COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 78

an important part. The capital ownership which emerges, vested in
citizens of the capital-exporting countries, is chiefly in two forms:
State and municipal bonds, and shares and bonds of railroad, publicservice,
 and, to a minor extent, manufacturing companies.
There is a close relation between this ownership and the export of
material. It is said “in the case of a certain Indian railway in 1857
that the expenditure in England was a little more than two-thirds of
the whole capital, while somewhat less than one-third was spent in
India. The expenditure in England was chiefly on iron and timber.”*
 An English railway secretary calculated in 19092 that, out
of certain investments in South American railways, amounting to
£12,000,000 ($60,000,000), 33 per cent, or £4,000,000 ($20,000,000) had
gone abroad in the shape of materials (rails, locomotives, etc.) manufactured
 in the United Kingdom and that 4 per cent went in the shape
of materials manufactured abroad.
Ownership and control of foreign enterprises furnish a constant
stimulus to exports. Several circumstances contribute to this result.
Managers and engineers are in most cases of the same nationality
as the owners of the capital. They are accustomed to the machines
and the materials of their own country, and prefer for that reason
to use them. This preference is strengthened, no doubt, by feelings
of patriotism.
But back of engineers and local managers are the home officers and
directors, with whom rests the final control. They are men of large
and varied property interests, often including steel works and machine
 works which turn out the materials that the foreign enterprises
 use. Indeed, the direction of their investments to foreign
countries may have been guided by the nature of their property at
home. It is well known how widely the manufacturers of electric
apparatus have extended their interests in electric installations.
When the controlling powers in a railroad, a gas works, a waterpower
 or electric plant, are largely interested in the production of
machinery and supplies which such enterprise consumes, they will
naturally see that their products are favored. A South American
railroad manager, whose road is controlled in England, says that all
important machinery and supplies are required to be bought there,
and gives as a reason that the road has never paid, and the stockholders
 consider that they ought therefore to profit by its expendikures.


A large American company making a steel specialty states that
the influence of ownership of public utilities is sometimes so strongly
em —— oe _—°
1 Select committee on East Indian Railways, Minutes of Evidence Q., 1914, cited by
C. K. Hobson, op. cit., p. 7.
2 Lord St. David's speech in the House of Lords, Nov. 24, 1809, cited by Hobson, op.
sit. Dp. T.