Now, it is quite natural that new countries should be indebted to this country for the means of developing their natural resources. Simply stated, and ignoring for the moment the financial and commercial machinery by which the end is accomplished, Great Britain hands over to her Colonies and to foreign countries a certain amount of plant, machinery and materials every year, and takes in return a percentage of the profits they yield. That is the transaction in its essence, though it is obscured somewhat by the form it takes in practice. The question that arises is, Are there not serious drawbacks to the carrying out of this useful and, indeed, necessary transfer through the medium of extensive loans contracted by governments? There unquestionably are. First, public works carried out by governments are sometimes badly done, and are always extravagantly done. Secondly, the power of raising money for productive public works is sure to be employed sooner or later for non-productive works whose usefulness can be plausibly maintained. Thirdly, the public never troubles its head, when it is 'in a buying mood,' about works of any kind, but insists on regarding the loans as the obligations of a 'rich and progressive young country,' New Gerolstein, let us say, vouched for by that 'eminent house' X, Y, Z & Co. There is not much, therefore,
to prevent the Government of New Gerolstein, with the aid of Messrs. X, Y, Z & Co., raising loans for any purpose it may think fit, including the reimbursement of Messrs. X for advances previously made, perhaps to provide interest on loans for 'productive public works' which have, quite unaccountably of course, failed to yield profits. To sum up, the process of equipping a new country with the appliances of a modern commercial and industrial community by lending largely to its government, involves waste of money and bad work from the commencement, and bad and, very possibly, corrupt finance eventually. It is almost an infallible way of producing a breakdown of the credit of the country concerned, unless it is conducted with more prudence on all sides than can reasonably be expected of human nature. And, as has been shown, the consequences of the breakdown in the credit of a country which has been a large customer for commodities is a sudden stoppage of demand for them, and a violent fall in their price, followed, of course, by forced restriction of production, loss of capital, eventual reduction of wages, and all that results therefrom.