We may seem to have strayed far from the problems of International Finance and the free interchange of capital between countries, but in fact we are in the very middle of them, because they are so complicated and diverse that they affect nearly every aspect of our national lives. By sending capital abroad we make other countries produce for us and so we help a tendency by which we grow less at home, and export coupons, or demands for interest, instead of the present produce of our brains and muscles; and we do much more than that, for we thereby encourage the best of our workers to leave our shores and seek their fortunes in the new lands which our capital opens up. When we export capital it goes in the shape of goods and services, and it is followed by an export of men, who go to lands where land is plentiful and cheap, and men are scarce and well paid. This process again was sound enough from the purely economic point of view. It quickened the growth of the world's wealth by putting men of enterprise in places where their work was most handsomely rewarded, and their lives were unhampered by the many bars to success that remnants of feudalism and social restrictions put in their way in old countries; and it cleared the home labour market and so helped the workers in their uphill struggle for better conditions and a chance of a real life. But when the guns begin to shoot, the question must arise whether we were wise in leaving the export of capital, which has such great and complicated effects, entirely to the influence of the higgling of the market, and the price offered by the highest bidder.
Much will evidently depend on the way in which the present war ends. If it should prove to be, as so many hoped at its beginning, a "war to end war," and should be followed by a peace so well and truly founded that we need have no fear for its destruction, then there will be much to be said for leaving economic forces to work themselves out by economic means, subject to any checks that their social effects may make necessary. But if, as seems to be probable, the war ends in a way that makes other such wars quite possible, when we have all recovered from the exhaustion and disgust produced by the present one, then political expediency may overrule economic advantage, and we may find it necessary to consider the policy of restricting the export of British capital to countries with which there is no chance of our ever being at war, and especially to our own Dominions oversea, not necessarily by prohibitions and hard and fast rules, but rather by seeing that the countries to which it is desirable for our capital to go may have some advantage when they appeal for it.
This advantage our own colonial Dominions already possess, both from the sentiment of investors, which is a strong influence in their favour, and will be stronger than ever after the war, and from legal enactment which allows trustees to invest trust funds in their loans. Probably the safest course would be to leave sentiment to settle the matter, and pray to Providence to give us sensible sentiments. Actual restraints on the export of capital would be very difficult to enforce, for capital is an elusive commodity that cannot be stopped at the Customs houses. If we lent money to a friendly nation, and our friend was thereby enabled to lend to a likely foe, we should not have mended matters. The time is not yet ripe for a full discussion of this difficult and complicated question, and it is above all important that we should not jump to hasty conclusions about it while under the influence of the feverish state of mind produced by war. The war has shown us that our wealth was a sure and trusty weapon, and much of the strength of this weapon we owe to our activity in International Finance.
[Footnote 7: "England's Foreign Trade in the Nineteenth Century," p, 16, by Dr. A.L. Bowley.]
[Footnote 8: "Paper against Gold," Letter III.]