1. These figures include reinvestments of profits from subsidiary companies etc. Source: United Nations, The International Flow of Capital, 1956–1958 (New York, 1959) Tables 2 and 7.
2. In this connection it should be noted that during the period prior to the first World War direct investments were preferred in private capital exports of the USA, i.e. the same position as today. On the other hand, in Great Britain before World War I fixed interest securities investments quite definitely predominated.
3. In American statistics “direct investments” cover participating interests of investing firms or private individuals in which 25 % of the shares of the project are in the hands of the investor. This agrees with the German definition of “participation”. Naturally the percentage alone is in practice not a good guide since the extent of control exercised is dependent upon the distribution of the shares. From the technical point of view direct investments can take a multitude of forms; apart from the “standard” form of cash transfer there is for instance the use of export earnings (this is frequently used illegally to counteract exchange controls,) contributions in kind, sales of patent rights and licences etc.
4. The following analysis is largely based on conditions in the United States where the advance of direct investments was particularly marked and thus easiest to examine. The conclusions — with the exception of point 8 — are, however, generally applicable. In recent years one could not speak any longer of a recession in security investments. Direct investments are, however, today still the dominating type of investment.
5. The position has markedly improved since 1956 both in respect of international and nationalcapital markets, although the less developed countries have not profited much by this improvement. We shall come back to this development in our final chapter.