made a global economy a distant, but realizable, possibility. Only late in this process, from the nineteenth century, did external capital markets play any major role, but once in place they became important in many dimensions. They served as an engine of growth for the region, changed patterns of income distribution and sectoral growth, and, as a problem of political economy, they prompted complex and ambivalent responses that shaped subsequent development.

The subject of this chapter is capital flows between countries or regions – that is, international investments. Specifically, I consider only their long-term function, focusing on areas other than the needs of trade (i.e., short-term commercial credit) – a topic that is best reserved for discussions on the evolution of international trade. My goal is to document what we know of these flows. For the colonial period, there is not much evidence, but the flows were probably small. In the nineteenth century, when good records begin, the flows increased over time as global capital-market integration increased. Economic growth had fallen behind the core countries in the early 1800s, as the struggles for independence weighed down this peripheral region and the industrial revolution lifted the core. But parts of the region, helped by capital inflows, managed to regain ground in the late 1800s.

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Publisher: Cambridge University Press
Print publication year: 2006

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References

Coatsworth, John H., “Economic and Institutional Trajectories in Pre-Modern Latin America,” in Coatsworth, John H. and Taylor, Alan M., eds., Latin America and the World Economy Since 1800 (Cambridge, MA, 1999).Google Scholar
Eichengreen, Barry J., Globalizing Capital: A History of the International Monetary System (Princeton, NJ, 1996)Google Scholar
Marichal, Carlos, A Century of Debt Crises in Latin America: From Independence to the Great Depression, 1820–1930 (Princeton, NJ, 1989).Google Scholar
North, Douglass C., Institutions, Institutional Change, and Economic Performance (Cambridge, 1990).CrossRefGoogle Scholar
Polanyi, Karl, The Great Transformation (New York, 1944).Google Scholar
Rippy, J. Fred, British Investments in Latin America, 1822–1949: A Case Study in the Operations of Private Enterprise in Retarded Regions (Minneapolis, MN, 1959).Google Scholar
Stone, Irving, “British Direct and Portfolio Investment in Latin America Before 1914,” Journal of Economic History 37 (1977).CrossRefGoogle Scholar
Twomey, J. Michael, A Century of Foreign Investment in the Third World (London, 2000).Google Scholar
Williams, John H., Argentine International Trade Under Inconvertible Paper Currency, 1880–1900 (Cambridge, MA, 1920).Google Scholar

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