British Public Policy and Multinationals during the "Dollar Gap" Era, 1945-1960

This article examines the role of British exchange and importcontrols in stimulating the dramatic increase in overseas (particularlyAmerican) multinationals in Britain from the end of the SecondWorld War to the late 1950s, together with the ways in whichthe government used controls to regulate the foreign directinvestment (FDI) inflow. Exchange controls were both an importantstimulus to inward investment and a powerful and flexible meansof regulating its volume and character. Government was relativelysuccessful in using these powers to maximize the dollar balanceand industrial benefits of FDI to Britain, given initially severedollar and capacity constraints, and in liberalizing policyonce these constraints receded and competition from other FDIhosts intensified.