Is there overestimation of 'British capital' outflow? Keynes' Indo-British trade and transfer accounts re-examined with alternative evidence

An excessive export of capitalfrom Britain during 1870-1914 allegedly reduced the domestic rate of investment. Few studies have really tried to find out how much of the nominal sum in each case was taken up by British investors, and how much of that, in turn, actually found its way abroad. The profits that accrued from trade in colonial products are either ignored altogether or grossly underestimated in the usual accounts of 'benefits of imperialism'. Drawing on Indo-British official trade statistics as well as on private papers, this article re- examines Keynes'estimate of 'drain' from England into India based on the sales of Council Bills. The conclusions of this study are: (a) the profits on Indo-British commodity value chains were much higher than they were assumed to be; and (b) a very large part of the 'British'capital outflom to colonies was in fact recycled profits made on colonial trade.