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.

FOOTNOTES: 

[Footnote 7:  “England’s Foreign Trade in the Nineteenth Century,” p, 16, by Dr. A.L.  Bowley.]

[Footnote 8:  “Paper against Gold,” Letter III.]

CHAPTER VIII

REMEDIES AND REGULATIONS

Apart from the political measures which may be found necessary for the regulation, after the war, of International Finance, it remains to consider what can be done to amend the evils from which it suffers, and likewise what, if anything, can be done to strengthen our financial weapon, and sharpen its edge to help us in the difficult fight that will follow the present war, however it may end.

It has been shown in a previous chapter that the real weaknesses in the system of International Finance arise from the bad use made of its facilities by improvident and corrupt borrowers, and from the bigger profits attached, in the case of success, to the more questionable kinds of issues.  With regard to the latter point it was also shown that these bigger profits may be, to a great extent, justified by the fact that the risk involved is much greater; since in the case of failure a weak security is much more difficult to finance and find a home for than a good one.  It may further be asked why weak securities should be brought out at all and whether it is not the business of financial experts to see that nothing but the most water-tight issues are offered to the public.  Such a question evidently answers itself, for if only those borrowers were allowed to come into the market whose credit was beyond doubt, the growth of young communities and of budding enterprises would be strangled and the forward movement of material progress would be seriously checked.