visible than in that of interest and loans. The stock exchanges of Europe are full of the stocks of distant countries the railway, the public press, the telegraph, and the steamship, have bound peoples together as if they were provinces of one universal state. Of this vast state London has become the capital. To be able to borrow in London, to stand in good repute with its capitalists, is a strength coveted by mighty empires. If discount rises or falls in London, the effect vibrates through every other stock exchange. Funds for the money market are rapidly sent to or from the English market. The consequences of this unity of movement are diverse. The supply of the means of investing are enlarged. French, German, Austrian, and other monies, as they are called, appear in London: a change supervenes and the streams pour back to Paris, Vienna, and Berlin. On one side, the tendency of this financial fraternity is to diminish the rate of interest; there is more to lend in all the markets. In relatively poor countries means are acquired more cheaply for industry. The development of their production is facilitated, English and other loans come to their help, and interest points towards a fall. But how will it be in England and the richer countries? It might seem as if a market already gorged with resources difficult to employ would be oppressed yet more severely; this effect, undoubtedly, has been felt in London. The Germans lodged large sums in the London banking world, and told heavily at times on the money market.

But it would be to take a narrow view of the facts to suppose that a lowering of interest is the necessary consequence of the appearance of foreign funds in

London. The increased sense of fraternity and security, which led to the intercommunion of the money markets, generated also a very strong desire in lessdeveloped countries to acquire the fitting machinery for creating wealth, to obtain capital for agriculture, for manufactures, for shipping and harbours, and above all, for railways. They became eager to borrow in England, and Englishmen were willing to lend. The being able to lend was of infinitely greater importance to England than the gain of additional power to borrow.

This view has been controverted in many quarters. It isadmitted that the purely investing portion of the British public, men who have purchasing power which they cannot themselves make use of, but which they are willing to transfer on loan to foreigners, may be largely benefited by the appearance of additional borrowers; but the people of England itself, it is argued, especially the labourers, are injured by the process; the capital, that is the commodities sent abroad, are a loss to them. They are, as it were, made non-existent, they create no call for English labour, they bring no gain to England save the interest received. How different would the effect have been had these commodities been applied to the extension of English industry!

The answer to these objections depends, in no small degree, on a broad and very important principle. Political Economy has not for its aim the enrichment of a particular people. Its subject is the wealth of nations. It knows nothing of the distinction between natives and foreigners, except so far as the distribution of mankind into nationalities tends to create laws in various countries, which oppose freedom of industry

and trade, and interfere with the more natural and fitter course proclaimed by its teaching. Trade is always an exchange of equal goods, and Political Economy asks no questions about their nationality. This all-important truth has a great voice in this matter of international lendings, and is supreme in the domain of free trade. It follows as a direct consequence from this principle, that if the capital sent away from England to a foreign country-and it is always sent away, be it remembered, in goods, not in moneygenerates in it a production of wealth, which is exported to England in exchange for English goods, it makes no difference to England whether that capital has been invested in her own territory or in a foreign one; English labour has been equally benefited in both cases. The consumption of the capital in England would have resulted in the production of a stock of wealth by English labour; but if that capital had been invested in America, in the creation of an additional quantity of cotton, which was sent to England in exchange for English goods, then those English goods sent to America would have given additional employment to English labour, to an absolutely equal extent with those which would have been made, if the capital had been employed in England instead of in America. English capital lent to Australia has built up the great trade between that country and England, and along with it, the large extension of industry and of the employment of labour in England.

On the other hand, the loan may be applied abroad to purposes which do not supply goods to send to gland, and do not directly increase English trade.

It

may have been used in the construction of railways, an assistance which England has bestowed on so many foreign states, or China may have employed it in developing purely local industry. Directly, the gain to England is solely the interest which she annually receives, but here we must draw an important distinction. If the loan has been granted by England out of savings, out of surplus wealth won above consumption, then England is not made poorer by the loan than she was before it was granted; but there is a great principle which governs this question, which produces powerful effects. The progress of other countries, their growth in civilisation, generates a sure and constant development of exchange with each other, and especially, under the existing circumstances of mankind, with England; they increasingly desire English products, and England desires theirs. Tea from China, cotton and corn from America, wool from Australia, indigo from India, become the subjects of ever-expanding demand in England, and these countries gladly take English goods-the fruit of English labour, in return for what they send. In this great matter, nothing develops a country more than railways. The railways constructed with English money, bring corn to the sea-coast of America and Russia; lands formerly shut out from the rest of the world, are made part, so to speak, of the common agricultural machinery of collective humanity. Food can now reach England through the help of these railways, and food is what England most needs, and what is most essential for the support of her labourers. The enormous expansion of English trade, its vast exports, the

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products of English labour, are due to the progress of other countries beyond all other causes, and if English loans have helped that progress by enabling its instruments to be provided, they have multiplied the international exchange of commodities, and thereby fed English industry, and rewarded English labourers with additional wages, and English capital with augmented profits.

We thus reach the conclusion that it is the manner in which the English loan is applied in the foreign. country, which determines whether the export of English wealth does or does not benefit the industry of England, and those who profit by it. A loan to a spendthrift foreign people, which has consumed its wealth and merely seeks to satisfy its creditors, whatever may be the security given for ultimate repayment, is merely a gain of interest to England, and in every other respect is as pure a waste, as if it had been hoarded in gold in the Bank of England's cellar. If, on the contrary, it has been absorbed by sending out emigrants to Australia, who produce more wool for the increase of English trade, the effect is precisely the same as if it had been laid out in Lancashire or Yorkshire.