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Evaluate the macroeconomic and structural effects of overseas investment during the period 1870-1913
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Evaluate the macroeconomic and structural effects of overseas investment during the period 1870-1913 During the period 1870-1913, net foreign investment averaged 4.3% of GDP, implying (gross) overseas investment was larger. This capital outflow was higher and sustained longer than investment previously (e.g. 2.8% in the 1860s). Overseas investment gave rise to various macroeconomic effects. Investment in the most profitable projects may have maximised national income and welfare in the short term. The income generated from overseas investment altered the UK's balance trade and balance of payments, perhaps causing the exchange rate to rise. Overseas investment may have reduced foreign producers' prices, improving the UK's terms of trade. Linked to these macroeconomic changes, structural effects also arose. Excessive overseas investment may have led to the UK's relative economic decline up to today. Insufficient domestic investment could have resulted in a failure to develop new industries with the potential of greater growth and...
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