84	IRON AND STEEL IN BRITAIN
TABLE   14
average annual overseas lending
1862-1872	£45 million
1872-1882	£30 million
1882-1893	£72 • 5 million
1893-1902	£9° million
1902-1914	£125 million
1914-1929	£*o million (net borrowing)
Capital migrates to where it is most wanted and will earn the
highest interest. In the post-war period British financial interests
were just as anxious to make profitable loans abroad as before, but
as the favourable balance of payments had diminished they had
themselves to borrow in order to do so, American financial interests,
on the other hand, had large surpluses available and invested large
sums in Europe and South America during the last decade of the
period. This investment accompanied an increase in America's
export surplus.
There are two sides to foreign investment: the financial, repre-
senting the placing of funds at the disposal of the borrower, and
the real, in which the funds are used to buy goods. One does not,
however, follow inevitably from the other. Having borrowed in
one country the debtor may find it profitable to spend in another.
This is just what happened in post-war Britain. This country did
not apparently offer goods on sufficiently favourable terms although
it was a good capital market. Having borrowed here, the debtor
bought in America or in Europe, and the loan would have been
taken out of this country in the form of gold had this country not
in turn borrowed on short term. The consequent accumulation
of short-term debt was a direct cause of the abandonment of the
gold standard in 1931, when the lenders claimed repayment in
gold which we were unable to satisfy. The foregoing illustrates,
however, that the power to export is more significant than the
power to lend, or, to put the point more precisely, a country must
be a good exporter to be able to lend with impunity. The trouble
with this country in the post-war years was not so much that it
was ceasing to be a good lender but that it was ceasing to be a
good exporter. The decline in foreign investment is, therefore, a
symptom rather than a cause of a weakness in British export
industries.
Another point is that an export trade in capital equipment must
bear within itself the seeds of its own decline. The new countries