The Accounts of the British Empire: Capital Flows from 1799 to 1914 (review)

British economic historians teaching in traditional history faculties commonly experience considerable indifference, even resistance, to statistics among many of their undergraduate students. One figure that always seems to impress, however, is the £4000m estimated to have been invested by Britons abroad by 1914. According to a United Nations survey cited by Tiberi, this represented more than 40 percent of all overseas assets at the time. Along with British trading and service activities and the global importance of its empire, these investments made Britain the engine house of the international economy in the decades before the World War I.

This is a curious book. It is not a history of British foreign investments or does it offer any new estimates of overseas income or capital stock held abroad before 1914. It is, instead, a scholarly, meticulous historiographical survey and critical assessment of the various methodologies used to construct those estimates since the mid-nineteenth century. As such it would appear to have an extremely narrow focus and address an unusually select audience. As Tiberi's survey shows, however, the number of scholars who have contributed in some way to this aspect of British national accounts is substantial—his author index runs to 116 names—which itself is testimony to the importance that contemporaries as well as historians have placed on this topic.

Tiberi identifies three basic methodologies in the literature. The first, and most prevalent, has been the 'indirect' method of aggregating the annual balances on the current account. The second method has been to capitalize the various types of overseas income in any particular year, such as profits, dividends, interest, and rent, usually by applying a notional year's purchase figure derived from the average rate of return attributable to each type of asset. The third, or 'direct,' method has been to identify and sum the financial and real assets, notably foreign securities, held abroad at any one time. Chapter one is devoted to a discussion of the first method, originally explored by statisticians during the third quarter of the nineteenth century, then take up by contributors such as Hobson, Jenks, Cairncross, Imlah, and Feinstein. Tiberi carefully notes the omissions from different estimates, such as proceeds from the sale of diamonds and ships, and he examines in detail how various elements were dealt with by different authors, for example, whether bullion movements were treated as goods (Imlah) or as money (Feinstein). The principal difficulty with the method has been to establish what figure of capital stock to start with. The longer the time series, the larger this problem became, particularly for those such as Imlah attempting to reconstruct foreign investments during the first half of the nineteenth century when data sources are scarce.

Chapter two surveys the ways in which the other methods have been applied by various authors. The complexity of capitalizing assets with variable rates of return makes the second method, according to Tiberi, rather unreliable for estimating annual flows of foreign investments. Several other problems recur with the different methodologies, including the difficulty of coping with incomplete data, the question of whether securities were taken at nominal, called-up, or market values, and the question of whether foreign inward investment in Britain was properly accounted for. One of the Tiberi's tables (2.6) suggests that the latter amounted to some 10–12 percent of the value of British foreign investments in 1906, and yet, remarkably, not all authors have been explicit about whether their estimates are net or gross of capital invested in Britain by foreign residents.

These chapters are followed by a discussion of the 'sceptical positions,' in which, unsurprisingly, the work of D. C. Platt occupies center stage. Tiberi suggests that Platt is "not very convincing" (p. 121) in both his criticisms of the direct method and his revision of Cairncross's estimate of British holdings of foreign securities in 1870. A...